Car Purchase - Help Required !

[AdeM]

Hi All

I am about to start a new job and need to purchase a car (coming off company car scheme) ,we have decided on a new honda crv at a cost of £21150 and have been going round in circles as what is the most cost effective way of purchasing this we have a couple of options:

1) PCP with a deposit of approx £3500 + £400 pm over 3yrs and final GFV approx £8.5K total cost if we buy at end approx £25K

2) Buy outright with a £12k loan (approx £360 pm) and £8k from Isa savings, total cost approx £21.5k.

There is of course lease hire and contract hire etc etc we are really confused on the best option !:confused:

Does anyone have any similar experiences that they would be able to share with us as we need to make a decission by the weekend !

[anewman]

What about going for a cheaper car or second hand one that's say only 6 months or a year old or something and paying outright? It seems like you'll only be paying extra on top of extra to get a brand spanking new one.

[Pew Pew Pew Lasers!]

Totally agree. Unless you want a new car you could have yourself a very nice second hand Mercedes S-class for that money.

And the best thing is that after 3-5 years it would still be worth more than the Honda.

[daveyjp]

Disregard anyone who says you should buy something else etc - that's your decision.

First shop around for the best deal on your new car. If you have no part exchange try some online brokers.

My choice would be to buy the car. If circumstances change you own the car and have no loan tied to it. You can sell the car freely.

On a PCP you are tied into a contract attached to the car and are borrowing money to finance depreciation, if circumstances change it can be expensive to get out of it. PCP often have hidden other charges such as set up fees, document release fess etc etc.

[Wig]

Absolutely make your own decision on what you want and your method of buying it. No ones forcing you to do anything. But we here to help offer alternative suggestions that you may not have considered or given due consideration.

I have no experience on the questions you asked, so can't help there. But I will suggest you consider buying the car you have chosen, 1 year old from an auction. The car will still be "as new" will be the colour and model derivative you want (might be even better). Will still come with manufacturers warranty of 2 years yet to run.

Now then lets look at prices for you to see what we are talking about

Your chosen car
Honda CRV - you can buy one at auction for about 14k + about £400 fees
= £14,400 on a retail car new costing £20000 - £21000

HONDA CR-V 2.2 I-CDTI SPORT Estate,
SILVER, 5 Doors, Manual Transmission,
Diesel, 9900 Miles,
Registered 24-01-2007 (1 year old)
To be sold @ Walsall on 12-02-2008

Avg:£13950 11K 5+ << an average of actual recent sale prices for cars like this with mileage approx 11K

New:£19952
Ret:£16150
Cln:£13950 << approx worth at auction


So for the sake of 10,000 miles and 1 year are you willing to pay an extra £6,000 - £7,000 ? It will also be last years model, they have done a recent facelift. But if you want the new face on a 4 - 6 month old car that can be arranged at auction aswell.

Also check autotrader

[deltic]

2) Buy outright with a £12k loan (approx £360 pm) and £8k from Isa savings, total cost approx £21.5k.


Have you added interest charges...

12,000 @ 3 years at 7% is approx £450pcm

Loss of interest from £8k ISA at 6% = £1440 (excluding compound interest)

Roughly speaking, these add about another £4k to the cost !

[Pew Pew Pew Lasers!]

Never calculate the cost of buying a car without also factoring in depreciation.

Over 3 years, add £10,000 to those sums.....

[Cardelia]

Never calculate the cost of buying a car without also factoring in depreciation.

Over 3 years, add £10,000 to those sums.....
You're buying a car. It's a purchase, not an investment. Unless you're going to buy a classic car, the value of your purchase will (in common with almost anything else you buy in this world) go down over time.

To 'add on' money to the list price of a car in order to take account of depreciation is ludicrous. Where does that £10k you mentioned come from? If you buy a new CRV for £21.5k cash and in 3 years time it's worth £8.5k, then the value depreciates by £13k over 3 years. However, you've still only(!) paid £21.5k. You don't need to pay more money to take account of depreciation.

[Wig]

You're buying a car. It's a purchase, not an investment. Unless you're going to buy a classic car, the value of your purchase will (in common with almost anything else you buy in this world) go down over time.

To 'add on' money to the list price of a car in order to take account of depreciation is ludicrous. Where does that £10k you mentioned come from? If you buy a new CRV for £21.5k cash and in 3 years time it's worth £8.5k, then the value depreciates by £13k over 3 years. However, you've still only(!) paid £21.5k. You don't need to pay more money to take account of depreciation.

Perhaps what he meant to say was work out the cost to you over the period you intend to own the car.

(Purchace price + interest on loans or loss of interest on cash in bank) - (value when you intend to sell)

and compare that cost with the cost of buying a used car.

[Pew Pew Pew Lasers!]

You don't need to pay more money to take account of depreciation.


Oh really? Where do you get that money from when the time comes to replace it like for like? Fresh air?

I disagree with your assertion that a car is not an investment. If you're buying a car for work then it most certainly is an investment regardless of profitability.

[anewman]

Only cars I can think of that may be an investment are classic cars. All other cars depreciate at varying degrees as everyone wants to buy new. The prices have to be reduced enough to tempt second hand buyers. A £21k new Honda will not be an investment in so far as it is an asset, as it will not gain any value until possibly 50 years time, when it would need to have been maintained in absolutely perfect condition which would cost lots of money and time to do over the years. Any car can get you to work including one costing £100.

[Cardelia]

Oh really? Where do you get that money from when the time comes to replace it like for like? Fresh air?

I disagree with your assertion that a car is not an investment. If you're buying a car for work then it most certainly is an investment regardless of profitability.
Who said anything about a like-for-like replacement? A CRV is not a very fashionable car, but it will easily do 100k miles without much in the way of maintenance. Look after it well and it will last you for 15, 20 years. That's plenty of time to save enough for a replacement.

However, assuming like-for-like is what you want to do, surely the same logic applies to any other item you buy? Computer, fridge, TV - you use them until you want/need a new one and then you replace them. If you're lucky enough to get a bit of money for your old item, will you get the full purchase price back? Of course you won't because it's now second hand, contains older technology, costs more to maintain, is out of warranty and it is nowhere near as valuable as a new item. Using your logic, a £1000 laptop should be thought of as a £2000 laptop because 5 years down the line you'll replace it for a new one and the money to do so doesn't come from fresh air. It's a patently ridiculous stance to take for a laptop, so why is it different for a car?

PS - the OP specifically stated private purchase rather than company car. In what way is the purchase of an item which will depreciate in value, and actually cost money to maintain, an investment?