New Car advice

jack_tyler

Hi, I will be getting a new car very soon (approx 2-3 months) and I don't know whether to pay for the car outright or do it on a P.C.P.
I had originally decided to buy it outright so as to avoid the interest charged for credit. My plan was to put the money in an account that will give me the best interest, and then use this to pay the monthly payment every month. But after talking with family & friends, a lot of them are saying don't do that, pay for the car on a P.C.P its the best option. 1, I won't be parting with a lot of money straight away (because once that money has gone it's gone)...2, the depreciation of the car will be with the dealership and not me...3, no M.O.T's to worry about for 3yrs and 4, have the option at the end of the 3yrs to either walk away, pay off the final payment (if I decide to keep the car) or change it for another brand new car. So I really don't know what to do...totally and utterly confused:huh: This is the first time in my life that I have been able to buy a brand new car. In the past when I have bought cars, they have always been on HP.....but as there is now so many different ways to purchase a car, I don't know which one is the best or which one would save me the most money in the long run. So any help or advice would be greatly appreciated

neilmcl

Presumably you've already agreed a PCP deal when you ordered the car, did you get any dealer contribution/discount because if this?

The conventional wisdom if you have the money for the car is to buy it outright, or in the case of any PCP discounts etc, to settle the finance soon after collection.

At the end of the day all finance packages are in the favour of the finance co and dealerships so my advice is to only take out finance if you can make it work for you.

System

jack_tyler wrote: »

2, the depreciation of the car will be with the dealership and not me...

Completely and utterly wrong. You take the hit for the depreciation, you just pay for it in monthly instalments.

andrewf75

If you want to save money, why not buy nearly new rather than brand new? A year old car is still basically new, but many thousands cheaper. Even an ex-demonstrator or few month old car will save you thousands.

jack_tyler

Thanks every one for your replies. To neilmcl:- no I haven't already agreed a PCP, at the time when I decided on the car, I said I would probably pay for it in full, the salesperson told me not to worry about that right now, as that can be decided more nearer the time. The car ive ordered isn't acutally ready yet, it has a projected build date of 3rd June. As for discounts etc, no I was told that there wasn't any because of the type of car I was getting (sports type car).
To tarambor:- thats what I was told so if its wrong then im sorry, im only repeating what somebody told me.
To andrewf75:- because of the car im getting, that unfortunately isn't an option, as the car hasn't been built yet, and they are only making a limited number of them. The car only became available to order last July/Aug which is when I ordered one. I have been told that the projected build date is 3rd June, and I have already put a small deposit down

neilmcl

In that case it makes it pretty simple. If you're not getting any dealer contributions then there isn't any real incentive to taking out a finance agreement with the dealership. What car is it, if you don't mind me asking?

Mobeer

1) There is a value to having some free cash as an emergency fund.
2) As already mentioned, the effect of depreciation is included in your payments
3) Using finance does not affect the requirement for an MOT
4) Having an option is nice, but you will essentially have paid interest to have that option

Much depends upon the finance cost (fees, APR) and your own personal finances. Generally I'd say its better to avoid paying interest on a car, unless you can justify this some other way, like getting a very low APR on the car and paying off a mortgage lump sump.

Nasqueron

If on 0% finance or you can earn more interest than you're paying then PCP is ok but I personally only recommend it if you want the car at the end.

If I wasn't keeping mine I would have gone ex-demo or similar rather than PCP - car new was £24k and second hands ones are around 15k after 2 years and the GMV after 43 months is only about £8000 so I'd have "lost" 16k in 3 1/2 years. As it is, I'm keeping it so earned interest on the money in my account as the finance was 0% and as I intend to keep it probably 10 years like my last there is no depreciation to worry about

jack_tyler

to neilmcl:- no I don't mind you asking, the car is the new Ford Focus RS. There were no incentives with the car because of the type of car it is, (this was also the same for the Ford Mustang). Apparently because of the exclusivity of the car and the fact that they is also a limited number of them being made, they don't need to do any discounts/contributions, the car basically sells itself.
To mobeer:- I understand that using finance does not affect the requirement for an MOT, but as the car will be brand new, it won't need an MOT for at least the first 3yrs. As for finance cost/APR etc, that's what I dont know yet.
To Nasqueron:- if I got the car on finance, I don't think it would be 0% interest, as I remember when I first went for a test drive in the car and we talked about this, the salesperson did say that a lot of the cars are 0% as an incentive to buy, but this particular car (and others) don't come with 0%. Ideally what I would like to do is, put the full cost of the car into a bank account, and then use the money that this money makes to pay for it....but as there is no accounts out there that pays really good interest, (or at least enough to cover the monthly payment) that's why i'm not sure what to do. I know il pay more in interest on finance, but if its not much different to what id get if I put all the money in a bank account, then I think id rather get the car on finance

Nasqueron

If you don't get 0% then you'll almost certainly pay more in interest than you'd earn even though clever use of 3-4 current accounts paying 3-5% so it'd be more money saving to pay in full - you'd have to get the garage to do the sums on finance then work out what it'll cost you in full with interest minus the interest you could earn if you saved the money vs paying up front vs what it'd cost you and work out what you want.

Taking quick and dirty figures, if you had a £10000 finance on say 10% interest and paid £11000 for the car total while earning say 2% interest on the money and got £200 you'd be paying £800 more for the car than paying up front

wgl2014

Just for comparison http://www.tch.co.uk/new-car-offers/new-ford-focus-st-offers/ford-focus-st-finance/
2k deposit contribution and 2 years 0% finance.