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New or car, lease vs loan vs PCP?
TheCyclingProgrammer
Posts: 3,702 Forumite
in Motoring
Hi there, my first post so please go easy on me! 
I'm unexpectedly in the market for a new car. Unfortunately, my first ever car has finally died after 7 years of ownership (Seat Ibiza, suspected timing chain jumped). I was hoping to get some advice and see what other people's opinions were. Sorry if this is a bit of a long one - I can ramble a bit!
It couldn't be worse timing really; we're in a good place financially but we are already paying for a wedding, an expensive unplanned holiday in the middle of the summer holidays for my sister's wedding and are planning to buy our first house after we get married in April.
Fortunately, we budget carefully and both my fiancee and I have a couple of £k in emergency funds plus some general savings on top of this that we can use without touching the savings we've got set aside for the above. That doesn't mean I'm happy about it though! (I planned to run my Seat into the ground and buy a new car in a few years...unfortunately it had other ideas).
So...I've been researching our options and I'm feeling pretty overwhelmed. Car wise, I don't need anything expensive or high end and I was quite happy with my Seat Ibiza in terms of how it drove. Something like a Ford Fiesta (or similar) or possibly a Focus (or similar) would be good for us.
I initially looked into leasing through a PCH deal and whilst this might be the cheapest in terms of monthly payments but I just don't like the idea of never owning the car and pretty much be in the position of constantly paying a monthly rental and worry about any minor damage costs at the end of the lease term. Mileage isn't a worry generally as I only do about 4-5k a year and I don't expect this to increase much beyond 6-7k when my fiancee passes her test.
Buying a used car (something 4-6 years old) is a possible option, although I don't think our savings would quite cover it so I'd probably have to take either a personal loan or a director's loan from my company to cover this (as long as I can pay the director's loan off in 15 months). But I'm very wary of this. My 2003 Seat Ibiza cost me £4300 when I bought it in 2007 and I must have spent around another £3000 on it since then - it just wasn't very reliable - and the last thing I want is to be stuck with another unreliable car that costs me lots of money in the long term.
So I started looking into buying a new car. Yes, I know what everybody says about buying a new car and the depreciation hit, especially in the first year, but I'm willing to entertain it.
Finance wise, this would have to either be a PCP deal or a personal loan. PCP deal looked attractive - we can afford a £2k deposit and a brand new Ford Fiesta EcoBoost 1.0 Zetec, with then Sony DAB/Bluetooth stereo upgrade, which is about £14500 new, works out at about £234/month for 2 years with a final £7k balloon payment. Realistically, I think we'll be able to afford the balloon payment after 2 years (although 3 years would be more comfortable) but at least we have the option of handing it back or part-exing for a new model.
However, everything I read about PCP suggests its only a good deal if you plan to hand the car back. Is that right? I'd really like to own the car outright at the end and would prefer to keep any new car we buy for at least 5 years, so we get a few more hopefully reliable years out of it (low mileage remember) and then still sell it for a reasonable price.
A personal loan is an alternative option but we would probably have to spread it out over at least 4 years to keep the monthly payments affordable (I want to keep a reasonable savings margin in our monthly budget).
Finally, I thought I'd look into the price of 1 year old cars and had a bit of a revelation - a Ford Focus with a bit of mileage on it depreciates a huge amount more in its first year than a roughly equivalent Fiesta. Looking on Motorpoint, a 1 year old Fiesta, equivalent to the new model I'm looking at with < 10k miles goes for around £11-12.5k - about £3k cheaper on average than brand new.
However, a slightly better specced 1 year old Focus (still 1.0 EcoBoost but in the Titanium trim with the Sony DAB/Bluetooth plus more as standard) with 15-18k can be had for about £11k, a saving of about £7k versus brand new!
Not only that, but at £11k, with a £2k deposit, we could finance the remaining £9k with a personal loan over 3-4 years at about 4.6%, costing about £700-800 in interest over the lifetime of the loan. This brings the total cost to about £11.8k but given our modest mileage (say 6k a year) and the prices of 6 year old Focus' today, I think if we kept it for 5 years, we'd have a 6 year old Focus with < 50k miles on the clock and I think we'd still get at least £5k for it, meaning our total cost (excluding petrol/insurance/servicing etc.) over 5 years would be just under £7k.
So you can see why I'm a bit overwhelmed with all these options. Sorry if I've overwhelmed you too!
To summarise:
* I think I've pretty much ruled out PCH
* I haven't ruled out buying new entirely - so far I've only got list prices to go on (and there's a £500 deposit contribution if I take the Ford Options PCP finance) but there is probably room to negotiate discounts and freebies.
