PCP vs bank loan

boj27

Hi Guys,

I am looking to swap my car. I have a 2014 Leon Cupra worth around £17-18k in a private sale. i have £6700 worth of remaining finance on the vehicle. I am thinking of selling, and getting my £10,000 back out of the vehicle, and paying the rest off. The only reason I would like to swap is because the warranty runs out in April of next year and I have already had a replacement gearbox in the vehicle. if that was to come out of my own pocket it would have cost upwards of £2500, not a thought i'd like to think about in all honesty.

the replacement car I have been looking at is a VW golf R (yes i love cars, everyone has something they are a sucker for!) and it is priced at £29317 (£250 of a 4 year warranty in there, i intend to keep it for the whole term) if i take out the PCP deal where VW are giving me a £2,000 deposit contribution. this means it could either go 2 ways.

1) I put down the smallest deposit available and agree to the finance deal. Just after the car is delivered within the 14 day cool off period i cancel (from what i understand there is no penalty in the first 14 days to do this). for arguments sake, if i put down say £500, I owe £28,817, on the car. If i then take the £10,300 from my old car above, that means I owe £18,517. I then planned on taking out a bank loan for £18,500 @ 3.3% APR fixed over 48 months, with a repayment of £411 per month. this means I am paying £1253 in interest over 4 years, not a lot. my reasoning behind this is because if i don't take the PCP deal i do not get the the extra £2000 off the car. in 4 years i expect the car to be worth around £15,000 by the looks of autotrader, I'd own the car, and it would have cost around £15517 over 4 years, which equates to £3880 per year in depreciation.

2) the second option is i take out the PCP as it supposed to be done. I would put down £5,000, leaving a remaining balance of £24,317. I then pay 49 monthly payments of £262, equating to £12,838. add my deposit onto that and I have paid £17,838 and DO NOT own the car. The final balloon figure was something like £12-13k.

i guess both have their pro's and cons. at the end of the PCP i can just hand the keys back or use the equity in the car towards a new agreement. no "loan" required, although finance is a loan but not in the traditional sense.

what are your guy's thoughts on this? yes i know, brand new cars are a waste of money, but its all my money goes on, its what i enjoy in life.

there is also the option of dipping into my money which is sat in premium bonds making naff all, so instead of getting the full £18,500, i could take £8,000 from that and borrow £10,000.

thoughts?

Pixie5740

If it's a brand new car you want have you tried Drive the Deal? It could help you knock more than £2k of the price.

Take the PCP, get your £2k discount plus whatever else you manage to negotiate off. Then repay the PCP (I do this when I buy cars) using a mixture of a loan (Providing you can get a decent rate. Remember that you might not be one of the 51% offered the representative APR) and savings since your Premium Bonds aren't really making you anything. Keep some savings back for emergencies though.

boj27

Hello,

Yes I've tried drive the deal, carwow, carfile, orange wheels and broad speed. carfile are offering the best deal. When you say pay off the PCP with a mixture of a loan, what do you mean exactly?

Pixie5740

I said you should pay off the PCP using a mixture of loan and savings.

boj27

As in cancel the PCP agreement and pay it off in one hit, or do you mean pay the PCP agreement monthly cost and deposit out of savings/loan? Sorry if I'm sounding dumb it's early :j

Pixie5740

As in pay it off in one go.

class2ldn

So your selling your cupra to buy what is essentially the same car underneath but looks different?
Just on a side note I had a golf r and I wouldn't be rushing back to one that's for sure.
As said above best way if you can do it is to pay off the pcp as you'll get a better deal with their finance usually although it doesn't always go down well but that's life lol.
Also I'm not sure if it will be worth 15k at the end, the mk7 r has been ruined by a massive influx of lease deals

boj27

The only reason I want to swap is the warranty runs out on mine, and there is no chance of a UK main dealership warranty extension, and given what's happened in the past, I don't fancy my chances.

May I ask why you wouldn't go back to a golf R?

You may be right about the price and the lease deals, I may recalculate my maths above

jaydeeuk1

Been some cracking lease deals over the months on a Golf R, working out at around £6800 in total over 2 years, replace after 2 with another and it will work out far cheaper than a PCP, and equivalent to £3400 depreciation each year.

Not many people want to spend £18k on a private sale, might struggle to sell quickly or at the price you want.

nomoneytoday

IMHO - I'd do the PCP thing to get the discount.


However, the PCP comes with a minimum value guarantee (the balloon), whereas the cash loan doesn't. With all the ex-cheap lease cars hitting the market when the loans run out, will the future market price be higher than the guaranteed balloon?


In essence, the PCP interest is insurance of a minimum price in 3 years.


(all IMHO)

nomoneytoday

Also, you're spending £29k on a new car to avoid a potential £2500 that might never happen?