Ford Options or Personal Loan?

iandv

Hi

I am purchasing a new Ford car for £15,500 with a £2,500 deposit so I need to borrow £13,000.

I am either looking at Ford 2 year options at 4.9% APR or a personal loan with Nationwide at 7.7% APR for 5 years which is the best loan rate at the moment on the market.

My question is what is best option to finance the car wither pay £261 per month with ford options for two years with a GMFV of £7839 after these two years, where I can either purchase the car and pay the GMFV, change cars or hand it back

or

pay £260 over a 5 year period with Nationwide.

Any recommendations?

Now33

I had the same scenario when I bought my Focus last year. I went with the Options deal, as you are borrowing at a lower rate. You are taking a bit of a risk as you dont know what interest rates will be after two years. If rates stay the same you'd be able to borrow the £7839 over 3 years at £242 per month saving you almost £20 a month. Obviously if personal loan rates were to increase you might end up paying a bit more. But possibly the credit crunch might be over in two years and rates might fall saving you even more. It all depends on your attitude to risk really.

emmell

If you buy a car with a bank loan it belongs to you from day one, if you buy on Finance you don't own it till the final payment is made. So if you want to sell it before 5years you're better off with a bank loan.
ML.

iandv

Thanks all, I would be most probably look to trade the car in for a new model in 2 years time, that's why I looked at Ford Options.

But I'm thinking that I would be better off with a 5 year personal loan with Nationwide at 7.7% over Ford Options even though it's only 4.9%, as with the Nationwide loan I could sell the car at any time after 9 months as I will be using a Ford employee discount voucher.

Which method of finance do you feel would

1.) Protect my deposit the best
2.) Offer more flexibility
3.) Work out the best value in the long term?

Lemonade_Pockets

In this scenario ford options every time there is absolutely no contest.

a) Its cheaper finance
b) Its more flexible should your circumstances change.
c) You retain the personal loan line of credit for emergencies.

Point a has already been explained by Now 33. But to expand on my second point.

If borrow the money from bank you have all of the risk owning the car and realistically no reward. If you go on Ford option you lose some of the risk but you retain the same flexibility as a bank loan.

Lets say after 2yrs you want to part ex it for a big/smaller/wider/posher/cheaper car on options if the car is worth more than the GFV you get the difference i.e. the equity. If its worth less you hand the keys back and walk away simples. You can part ex it after a month if you want...just it may not be worth more than what you owe on finance. If you want to sell it privately either get the purchaser to pay ford credit the GFV direct and give you the difference or take a loan temporarily to pay the finance off.

If you borrow a bank loan and then used car values plummet and lets say to be dramatic the focus is worth £1000 after two years but you still owe £8000 on the finance then you have to stump up the difference if you needed a different car...whereas if you'd been on options you could simply let ford take the hit, walkaway and start afresh.

I sound like i'm trying to sell ford options but in this instance its really a no brainer.

Lemonade_Pockets

iandv wrote: »

Thanks all, I would be most probably look to trade the car in for a new model in 2 years time, that's why I looked at Ford Options.

But I'm thinking that I would be better off with a 5 year personal loan with Nationwide at 7.7% over Ford Options even though it's only 4.9%, as with the Nationwide loan I could sell the car at any time after 9 months as I will be using a Ford employee discount voucher.

Which method of finance do you feel would

1.) Protect my deposit the best
2.) Offer more flexibility
3.) Work out the best value in the long term?

Ford Options to all three. You can also sell your car after 9 month on ford options, no issue at all if your part exchanging. If your selling privately you have two options as per my previous post.

Rolandtheroadie

Forget APR for a moment.
If you do the Ford deal and pay it off after the 2 years (£7839), whats the total payable?
If you take out a 5 year bank loan, whats the total payable.
If you take out the 2 year then refinance the £7839, whats the total payable.
Have you been approved for the 7.7% loan? Even with an excellent credit history, the typical APR isnt always what you will be offered.