* Buying a 1 year old car seems to have most of the benefits of buying new (yes, I lose out on 1 year of warranty but I could possibly buy an extended warranty if I wanted peace of mind) but offers potential savings, lots in the case of the Focus and also gives us more funding options.
Finally, I'm aware that taking on any kind of finance deal, whether it be PCP or a personal loan, is not ideal when you plan to apply for a mortgage in a few months time. Fortunately, I have a very good credit rating and no other debts and my mortgage broker seems confident it shouldn't affect my chances (the mortgage he has recommended to me, the lender is lending based on multiples of my last years accounts and is therefore prepared to lend me far in excess of what I actually need so lots of headroom there).
Sorry, did I mention this would be a long one? :rotfl:
I'm unexpectedly in the market for a new car. Unfortunately, my first ever car has finally died after 7 years of ownership (Seat Ibiza, suspected timing chain jumped). I was hoping to get some advice and see what other people's opinions were. Sorry if this is a bit of a long one - I can ramble a bit!
It couldn't be worse timing really; we're in a good place financially but we are already paying for a wedding, an expensive unplanned holiday in the middle of the summer holidays for my sister's wedding and are planning to buy our first house after we get married in April.
Fortunately, we budget carefully and both my fiancee and I have a couple of £k in emergency funds plus some general savings on top of this that we can use without touching the savings we've got set aside for the above. That doesn't mean I'm happy about it though! (I planned to run my Seat into the ground and buy a new car in a few years...unfortunately it had other ideas).
So...I've been researching our options and I'm feeling pretty overwhelmed. Car wise, I don't need anything expensive or high end and I was quite happy with my Seat Ibiza in terms of how it drove. Something like a Ford Fiesta (or similar) or possibly a Focus (or similar) would be good for us.
I initially looked into leasing through a PCH deal and whilst this might be the cheapest in terms of monthly payments but I just don't like the idea of never owning the car and pretty much be in the position of constantly paying a monthly rental and worry about any minor damage costs at the end of the lease term. Mileage isn't a worry generally as I only do about 4-5k a year and I don't expect this to increase much beyond 6-7k when my fiancee passes her test.
Buying a used car (something 4-6 years old) is a possible option, although I don't think our savings would quite cover it so I'd probably have to take either a personal loan or a director's loan from my company to cover this (as long as I can pay the director's loan off in 15 months). But I'm very wary of this. My 2003 Seat Ibiza cost me £4300 when I bought it in 2007 and I must have spent around another £3000 on it since then - it just wasn't very reliable - and the last thing I want is to be stuck with another unreliable car that costs me lots of money in the long term.
So I started looking into buying a new car. Yes, I know what everybody says about buying a new car and the depreciation hit, especially in the first year, but I'm willing to entertain it.
Finance wise, this would have to either be a PCP deal or a personal loan. PCP deal looked attractive - we can afford a £2k deposit and a brand new Ford Fiesta EcoBoost 1.0 Zetec, with then Sony DAB/Bluetooth stereo upgrade, which is about £14500 new, works out at about £234/month for 2 years with a final £7k balloon payment. Realistically, I think we'll be able to afford the balloon payment after 2 years (although 3 years would be more comfortable) but at least we have the option of handing it back or part-exing for a new model.
However, everything I read about PCP suggests its only a good deal if you plan to hand the car back. Is that right? I'd really like to own the car outright at the end and would prefer to keep any new car we buy for at least 5 years, so we get a few more hopefully reliable years out of it (low mileage remember) and then still sell it for a reasonable price.
A personal loan is an alternative option but we would probably have to spread it out over at least 4 years to keep the monthly payments affordable (I want to keep a reasonable savings margin in our monthly budget).
Finally, I thought I'd look into the price of 1 year old cars and had a bit of a revelation - a Ford Focus with a bit of mileage on it depreciates a huge amount more in its first year than a roughly equivalent Fiesta. Looking on Motorpoint, a 1 year old Fiesta, equivalent to the new model I'm looking at with < 10k miles goes for around £11-12.5k - about £3k cheaper on average than brand new.
However, a slightly better specced 1 year old Focus (still 1.0 EcoBoost but in the Titanium trim with the Sony DAB/Bluetooth plus more as standard) with 15-18k can be had for about £11k, a saving of about £7k versus brand new!
Not only that, but at £11k, with a £2k deposit, we could finance the remaining £9k with a personal loan over 3-4 years at about 4.6%, costing about £700-800 in interest over the lifetime of the loan. This brings the total cost to about £11.8k but given our modest mileage (say 6k a year) and the prices of 6 year old Focus' today, I think if we kept it for 5 years, we'd have a 6 year old Focus with < 50k miles on the clock and I think we'd still get at least £5k for it, meaning our total cost (excluding petrol/insurance/servicing etc.) over 5 years would be just under £7k.
