Buying a new car

katielou83

Hello,

I am wanting to buy a new car. I have seen the one I like and I'm going to do it on finance, but I'm unsure which is the best finance package to choose. I am after some advice on the best offer / least risky method.

Choice 1 is the traditional HP method.
The car costs £10865 OTR. I spread the cost over 4 years with about 9% APR. This works out at £224.13 a month. I will pay a total of aroun £12,558 over the 4 years.

Choice 2 is the new 'Options' package.
We have to agree how much the car will be worth in 2 years time. I pay the difference over the 2 year period then at the end of that period it is revalued. I then pay the agreed remaining lump sum, regardless of the value. If it is valued to be more then the original estimated value then I can use that money as a deposit on a new car. I have the choice of keeping the car/ upgrading/ paying and leaving. The prices for this are:
£10865 OTR £2000 deposit. I pay £162.29 a month for 24 months. The lump sum at the end is £5507. This is 4.6% APR. I pay a total all together, including fees, of £11524.67.

What do you think? I'm unsure for a number of reasons. Firstly, choice 2 has a really good interest rate and a very affordable monthly payment. But at the end of the 2 years I am then expected to refinance (either to pay off the rest of my current car or to get a new one) and we have no way of predicted what the interest rate for this will be. I could end up paying huge amounts 2 years down the line.

So it seems that choice 1 is the safest, but is it sensible to pay £1000 more to be on 'the safe side'?

Please help, I'm very confused as I've never bought a new car before. I can afford the monthly payments either way. Also, if anyone can suggest a different forum area that I should put this in then please let me know - I wasn't sure where was best to ask!

Thanks in advance to anyone able to offer advice.

KL83

verityboo

Option 2 has a lower interest rate. I do think the PCP type finance deals can be a good idea but only consider it if you are likely to change the car after the 2 year period. They also only really make sense on cars with relatively low depreciation but you have not mentioned the make and model of car you are considering.

The option 2 PCP deals can offer protection against the bottom falling out of the car market. Our Neighbour purchased his Range Rover Sport using a PCP but the value of it at the end of the 3 year deal was thousands less than the outstanding lump sum so he just handed it back saving him thousands in depreciation which he didn't have to pay

missile

In your case option 2 is the best deal. You could put the money you would have paid into a savings account and use it to pay the baloon payment. You would have the option to hand the car back and use savings as deposit for a.n.other car.

Check the agreement carefully. Many have onerous T&Cs, e.g. charge 6p a mile for more than the agreed annual mileage.

Another option would be a personal loan, which would be less than 9.0% APR.

Inactive

Be aware of this;


http://www.moneysavingexpert.com/news/mortgages/2010/08/interest-rates-could-hit-8-says-economist?utm_source=forum&utm_medium=sidebar&utm_campaign=box

daveyjp

If Options means it's a Ford look around for the best price on the car - this could save you a lot more than a £1,000 in interest.

Provide full details of the car and some kind posters may even search out deals for you. I'd being with https://www.drivethedeal.com

katielou83

Thanks for your responses.

It seems like there is still a lot to think about, although I may be shifting slightly towards the PCP option.

It is for a Fiat 500 1.2 Lounge.

Thanks