Using a Personal Loan like PCP

blebo2000

Hi,

I'm new here and have tried the search function. I have found loads of threads on PCP vs Personal Loan but couldn't find one that answers my question.

I am looking to buy a new car and have usual choices of PCP or Loan. I like the idea of PCP as I usually end up changing my car after 5 years or so and the low month payments are attractive. However, I also have a very good credit score and I qualify for 3.0% apr loans. This got me thinking can I use a personal loan as a PCP deal. Take out a seven-year loan that reflects the PCP deal offered by the dealer at a lower rate, meaning that at the 5-year point I could trade the car in (value of car deducted from the new vehicle), take out a new loan (cost of new vehicle + o/s loan balance) and pay off the existing loan and start again.

What are the disadvantages? Am I missing something? From the numbers below I would be paying £20 a month less and save over £1000

The numbers are here:

Dealer Loan Type Agreement
48 monthly payments of £171 £149.95
Customer deposit £2,600 £2,635
Cash price £12,435 £12,435
Dealer deposit contribution £500 £0
Total amount of credit £9,335 £9800
Optional final payment £3,100 £3,500
Total amount payable £14,407 £13,333
Duration 48 Months 48 Months
Fixed interest rate p.a. 7 .90% 3.00%


Cost of credit £1,972 £898

motorguy

blebo2000 wrote: »

Hi,

I'm new here and have tried the search function. I have found loads of threads on PCP vs Personal Loan but couldn't find one that answers my question.

I am looking to buy a new car and have usual choices of PCP or Loan. I like the idea of PCP as I usually end up changing my car after 5 years or so and the low month payments are attractive. However, I also have a very good credit score and I qualify for 3.0% apr loans. This got me thinking can I use a personal loan as a PCP deal. Take out a seven-year loan that reflects the PCP deal offered by the dealer at a lower rate, meaning that at the 5-year point I could trade the car in (value of car deducted from the new vehicle), take out a new loan (cost of new vehicle + o/s loan balance) and pay off the existing loan and start again.

What are the disadvantages? Am I missing something? From the numbers below I would be paying £20 a month less and save over £1000

The numbers are here:

Dealer Loan Type Agreement
48 monthly payments of £171 £149.95
Customer deposit £2,600 £2,635
Cash price £12,435 £12,435
Dealer deposit contribution £500 £0
Total amount of credit £9,335 £9800
Optional final payment £3,100 £3,500
Total amount payable £14,407 £13,333
Duration 48 Months 48 Months
Fixed interest rate p.a. 7 .90% 3.00%


Cost of credit £1,972 £898

Yup. Sounds about right. Dealers / Manufacturers have started to exploit the "low monthly payments" headline of PCP deals to hide high APRs.

You'd be right to use a personal loan in preference