PCP or HP?

[/\ndy]

Sup fellas.

Mrs needs a new car and is currently on PCP which is due to end soon. Was looking at both PCP and HP and thought to myself why would you pay XX amount for a new car on PCP and then NOT own the car at the end? Surely it makes more sense to get something nearly new with only a few k on the clock and go down the HP route? (which would give near identical monthly payments to PCP) Still has warranty and all the rest of it, and plus you actually own the car without any balloon payment at the end.

Am I missing anything? Seems to make better sense?

 

[Steedie]

If you're more likely to want to swap your car before the end of the agreement, PCP is the way to go. If you plan on keeping it long term and want to own it at the end, HP.

HP makes no sense for me as I'll rarely keep the car the duration of the term. I just always do 3 years as it's good for the figures.

In b4 omg you're poor and can't afford a car if you have to finance

 

[Havana_UK]

Financing a used car through PCP or HP is often not a good deal because the manufacturers like to incentivise new car purchases through favourable interest rates and big manufacturer deposit contributions.

As an example with BMW you can buy a brand new car with typically 6.9% APR, some even at 4.9%, and a great discount, say £4-7K off list on a brand new car, but if you want a used approved you might get a little bit off the asking price depending on how keenly it is priced, but then the APR will be somewhere around 10.9%.

Buying used makes a lot of sense if you have a low cost way to finance the purchase such as a bank loan or cash.

 

[Abyss]

For me it all comes down to the total cost of ownership and the cost of the finance.

If the interest rate on HP is 10% but it's 5% on PCP then it makes a lot of sense.

At the end of the day PCP is similar to just getting a loan over a longer period then paying off the balance after 3 years by selling the car. The main difference being you have no guaranteed future value, however these are always extremely low.

For me the lowest total cost of ownership the last two times I've bought a car has been take out PCP with a dealer contribution, then withdraw from it and finance the car with a bank loan. I'm currently paying 3.4% and got a further £2k off the car by initially taking out Audi's 10.9% finance.

 

[thewanted]

If the interest rate on HP is high and low on PCP, you can ask them to drop the GFV as far as their system will allow. If you can afford the higher monthly payment, this will effectively make it an HP deal (with a higher final payment) but with a decent rate and you'd still qualify any contribution offer(s).