Bank loan or PCP?

kates08

Thank you for the helpful responses. Sorry i thought PCP was a standard term, I'm not sure if its the same as HP or not but the policy we're looking at is 2 years of regular monthly payments followed by a balloon payment. At the end we have the option of paying the balloon payment, financing the balloon payment over a further 3 or 4 years or giving back the car and getting a new one.

Does anyone have any advise regarding whether its worth putting a deposit down with PCP?

CLAPTON

kates08 wrote: »

Thank you for the helpful responses. Sorry i thought PCP was a standard term, I'm not sure if its the same as HP or not but the policy we're looking at is 2 years of regular monthly payments followed by a balloon payment. At the end we have the option of paying the balloon payment, financing the balloon payment over a further 3 or 4 years or giving back the car and getting a new one.

Does anyone have any advise regarding whether its worth putting a deposit down with PCP?

add up the monthly payments over the 2 or 3 years without a deposit

then up the revised monthly payments over the same period plus the deposit

then compare them.. which is lower?
you may want to fact in the interest you would otherwise have earned on your deposit (assuming that is money in the bank)

emmell

On the motoring and public transport site there is a forum member who has studied this type of financing (PCP). From what little knowledge I have about it there is no point in paying a deposit larger than what the dealer specifies, but I know a friend who bought a clio on PCP and they told him at the end of the agreement the difference between the balloon payment and value of the car would give him a deposit for his next car and guess what, his car was worth no more than the guaranteed future value. So really he had leased a car for 3 years.
There will be mileage limits like there is with leasing and if you go over the mileage it can work out very expensive.
Maybe you ought to try posting on the motoring section as well.
ML.

paulmcerlean

woodbine wrote: »

why a new car?you could get a decent 2nd hand one for half of that if you shop around

Really grinds on me that increasingly on this forum, people are insistent in telling the OP that they don't need the things that they want, or question why they would want something new or impressive.

Look, if people didn't buy new cars, there would be no decent second hand ones for the rest to buy!

HP, PCP and bank loans are designed to allow us to buy nice shiny new cars and providing we can afford the repayments, a fair rate of interest makes an otherwise unaffordable product, affordable.

It's not a con. I save money like the rest and am careful about interest rates and not getting into debt I cannot afford - but I am very happy with my £15000 car loan, because I am driving a car I wouldn't have been able to, and think what you like, I work very hard, and I get much more satisfaction from my shiny new car than I ever would from an older second hand one.

CLAPTON

paulmcerlean wrote: »

Really grinds on me that increasingly on this forum, people are insistent in telling the OP that they don't need the things that they want, or question why they would want something new or impressive.

Look, if people didn't buy new cars, there would be no decent second hand ones for the rest to buy!

HP, PCP and bank loans are designed to allow us to buy nice shiny new cars and providing we can afford the repayments, a fair rate of interest makes an otherwise unaffordable product, affordable.

It's not a con. I save money like the rest and am careful about interest rates and not getting into debt I cannot afford - but I am very happy with my £15000 car loan, because I am driving a car I wouldn't have been able to, and think what you like, I work very hard, and I get much more satisfaction from my shiny new car than I ever would from an older second hand one.

your mathematics is poor

if you buy a 15k car on credit then you do indeed spend 15k plus a lot of interest on the car;

if you save for it then you only spend 15k
in both cases you can have a shiny new car ; its just that in one case you pay 15k and the other you pay 18 or 19k

now please don't tell me you can't afford to save ... if you can afford to repay 18k for something worth only 15k then you can afford to save.

yes it does mean that you do have to delay having shiny new car just once... the first time you break the silly cycle of always overpaying for a car.

mitchaa

kates08 wrote: »

Hi, sorry I'm not sure if I've posted this on the right board.

We need to buy a new car and in the past have always put down a deposit and taken a bank loan for the remainder.

Went into a car dealership yesterday to see a few cars and the salesman started telling us about PCP and how it would be better for us because we like to change our car every 3-4 years and we would be able to get more car for our money.

