Solutions car finance, can someone explain please?

hethmar

Son has just rung me and said he has put a deposit on a car and the salesman has offered to finance it on their Solutions plan. Now, it sounds like leasing to me?

What would be the benefit (if any) of doing this instead of a bank loan or HP please?

CLAPTON

you would need to tell us something about what the details of the 'solutions plan' is as it is l simply be marketing term for the dealer

hethmar

Im sorry, Im not really up on it but Ive looked on the website which says:

Volkswagen Finance Solutions

That's why Volkswagen Finance Solutions let you switch to a new model more often, to keep in step with the latest trends, or your changing needs. Solutions is a personal contract plan that lets you make payments over a period of 18 months to 3 and a half years. You have the flexibility of putting down a small sum initially - and after a period, you can either:

• Pay the outstanding amount and own the car
• Return it to Volkswagen and walk away (subject to terms and conditions) OR
• Part-exchange it for another model to suit your lifestyle

You may find that Volkswagen Solutions provides you with the chance of driving a higher specification car for the same monthly budget you were planning to spend, when compared with hire purchase.
Benefits of Solutions

Other benefits of Solutions:

• Drive a new car more often thanks to shorter replacement cycles
• Maintain your lifestyle by driving the latest Volkswagen
• Afford a new car or a higher specification model
• Include additional optional products such as fixed-cost maintenance in your motoring budget
• Known cash flow - fixed interest rates and payments
• Reduced term of funding - ability to defer your decision to purchase until the end of your agreement
• Easy entry - as little as the equivalent of one monthly payment required as a deposit
• Available for new and used Volkswagens

CLAPTON

So it's a PCP ..personal contract purchase.. very common if dealing with main dealers

he needs to compare the total cost with the other methods of financing the deal

hethmar

Ive been trying to understand this but I can only see it offered on brand new cars - the car he is buying is nearly 2 years old. Im a bit concerned about having to pay a lump sum to actually purchase the car at the end of the deal.

He said something to me about his own bank only offering decent loans over £7500 and he only wants £5k.

I suppose, as you say, he needs to sit down and find out the total cost of the car using a normal loan and this system.

CLAPTON

yes, PCP is usually for new car so maybe he needs to check with the dealer

barclaysguy

Ive never known a pcp for only brand new cars, just new cars to customers. It is a form of HP so you get the halfs and thirds rights, and is also a form of lease. I would ask him to check the apr as normally they are very high for small hire purchase loans due to high credit arragement fees. I believe average CAFs are about £350 atm. Also is a balloon payment needed, if he wants to keep the vehicle at the end of the contract but his credit rating doesnt permit, hes without a car. A normal HP loan over 5 years will let you hand the car back after 2.5 years without a deposit with no excess milleage charges, plus he can own the car if need be.

hethmar

Thanks, Im getting confused as Im googling and reading its a good idea, but I cant weigh it up properly.

The car is £11k, they are giving £2k for his old car and he is putting down £4k of his own money leaving £5k outstanding to finance. Looking at bank websites, he seems to be correct in that the best interest rates for loans is on those over £7.5k.

PNPSUKNET

If he wants a car to keep at the end, pcp is not the option. At least with hp he will have something at the end of it.

CLAPTON

PNPSUKNET wrote: »

If he wants a car to keep at the end, pcp is not the option. At least with hp he will have something at the end of it.

why is that.. there is the option to pay the balloon payment

fortgrange

Why not put the old car and £1.5K of savings in. Borrow £7.5K on a personal loan (approx £230 per month @8% x 36months) That way you have £2.5K in savings to help with early payments, you own the car outright from day 1 meaning you can sell it and pay off the loan if you fall on hard times and there's no balloon payment at the end. Obviously depends on credit rating and how much less the PCP payment would be.