PCP, HP or Cash for New Car?

Birdman2015

We have been looking at new cars recently and have had test drives of a couple of models, both dealers gave us similar quotes and trade in values. Both quotes were based on PCP deals.

I tend to change my car quite frequently (every 2-3 years) so maybe a PCP deal is the way to go? I do like the comfort of knowing that the car is mine at the end of the payments though so HP (as I have my current car on) seems atttractive.

On the other hand I do have the funds to be able to pay cash for the new car but that means com mitting a large chunk of our savings into a lump of metal!

I paid 18K for my current car 15 months ago and trade in value is 12K so that's the equivalent of £400 per month I have spent on the car. Compare that to the PCP deal for a BMW 1 Series at £258 per month for 3 years with a 5K deposit and the PCP perhaps makes more sense if i plan to change in 3 years.

Any advice on the way to go would be appreciated.

jonesMUFCforever

Look at it this way in 15 months you have lost £6000.
Madness I tell you madness.

If you have the cash get the finance first if the dealer offers you a bribe to do so then pay it off imediately and you will at least save you some interest.

tlc678910

I don't think your comparison of £400 v £258 is equivalent. The car has depreciated 6K in 15 months but the fastest depreciation will be when the car is new. It won't continue to depreciate at that rate.

The £258 car will cost £9,288 in monthly payments over the 3 years (plus the 5K deposit) = 14,288 (I assume you don't get any money back if you choose not to buy the car at the end of three years)

Your car could depreciate by a further £8,288 in the next 21 months (equivalent 3 year term) before you experience the same loss. For that to happen your car would have to fall from being worth 12K to being worth £3,712 in the next 21 months - not gonna happen. Or am I misunderstanding the terms of the PCP?

Birdman2015

I worked out that my current car would be worth just over £9,000 at the end of the 3 years. As this is on a standard HP deal it's not an issue.

I agreed to buy the BMW today and was approved for the finance. Managed to squeeze £900 of extras out of them too! Yes, there is no guarantee that there will be any equity at the end of the 3 year term although surely it's in their interest to do me a deal in 3 years to keep my custom.

Looking at the figures now I'd pay £2500 in interest over 3 years but would only make £1200 in savings for the amount borrowed over that same time so using my savings perhaps makes more sense.

Thrugelmir

Birdman2015 wrote: »

although surely it's in their interest to do me a deal in 3 years to keep my custom.

I wouldn't have thought so. Business is business. Not a charity.

Caz3121

andrewjack21 wrote: »

Deciding how to finance your car is an important decision many of us need to make. In 2015, 70% of all new cars buyers used finance from their dealer to pay for their purchase.

In the majority of your posts, you copy and paste from other websites - if someone wants to read the full article it is useful to link to the source
http://www.arnoldclark.com/newsroom/006-pcp-pch-or-hp-car-finance-explained
(although you did appear to change the year!)