PCP or 0% finance

harrpau7

Hello,

Yesterday I went to my local Ford garage and got a PCP deal on a brand new Ford Fiesta Zetec Ecoboost 1.0 car, trading in my old Ford Fiesta studio 57 plate. I got £2,000 for my old car, plus will have to to pay £800 initial deposit on Friday. Ford also put £500 towards the deposit as they are doing an offer where if you take a car for a test drive they give you £500. So total deposit for the car is £3,300. The car is about £12,000 in total (can't remember the exact amount as I am at work, but it's not far off either side). My PCP contract is £150 a month for 36 months then at the end it's around £5,500 to buy the car (also the GMFV). Seems a good deal, but the fact I don't own the car is playing on my mind.

Would I be better off putting a bigger deposit down (which I can afford, I could actually buy the car outright with my savings but am saving for a house and that would be 2/3rds of my savings gone) and then taking advantage of their 0% finance offer, which you can have up to £7,000? My rough calculations say I would need to out an extra £1,700 down as deposit, which would take it to £5,000 with the £2,000 from my old car and the £500 ford give me and then have a £7,000 loan over 3 years at 0% interest, which means at the end of the 3 years I own the car. I still get all the goodies in the meantime, free servicing, no MOT's, 3 years warranty, breakdown cover (and tax is £0 on these cars, 100% free), and would only be about £45 a month worse off in the mean time and would have to deposit an extra £1700, which totals an extra £3320 or so over the 3 years but I own the car at the end.

Any answers would be greatly appreciated.

Nodding_Donkey

I guess the question is how much is a three year old Fiesta worth and would you want to keep it after three years?

WTFH

Nodding_Donkey wrote: »

I guess the question is how much is a three year old Fiesta worth and would you want to keep it after three years?

This.
Also, when are you thinking of buying the house?
If it's in 3-4 years time, then I'd say buy the car rather than PCP it. That way you own the car and don't have any additional outgoings or deposit to worry about when you are spending a lot on a house - so you might not have much cash around for othe things.

alleycat`

The other thing you'd need to consider is that if you have a pcp deal with ford you've eaten part of the amount the bank will be prepared to loan you on a mortgage.

It depends on when you want the mortgage i guess.

Hintza

If you are wanting to get on the housing market then buying a new car is not going to help that goal. But if you must why not try and pay the car loan back in 2 years?

harrpau7

I am hoping to get a mortgage within the next year or so.

The car I have now is starting to have little things go wrong with it, in the last year I have spent over a grand fixing it. It needs new breaks and a new engine for starters. That's why a new car with 3 years warranty seemed appealing. Plus the free tax, breakdown cover, servicing and lower fuel costs make me about £40 a month better off too (not sure about insurance yet though).

I have no other debts at all, about £17,000 in savings and I bring home at least £1,500 every month. I want a reliable car, I am however considering going for the cheaper Ford Fiesta Studio now, which is under £10,000, would still get the 3 years warranty, servicing etc. In that case I would possibly (if I can get 0% finance) have a loan for 5K over 30 months, which is £166.67 per month, and finance the deposit with the 2K from my car, £500 ford give me and 2,500 from savings. I also do overtime as well so any extra money I would put to one side and clear the car finance quicker.

Does this seem like a good idea, or do I need to rethink things? My options seem to be PCP, buy outright with 0% finance loan or do nothing and hope and pray my car lasts without too much work needing done, something which either of the first two options eliminates.

Thanks.

Building_Surveyor

Surely these are questions that you should have been asked before you bought the car in order to make an informed decision, was this a spare of the moment thing?

Neither finance options are good if you intend on buying a house before the deals finished. It will be a credit commitment therefore will be deducted from the mortgage amount you can borrow...

AND you haven't checked insurance? Crazy!

harrpau7

Building_Surveyor wrote: »

Surely these are questions that you should have been asked before you bought the car in order to make an informed decision, was this a spare of the moment thing?

Neither finance options are good if you intend on buying a house before the deals finished. It will be a credit commitment therefore will be deducted from the mortgage amount you can borrow...

AND you haven't checked insurance? Crazy!

