Purchasing a car using the PHP 3 year plan?

bindi60

Hi,

Has anyone got any views on the PHP plans that car dealerships use. I have wanted a 'luxury' car for a long time and since i have no commitments at the moment felt it was a good time to go for it as i guess once i have a house, kids etc there will be no chance of having a nice car!

After the 3 year period is over i will need to handover a lump sum to keep the car or gove the car back to wipe off the remaining finance but this leaves me with the problem of having no money left to buy another car or start a new PHP plan again but i feel this is going to be a huge waste of money...

Any comments greatly welcome.

albionrovers

I lease a new car every 2 years.
It's a waste of money but so are all cars.
What I do get however is a brand new car that never needs an MOT, is always in warranty and delivery to your door is free, as is road tax for both years.

My new deal?
Audi A3 - 3+23 @ £214/month - that's 3 payments up front and 23 monthly payments for the next 2 years. Hand it back at the end. Even gets picked up for free.

Try

www.skyfleet.co.uk
or
www.lingscars.co.uk

I've used both companies. No complaints. Remember to add VAT @ 17.5%. Ling advertises cars inclusive of VAT on her site. Just click 'personal deals' instead of 'business deals'.

bindi60

Thanks for your feedback. I will check out the websites you recommended.

Currently i have a Mercedes SLK with 1.5 years left before i decide to keep it or change it, obviously it is going to be better to change it but i think the deal you have sounds much better going for 2 years rather than three with regards to warranty etc... plus unfortunately i think i have spoilt myself now with this car. DO you go through the websites for your cars or go straight to the dealers?

I agree with you, yes all cars are a waste of cash!

Scuttsy

Hi I work in a dealership and a PCP type plan is a good way of making a car more affordable if you are considering paying monthly. I would advise if looking at an expensive car a dealer should offer a better standard of service and backup. A PCP is especially useful if you are considering a "gas guzzling" vehicle as the finance company usally offer a guaranteed future value on the vehicle, in the current 2nd hand market where high tax group cars are tumbling in value this could prove a very helpful reassurance.

If considering a PCP be aware of a couple of factors, firstly any deposit you put in will lower the payments to what may appear more attractive levels but tread carefully when you get to the end of the agreement in order to get a new car with similar payments assuming it is a similar price you will need to find this level of deposit. Any cash you put in at the bheginning is effectively lost. Also don't forget to negiotiate most dealers are having a tough time at the moment and will bend over for your business, as well as the list price being negiotable (check What car for target prices) the interest rate on the PCP is also usually negiotable.

Hope This Helps

albionrovers

"Do you go through the websites for your cars or go straight to the dealers?"

I go through the websites. Dealers may price match though.

Forgot to mention above.....

My £214/month is inclusive of VAT so it's about £180 bottom line.
Also, Ling doesn't take an admin fee up front, Skyfleet generally do for your 1st deal (£300+VAT), they then offer to refund it as long as you renew with them. Which isn't really a refund then, is it?

After extensive research, it's Lings for me this time around.

bindi60

Thankyou Scuttsy and Albionrovers.

Scuttsy - would you advise putting in a small deposit then, this time round i did put down a larger deposit to bring the monthly payments down but to do this again at the end of the agreement is going to be impossible for me to do. Mercedes have given me a guaranteed value for the car at the end of the agreement but i am guessing they wont go any higher, so in your opinion as you work in the trade do you think it would be best to pay the lump sum at the end to keep the car and then sell the car privately to make a profit as i think the car would be worth more than their bottom line figure?

I have had a few problems with the car and as i have got the plan through Mercedes taking the car in on several occassions to be sorted out has not been a problem infact the service they have provided me with has been fantastic. I am just worried if i go through websites to purchase one the after care will not be the same? I have made a huge fuss over the problems with this car but have felt justified doing this seeing as i got it from the Merc garage.

Anyways, thanks to both of you for replying i just want to get as much background info so i can get some good research in before i have to renew!

Scuttsy

Hi Bindi,

You will always sell a car privately for more than a dealer can offer so this is usually the best route to go to near the end of a deal. Even if you get a cheap personal loan to pay off the GFV figure, giving yourself more time to sell the car and clearing the loan when you have done so. Mercedes will always put a low GFV on a car as they do not want you to hand the car back at the end of the agreement if it is worth less than the GFV. If values do drop significantly this is a valuable protection to you. 3 years ago no-one could have predicted the big loss some 4wd cars have took in this scheme has proved very helpful to some of my clients.

I think you have answered your own question regarding how much deposit to put in, remember any part exchange counts towards this lump sum. I would generally advise against putting in any more than 10%-15% maximum. You will be creating a problem down the line if you do.

When you are buying probably the 2nd most expensive assett you will own I would always advise sourcing from a local dealer with a good reputation. You may pay slightly more than you can source from an internet broker but having the personal contact and level of service and building a relationship with a dealer is worth it I believe in a very expensive purchase. These opinions have generated some critism for me on this site in the past as it is a money saving site but I firmly believe the extra may be worth it.

Best advice is to use the web to get a quote and take it to the dealer to see if they can match the deal. If not decide for yourself if the extra is worth it.

Bear in mind the deals Albionrovers appears to be looking at sound like contract hire which is essentially renting a car for a period of time with no option to own, the deal you are considering is a PCP which is a different product as it gives you the opportunity to own the car at the end. If you are happy to just rent the car though contract hire is well worth exploring.

AdrianHi

On the grounds that a car is always an average monthly expense over the period you have the use of it, the only number that really matters is that monthly expense figure.
If you include in that figure the cost of cash tied up in the car (lost interest on savings) if paying cash and then compare that with finance charges, that finance charge is really a tiny part of the expense figure.
Watch out for early settlement penalties, make sure your raising the deposit for next time around and it's not such a bad way to go.
You get this kind of car cheaper buying 3 to 6 months old with 30+ months warranty remaining or 6/7+ years old when depreciation slows, anything in between is not necessarily cheaper and carries the risk of being more expensive, year 4 depreciation (nearly as big as years 2 and 3) and an out of warranty repair bill? No thanks

hewhoisnotintheknow

i know its not what you want to hear or asked, but why not save up the cash and buy it, by the time you have saved you may not want the car, and if you still want it its yours!