Deposit protections a non starter. Its gone.
Flexibility is the bankloan. It's your car from day 1 (as mentioned) You can do what you want with the car.
Best value? 2 year deal then "find" £7839 (£16600 compared to bank loan costs of £18100.) If you then refinanced the GMFV at £242 for 3 years that would be £17500.
GMFV will have conditions. If you dont abide by them, there could be problems. (mileage and condition spring to mind).

Double check the figures, done quickly and could be out.

I'd go bank loan.

Lemonade_Pockets

Have you been approved for the 7.7% loan? Even with an excellent credit history, the typical APR isnt always what you will be offered

Quite right

Deposit protections a non starter. Its gone.

I can see the point your making. However if you take out a bank loan and you end up in massive negative equity you have NO options!!! If you take out Ford PCP you have several...so not so much protecting your deposit as limit liability.

Flexibility is the bankloan. It's your car from day 1 (as mentioned) You can do what you want with the car.

What could you do with it that you couldn't if it was on a PCP, apart from take it out of the country permantly or stick tacky halford crap on it (even if you did decide to do that you could then always take out the bank loan to get around any problems)?

GMFV will have conditions. If you dont abide by them, there could be problems. (mileage and condition spring to mind).

So if you put a dent in every panel and did a million miles you'd be in no worse a position than you would be if you had taken a personal loan!

Rolandtheroadie

Lemonade_Pockets wrote: »

So if you put a dent in every panel and did a million miles you'd be in no worse a position than you would be if you had taken a personal loan!

You would still be in the same position, but the cars yours. How much are Ford going to take off you to PX/ walk away etc. Money you had'nt budgeted for.

Lemonade_Pockets wrote: »

What could you do with it that you couldn't if it was on a PCP

I could sell it the next day, or 18 months from now with no hassle whatsoever as there is no finance outstanding. It would be my car and would avoid giving ford the interest then the bank some too.



I can see the benefits of options, I just dont think the reality of trying to walk away after the 2 years would be all rosy. Especially if used car prices had dropped like a stone.

Lemonade_Pockets

You would still be in the same position, but the cars yours. How much are Ford going to take off you to PX/ walk away etc. Money you had'nt budgeted for.

You've lost me there. If you got to this position and you still wanted to "own" the car then you could just get a that bank loan and pay the finance off!

I could sell it the next day, or 18 months from now with no hassle whatsoever as there is no finance outstanding. It would be my car and would avoid giving ford the interest then the bank some too.

You would get a rebate for early settlement on the ford finance. The bank aren't going to make the interest retrospective so you wouldn't end up paying more interest. Anyway i think most purchasers would be happy to settle the finance and then you give you the difference.

I can see the benefits of options, I just dont think the reality of trying to walk away after the 2 years would be all rosy. Especially if used car prices had dropped like a stone.

Surely this would be the time when it would work best. I've seen lots of cars been handed back when MFR's have got their GFV calculations wrong. Indeed when ford first introduced PCP's to this country they got it massively wrong and it cost them millions all to the benefit of the customer who effectively got well above market price for their car.


Incidently the idea of "owning" a car that you have borrowed finance to purchase to me is non-sensical. What difference does it make whether the finance is secured against the car or not (apart from the issues discussed above).

iandv

Thanks all, it's sound like 2 year ford options is best for me.

I have not been approved for a loan yet, so I suppose there it's not certain I would be 7.7% although my credit rating is very good.

With options on a car worth £15,495 with a deposit of £3,012.98 the total amount payable would be £16,501.98 with a charge of £1,006.98 charge for the credit.

There is the GMFV of £7,839.00 if I wish to own the vehicle at the end of the two year options.

I suppose if I wanted to sell the car and it was worth £12,839 for example I would walk away with £5,000 or use this £5,000 as a deposit against another Ford vehicle?

With the nationwide loan, borrowing £12,500 it would be £250.13 per month for 5 years with £15007.80 total amount repayable