I have 12 days to cancel if I change my mind, that's not an issue.

I am asking which option is better, the PCP or the 0% finance option, that's all.

I could probably clear my finance within a year with the overtime I do anyway and also by cutting back on monthly spends. It isn't a spur of the moment thing, I don't want to be starting to fork money out for expensive car repairs, I want peace of mind that I have a new car that is covered for 3 years. I would probably wait until I had cleared my finance before getting a mortgage if I really needed to.

With regards to the insurance I only got the phone call today that the car was 100% mine, Bristol Street initially made a mistake with the car, they found me a car but while I was sorting the deal that very same car was sold to someone else and so they weren't sure if they could get me another car straight away. Hence why while there was the slight delay from yesterday I thought I would come on here and gain some advice from people. I haven't paid a penny out yet and I have 12 days to cancel if I change my mind.

I have the money in the bank to buy the car outright if I wanted, but its a big outlay. That's why both PCP and 0% finance appeal to me. So the answers I want are more along the lines of which option is better, the PCP where I won't own the car, or trying to get the 0% finance on a slightly cheaper but still brand new model which I would own outright, not opinions on whether I should be doing this now, spur of the moment, questioning my mental state etc .

Any answers relating to my last paragraph would be greatly received, please don't personally attack me, that's not fair .

Building_Surveyor

The fact you don't own the car on the pcp deal doesn't really matter if you intend to pay the ballon payment at the end. Is that what you intend to do?

0% finance you don't own the car either until you've made the final payment. The finance company will be the legal owner. So neither deal if that's what's swinging it for you.

Personally if you have the cash, buy something a few years old or if push comes to shove the 0% finance. But unless you intend to get a bank loan for the car (which won't be zero%) then you won't be the legal owner til the car is paid off

Personally I wouldn't blow most of my savings on a car.

Btw the warranty doesn't cover all repairs so bear in mind you may find there are expenses along the way.

harrpau7

Building_Surveyor wrote: »

The fact you don't own the car on the pcp deal doesn't really matter if you intend to pay the ballon payment at the end. Is that what you intend to do?

0% finance you don't own the car either until you've made the final payment. The finance company will be the legal owner. So neither deal if that's what's swinging it for you.

Personally if you have the cash, buy something a few years old or if push comes to shove the 0% finance. But unless you intend to get a bank loan for the car (which won't be zero%) then you won't be the legal owner til the car is paid off

Personally I wouldn't blow most of my savings on a car.

Btw the warranty doesn't cover all repairs so bear in mind you may find there are expenses along the way.

If I went the PCP route I wouldn't buy at the end, I would likely just go into another one.

I would only likely buy the car if I can get 0% finance. That way the vast majority of my savings remain intact for now, I can still save £300 odd a month and anything extra, overtime or money left over from monthly spends would go towards paying the car off.

I may not even be able to get 0% finance on the car, but I am going into the dealership this Friday so I may enquire if it is a better option than the PCP. I figured it may be as the car is a couple of grand cheaper and I would own the car (when finance is paid off) rather than just hiring it. As well as the monthly payments on the loan I could also get about an extra £200 odd a month at least by cutting back on monthly spends and the odd bit of overtime.

I think whatever route I go will have positives and negatives, even I end up doing nowt and keeping my existing car, but just trying to find out what is best before it becomes 100% official.

Thanks for your help

Ultrasonic

I'd personally be prioritising buying a house sooner over buying a brand new car.

Assuming you are dead set on it though, how likely do you think it is you'd want to buy the car after 3 years if you went down the PCP route? If you think it's likely then the 0% option is clearly better (via PCP then paying the GMFV the total cost of the car is £14,200 vs £12k via the 0% finance route). Another downside of the PCP option is that it will have annual mileage restrictions.

The other way of looking at it is the following, IF the GFMV is an accurate estimate of the value of the car after 3 years:

PCP: pay a total of £8700 over three years and then hand the car back.

0%: pay a total of £12k over three years but have a car worth £5500 at the end; net cost £6500 for three years (£2200 less than the PCP option).

For the PCP deal to work out cheaper, the car would have to be worth less than £3300 after three years.