PCP v.s. Large Deposit and Loan

Marshall_Man

Hi, Just got a question about PCP v.s. a loan so would greatfully love to hear your views.

Basically I’m looking at getting a year old Fiesta which will cost approx. 11K. Originally the plan was to use 5k-ish out of some savings (still leaving a healthy emergency fund) and get a loan for 6k for the rest. I’ve got a very good credit rating so I’m assuming I’ll be able to get a rate of 4.2% with Sainsbury.

After seeing the dealership the (admittedly very grumpy) salesman was recommending getting it on a PCP to ‘protect the depreciation’ however I just can’t get over the bigger cost of the finance. While the monthly payments are less is it actually worth doing? I’m planning on keeping the car for approx. 3 – 5 years.

Here’s how I see the two scenarios – based on a cash price of 10,750

PCP
36 Monthly Payments £171.84
Optional Final Payment £5,220.00
Cash Price £10,750.00
Total Deposit £2,000.00
Amount of Credit £8,750.00
Total Charge for Credit £2,656.24
Total Amount Payable £13,406.24
APR Representative 12.9%
Rate of Interest (fixed) 6.34%
Annual Mileage 8000
Excess Mileage 8 ppm

Loan
Deposit £4,750
Loan 6k
Rate 4.2%
24 Monthly payments £260.87
Total repayable: £6,260.88
Total loan repayment + deposit - £11,010.88

Judging by the above the loan seems to be a better option. Provided I finish the term of the PCP and purchased I’ll be paying 2.4k more and be bound by the mileage and any other clauses. The salesman practically called me an idiot for wanting to do this – granted he’s probably on a commission but am I missing anything? I understand that to an extent PCP limits the deprecation. While I’d like to get a newer car in 3-5 years I may have priorities then such as buying a bigger home.

Another thought is that a loan gives me more flexibility in the event I have to drive more miles or god forbid lost my job so I could sell the car and get a cheap banger…

So – what’s your recommendations?

Cheers

jonesMUFCforever

Will the dealers offer you an incentive to take out Ford finance?
I got £1100 - you could then pay the PCP off with your savings and loan.

Also look at sites like carwow.co.uk - they negotiate a deal for you - could work very well for you if you do not have a car to trade in.

Marshall_Man

Thanks,

I had a look at car wow but it seems to be new cars only? I'm really only looking for a 1-2 year 2nd hand.

Forgot to add that my current car is a bit of a crate so I don't really have a trade in - going to eBay it I guess?

They didn't offer any incentives at all - but I guess as it's not a new new car - looking at ThinkFord if that makes any difference... Cheers

chanz4

they will have about 2k profit in it, don't worry

Marshall_Man

As in you reckon when I finish the 24 months of the PCP that the car would be worth roughly 7k? Then I could use the 1.5K equity for a deposit on a new one? Who/what would define the value? Surely the dealer would want it to be as close to the settlement figure as possible?

racing_blue

If I had £5K to spend on a car, I'd get a car costing £5k or less

Clearly this doesn't answer your question PCP or loan, but this is because I cannot think of a single reason to consider either.

I guess it's a bit like asking my wife whether she would prefer to watch Rocky III or the Red Dwarf box set.

racing_blue

Marshall_Man wrote: »

Optional Final Payment £5,220.00
Cash Price £10,750.00
Total Deposit £2,000.00
Amount of Credit £8,750.00
Total Charge for Credit £2,656.24
Total Amount Payable £13,406.24

So – what’s your recommendations?

Fast forward three years, you pay £5,220 and become the proud owner of a 4 year old Fiesta with around 30,000 miles on the clock.

That's not so bad.

But during those three years, with PCP you will have paid £8,186 (which is £13,406-£5,220) for the pleasure of pre-renting your future 4 year old Fiesta. Bit less with a loan, but the idea's the same.

Which is quite bad.

So my recommendation: buy a 4 year old Fiesta right now, cash on the barrel, and save yourself a lot of money.

noh

You would pay less buying a new one via Drive the Deal and taking out Ford finance which is currently offering a £1060 deposit contribution with Finance at 0.9% apr over 2 years.

noh

I have just done an enquiry on Drivethedeal.
A new 3 door Fiesta Zetec Ecoboost 1.0 in red with spare wheel would be £10970 if the deposit contribution is taken into account. With two years interest on £5500 at 0.9% being around £50 the total cost would be £11020. The same as your bank loan and much less than PCP from the dealer plus you have a newer car. It makes no sense to buy the second hand one from your dealer when a new one can be bought for less.

Marshall_Man

Thanks, I did consider new, and did look at those options.

Unfortunately you're looking a base Fiesta rather than the Zetec S - so we're not really comparing apples to apples. The quotes I got back were around £13500.

Starting to lean towards the loan - as I won't have to suffer any mileage penalties if I change jobs and start driving further.

noh

The total cost on Ford finance for a Zetec S in red via DtD would be around £12400.