PCP: Have I been duped

Walshy252

Hi all,

First time posting here but hoping for some sound advice.

So last week my 10 year old car gave up and based on cosmetic damage and wear, the repair was not economical. So time for a new car! Convinced by my dad to not buy new ("lost 30% as soon as you drive away") I looked at nearly new and found some good prices and spec at Motorpoint, finally settling on a Ford Focus Zetec s priced at £12900.

Now here is where the dilemma is. I can afford to stump up £12k, though this would take a significant chunk out of my available capital to place on a house deposit in future (hoping to buy within 2 years). The salesman discussed a couple of finance schemes and recommended their Boomerang scheme (PCP equivalent). My options were:
- £12900 cash
- £313 per month PCP on 14.9% APR Boomerang over 3 years. Guaranteed minimum future value of the car £5700

So I went down the PCP route on the basis that I could keep all of my capital for my deposit, pay lower payments than hire purchase, and have flexibility to change the car in 3 years. The salesman also worked out that 36x£313 was less than £12k, so it was cheaper to buy PCP than buy cash now. What I failed to see at the time was that it wasn't cheaper, as it was actually 36x£313 + £5700 for me to own the car. So I'd actually be paying over £18k over 3 years.

I am within the 14 day cooling off period, and I am tempted to cancel the PCP and pay off in full to avoid the balloon payment. However want to get a strength of opinion first. The pros of staying with PCP:
- Capital available to put down around £40k deposit when I come to mortgage
- Flexibility to change cars in 3 years (In 3 years I would look to upgrade and own the car outright)
- Lower payment than hire purchase which means potentially higher figure available for mortgage payment per month


Pros of paying off in full now within cooling off period as I see them:
- No monthly payment, so more disposable mortgage income per month and opportunity to build savings back up in the short term
- No balloon payment and the car is an asset to sell at any time (depreciation likely to cost about £180 per month over 3 years however)
- Car works out to 5k less over 3 years
- No mileage worries

So am I better off paying thousands more over 3 years, in order to reduce my mortgage in the future. Or am I better off denting my savings now and looking at selling the car in 3 years privately to upgrade?

Thoughts welcome and very appreciated but I need to decide quickly within my cooling period

Adam

maninthestreet

Can you hand the car back at the end of the 3 years?

Walshy252

Yes I can. If I hand back I've paid £11700 over the 3 years and essentially have nothing at the end, but more in my bank right now. If I buy in full now I have an asset to sell at the end of 3 years but less capital available in the interim for house negotiation.

molerat

Where are the monthly payments coming from ? Pay cash and repay it monthly, after 2 years you will have paid 2/3 of it back.

Walshy252

molerat wrote: »

Where are the monthly payments coming from ? Pay cash and repay it monthly, after 2 years you will have paid 2/3 of it back.

As in, pay cash now and repay my savings account over the next 2 years?

mcjordi

pay it off and put the monthly payment you would of been making into the savings account. that way you would own it and save 5k+

neilmcl

Walshy252 wrote: »

Yes I can. If I hand back I've paid £11700 over the 3 years and essentially have nothing at the end, but more in my bank right now. If I buy in full now I have an asset to sell at the end of 3 years but less capital available in the interim for house negotiation.

That's a ridiculously bad deal for a £12K used Ford. You could easily get a brand new £30K BMW for that sort of monthly payment.

Mercdriver

14.9%. Wow. Pay the amount off. I'm not sue that PCP is the way to go with a used car. HP perhaps, but not PCP. Others may differ on view, but PCP on a brand new made to order or ready to drive away new car, but I'm not sue I would do it on a used car at a car supermarket. Depending on your credit rating you would be better off getting a personal loan, and there are ways of checking what rates you would get through a soft search that doesn't show on your credit report.

thescouselander

That really is a terrible deal. PCP can work out well but not when the interest rate is an astronomical 14.9%.

You could have bought new for a fraction of the price. I think you'd be best handing the car back and sorting a better deal out

loskie

you havent been duped you obviously read, understood and signed the paperwork so you have just been stupid.
If you want to keep your capital get a cheap loan and pay it off 14% or so interest is very high.
If you are trying to get a mortgage why the desperation spending this much on a Focus?

maninthestreet

36 x £313 = £11268, not £11700.