He also told us that if taking out a PCP there is no point in putting down a deposit, as whether we put down a deposit or not our monthly payments would not be reduced significantly and the GFV of the car would not be affected by the deposit, therefore we would be better NOT putting down a deposit.

Everything he said seemed to make sense, but I'm aware he is a car salesman and will be trying to sell us whatever gets him the biggest commision rather than what is best for us so I wanted to get some opinions from others regarding the pros and cons of PCP?

Kate

You do need to put down a deposit on a PCP deal, most are say 3+35, i.e 3 x the original monthly payment as a deposit, followed by 35 monthly payments.

The higher the deposit, the less your monthly payments will be as you are borrowing the full amount and interest will be charged on the full amount so a deposit that decreases the amount of lending will in turn save you interest charges.

PCP, you will never own the car, it's like leasing, pay a fixed amount every month and hand the car back at the end of the 3yrs to start it all again with a new car. (Again you will need a new deposit)

With buying a new car, you will always have worth in it. Say you took out a £10k loan over 3yrs, at the end of the 3yrs, the car still may be worth say £5.5k so that £5.5k is an asset to you as it's yours. You can sell the car and bank the £5.5k. Switch back to the PCP and you would obviously not have this £5.5k, you would just hand the car back.

You may be able to get the £10k virtually interest free with 0% credit cards and balance transfers so you certainly need to do your maths.

Do not fall for the salesmans pitch, he is there to sell cars. He has already mislead you about initial deposit, I would be highly surprised if your 1st payment was not significantly more than the following payments.

kates08

CLAPTON wrote: »

now please don't tell me you can't afford to save ... if you can afford to repay 18k for something worth only 15k then you can afford to save.

Tha isn't really a sensible comment though is it? Saving at the same rate as the repayments on a £15,000 loan it would take at least 5 years to save enought to buy the car. Some how I don't think my old car is going to last that long!

immoral_angeluk

Hire purchase - secured on the car, but generally cheaper APR. After half of the HP has been paid you can refinance and change cars, or hand back the car. You would be liable for any shortfall if there was damage or anything though. Usually requires a large deposit. If you fall behind on repayments you risk the car being repossessed. You cannot sell the car without permission from the lender.

Bank loan - Usually more expensive APR wise, but is not secured on the car so if you fall behind they won't repossess the car. You can sell the car and repay the loan early if you wish, usually for a small penalty (something like 2 months interest.)

Leasing - You rent the car, but only pay for your petrol, no servicing etc. This is usually very expensive and you pay a lot of money if you go over any mileage limit. The car is never yours and you can't sell it, and usually have to hand it back or exchange it at the end of the lease unless you have the option to buy it at the end.

kates08

mitchaa wrote: »

PCP, you will never own the car, it's like leasing, pay a fixed amount every month and hand the car back at the end of the 3yrs to start it all again with a new car. (Again you will need a new deposit)
QUOTE]

But what about if you decide to pay the balloon payment and keep the car? That would make it more like an HP plan than car leasing wouldn't it?

The model of car we want doesn't seem to have any kind of traditional HP plan available so in this case our only option would be to have the PCP policy and then pay the balloon payment for the car (or hand it back and start again with a new one if we don't want the car).

Why do they have to make this so confusing? (thnks for all the help and advice so far though guys and gals)

mitchaa

kates08 wrote: »

mitchaa wrote: »

PCP, you will never own the car, it's like leasing, pay a fixed amount every month and hand the car back at the end of the 3yrs to start it all again with a new car. (Again you will need a new deposit)
QUOTE]

But what about if you decide to pay the balloon payment and keep the car? That would make it more like an HP plan than car leasing wouldn't it?

The model of car we want doesn't seem to have any kind of traditional HP plan available so in this case our only option would be to have the PCP policy and then pay the balloon payment for the car (or hand it back and start again with a new one if we don't want the car).

Why do they have to make this so confusing? (thnks for all the help and advice so far though guys and gals)

http://www.nationwidevehiclecontracts.co.uk/

This site is worth a look. Remember to factor in the 17.5% vat on top of the prices aswell though, and soon to be 20% in the new year.

These are generally 3+35 deals.