So you can see why I'm a bit overwhelmed with all these options. Sorry if I've overwhelmed you too!
To summarise:
* I think I've pretty much ruled out PCH
* I haven't ruled out buying new entirely - so far I've only got list prices to go on (and there's a £500 deposit contribution if I take the Ford Options PCP finance) but there is probably room to negotiate discounts and freebies.
* Buying a 1 year old car seems to have most of the benefits of buying new (yes, I lose out on 1 year of warranty but I could possibly buy an extended warranty if I wanted peace of mind) but offers potential savings, lots in the case of the Focus and also gives us more funding options.
Finally, I'm aware that taking on any kind of finance deal, whether it be PCP or a personal loan, is not ideal when you plan to apply for a mortgage in a few months time. Fortunately, I have a very good credit rating and no other debts and my mortgage broker seems confident it shouldn't affect my chances (the mortgage he has recommended to me, the lender is lending based on multiples of my last years accounts and is therefore prepared to lend me far in excess of what I actually need so lots of headroom there).
Sorry, did I mention this would be a long one? :rotfl:
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Comments
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Is there a reason you can't just fix the Ibiza?0
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If you find a nearly new one you like it'll normally be a better deal, plus you'll be able to drive it away in a couple of days.
To make things worse, have a look at some online brokers for a new car (broadspeed, drivethedeal, etc), as you may be able to get a new one for about the same as a 1 year old. Ford also discount pretty generously.0 -
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If you find a nearly new one you like it'll normally be a better deal, plus you'll be able to drive it away in a couple of days.
To make things worse, have a look at some online brokers for a new car (broadspeed, drivethedeal, etc), as you may be able to get a new one for about the same as a 1 year old. Ford also discount pretty generously.
So I went to the Ford dealer for a test drive of the Fiesta today. He's openly told me he hasn't given me his best deal yet, but so far he's quoted me a 2 year Ford Options deal of £250/month over 24 months with a £1k deposit and a balloon payment of £6970, so coming in just under £14k total including cost of finance. I'm not sure I'll get him lower than £13k if I push hard.
Conversely, I've just been to see a 4 year old Ford Fiesta Titanium model (so lots of extras including better stereo system) with only 22k miles on the clock going for £8800. The dealer says the lowest he can go is £8700.
And the other option I'm seriously considering is a 1 year old Ford Focus, with about 15k miles on the clock, for £11299. £7k cheaper than new but still with lots more depreciation to go.0 -
Seriously leaning towards the £11k 1 year old Focus Titanium. Great reviews and its already taken a £7k depreciation hit. I know there's more depreciation to come on the Focus, but I can seriously see myself owning this car for a minimum of 5 years, up to 10 years.
With an average of 5-6k miles a year, I can surely make a nearly new Focus last that long with proper servicing and looking after can't I?0 -
I'd lean towards the 1-year-old Focus, but have a look at all the options once you have the quotes on paper to compare the deposit, monthly payments, final payment (if any) and total payable.
Part of the reason for the large depreciation on the Focus is that very few people pay anywhere close to full price for them. So it looks like it has dropped a lot more than it really has.0 -
Thanks for the reply; we're also considering the 1.4l petrol Hyundai i30 as this would save us a few grand vs the Focus. Any thoughts on this?0
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TheCyclingProgrammer wrote: »A complete waste of money. It's 11 years old, worth about £600-700, would cost several hundred just to strip down the engine and check the timing chain, about £750 to repair it if it hasn't damaged the engine, over £1k if it has.
I accept this, just don't get the logic.
If you're going to run a car into the ground, it doesn't matter how much it's worth - as you're not going to sell it. Plus, it can't be measured in worth as you need it whether it's worth £1 or £10k.
My veiwpoint : I'd rather spend 1k on it and get it going, than get a finance deal at 11k, with money that isn't mine.
That said, best of luck with your course of action.0 -
I accept this, just don't get the logic.
If you're going to run a car into the ground, it doesn't matter how much it's worth - as you're not going to sell it. Plus, it can't be measured in worth as you need it whether it's worth £1 or £10k.
My veiwpoint : I'd rather spend 1k on it and get it going, than get a finance deal at 11k, with money that isn't mine.
That said, best of luck with your course of action.
You've got to draw a line somewhere. I have no desire to continue sinking money into an 11 year old car I'm afraid.0 -
It's your desicion pal, no need to justify it to me.
- All the best0
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