Purchasing Route for next car, PCP or Loan?

infernouk

Hi guys

I am starting to consider a new car as my circumstances are getting better and the option will soon be available.

I currently have a 2011 corsa i bought new when i was 20, so now im 26 and the car is 6 years old.

Im considering 2 cars specifically at the moment, a fiesta ST for around 17k new on 0% PCP, or a Toyota GT86 2 years old (itll have 3 years warranty left on it) with 10k or less mileage, also for 17k.

Issue is that obviously theres no PCP on the used car so id be looking at loans rather than PCP, benefit is less depreciation hit, disadvantage is that its going to have some level of APR.

I was wondering is there a clear winner in the two i am not seeing? or are both equally as viable as methods? Some background, I am 26 with a 30k job but am moving shortly to a 40k job, going to be renting a flat also soon. I have no debts beyond student loan and no major outgoings besides the usual food, phone, gym etc.

Cheers for any insight into making this decision!

neilmcl

The biggest "advantage" of financing via a loan is simply this, you own the car outright from the start. Clearly your repayments will be much higher than a PCP, it'll be more in line with a traditional HP agreement. It's worth searching various loan providers to see what a £17k car loan will cost you and to see if you can really afford it.

infernouk

neilmcl wrote: »

The biggest "advantage" of financing via a loan is simply this, you own the car outright from the start. Clearly your repayments will be much higher than a PCP, it'll be more in line with a traditional HP agreement. It's worth searching various loan providers to see what a £17k car loan will cost you and to see if you can really afford it.

thanks, my issue with searching is the APR is all representative until application, how can i know ill even get close to it?

Also i assume the lower PCP is due to the balloon payment? If you need to refinance the balloon id guess they arent going to be doing that a 0% also?

almillar

MSE has a loan guide, including an eligibility checker, that can help you a certain distance, but you're right, representative rates aren't necessarily the ones you'll get, especially if your credit is poor. I don't know of a way to find out, without getting a mark on your file.
The money you put into the Fiesta is to 'rent' the car. You hand back at the end, or buy your car. So at the end, you own zero. With the GT86, if it's from a garage, they won't have rates as good as on new cars, so certainly shop around as you say you will. Borrowing rates are good at the mo, if you are sure you can repay it all. The payments are higher, but at the end you own - a GT86. How much will it be worth? This will help you work out the net cost.
The above isn't a recommendation for either.
Finally - buy the GT86 - you can do a hot hatch any time and pretend to be sensible! They won't be making cars like this in the future!

Shaka_Zulu

infernouk wrote: »

Issue is that obviously theres no PCP on the used car so id be looking at loans rather than PCP, benefit is less depreciation hit, disadvantage is that its going to have some level of APR.

There is no such thing as a free lunch you will be paying interest somewhere.

So whether it has 0% APR or not is irrelevant, it is the total amount that you need to pay that is important.

System

infernouk wrote: »

Hi guys

I am starting to consider a new car as my circumstances are getting better and the option will soon be available.

I currently have a 2011 corsa i bought new when i was 20, so now im 26 and the car is 6 years old.

This is how people end up skint, living hand to mouth because of the finance they've taken out to buy new shinies because they've had an increase in income. If this is your default view you'll never feel any better off than you currently are now because you'll always increase your spending to match your higher income.

If the Corsa is running fine then keep it. If you must replace then look at 2-3 years old when the largest chunk of depreciation has happened, money that someone else has burned.

infernouk

Tarambor wrote: »

This is how people end up skint, living hand to mouth because of the finance they've taken out to buy new shinies because they've had an increase in income. If this is your default view you'll never feel any better off than you currently are now because you'll always increase your spending to match your higher income.

If the Corsa is running fine then keep it. If you must replace then look at 2-3 years old when the largest chunk of depreciation has happened, money that someone else has burned.

im well aware of lifestyle inflation, however my career path is on a trajectory where im certain i can afford this, its not like im looking at german luxury saloons, i already bought the corsa new when i passed my test, this will be a very very small part of my salary.

Its about relative income and enjoyment derrived from what you buy, i love my career and i dont resent my job so i have no concern in regard to what you have mentioned. Im already looking at 2 year old cars, hence the gt86

DUTR

infernouk wrote: »

im well aware of lifestyle inflation, however my career path is on a trajectory where im certain i can afford this, its not like im looking at german luxury saloons, i already bought the corsa new when i passed my test, this will be a very very small part of my salary.

Its about relative income and enjoyment derrived from what you buy, i love my career and i dont resent my job so i have no concern in regard to what you have mentioned. Im already looking at 2 year old cars, hence the gt86

Treat yourself, you've worked for it.... be wary of the Fiesta STs, they do get stolen a lot, the GT86 is nice but lacks modern technology.

infernouk

DUTR wrote: »

Treat yourself, you've worked for it.... be wary of the Fiesta STs, they do get stolen a lot, the GT86 is nice but lacks modern technology.

Im in a pretty safe area theft wise, the 86 would be for driving experience and not so much the tech!

System

infernouk wrote: »

im well aware of lifestyle inflation, however my career path is on a trajectory where im certain i can afford this

And I'm quite sure many people on the DFW and Bankruptcy boards on this site said exactly the same as they signed on the dotted line for their latest consumer fix.

You're also talking about renting your own place when you get your £10k wage rise, which is roughly an additional £7k take home but I bet the cost of the rent alone will eat all of that, certainly the cost of rent, council tax and utility bills will and then some. So actually when you move out on £40k you'll have LESS disposible cash to spend than you do currently on £30k. If you could afford this then you'd be paying in cash given you appear to be living at home on a £30k wage. But you can't so it suggests you can't afford it.

Your career path may be on a certain trajectory now but that doesn't mean that you'll be guaranteed to be in employment for the duration of the period of the deal, especially with the uncertainties of Brexit, and you take no account of lifestyle changes that may happen and that you're already planning a move giving you less money to spare than you have now. Moving from mummy and daddy's house to a flat of your own and being responsible for all of your bills will eat up ALL of your additional £7000 a year take home wage rise and then some. Then there's meeting a boy/girl, the costs of dating and the possibility of a baby infernouk. Do you really need the additional pressure of a £3000+ a year finance deal for something you don't actually need?

this will be a very very small part of my salary.

If that's the case then how come you've not managed to save up enough money to buy one over the last few years whilst you've been living at home?

As for very small part of your salary you're looking at payments at around 10% of your monthly take home pay. Not a problem but it won't be 10% of your disposable pay though will it, especially when you've got your own place. Its more likely to be 25% or more of your disposable pay after you've paid the rent and council tax. Chuck in food and all the frivolous crap you're currently tied into such as mobile phone, the gym, and the inevitable pay TV you'll get etc and it could form a very large percentage of your spare cash.

DUTR

infernouk wrote: »

Im in a pretty safe area theft wise, the 86 would be for driving experience and not so much the tech!

Many are, the STs do get targetted, just be mindful of that, you can search the web it's been near rife in the Midlands.