Loan or PCP on new car?

iamdriver

I am about to pick up my new car and will likely take out the PCP offered (to get the deposit contribution). However I would like to immediately pay off the PCP but may need to take out a personal loan to do this (interest rate is lower than PCP). I wouldn't need to borrow more than £10,000. I wondered what my credit rating would be like cancelling the PCP immediately after applying and whether I might not even get the loan if I applied with PCP finance already in place. Would it be better to get the loan first?


Any advice would be helpful.


Thanks

Nebulous2

Have you not applied for PCP? Last car I bought, with a dealer contribution, they did the finance application at the end of the sales process. They need to allow time for the finance to be processed if it is referred.

The problem with applying for the loan first is you might get turned down for the PCP.

I'd apply for both simultaneously.

pimento

I did exactly what you're planning when I bought my car. Not brand new but from a main dealer. They contributed £1000 and I never even paid the first payment on the PCP. As far as I know, it had no effect at all on my credit rating.

I now control what I'll do with the car (if anything) after three years.

I applied for the loan after the PCP was agreed. I never thought about the order because they approved me there and then in the dealership on the day I bought it. It was only after posting here that I wised up.

Niv

pimento wrote: »

I did exactly what you're planning when I bought my car. Not brand new but from a main dealer. They contributed £1000 and I never even paid the first payment on the PCP. As far as I know, it had no effect at all on my credit rating.

I now control what I'll do with the car (if anything) after three years.

I applied for the loan after the PCP was agreed. I never thought about the order because they approved me there and then in the dealership on the day I bought it. It was only after posting here that I wised up.

Hi, What did you wise up to? I know that if you don't pay the balloon payment at the end then you give up the car but what else is it that made the loan more appealing to you compared to the PCP?


Thanks,

pimento

Well the car is mine for a start.

Here's my original thread from when I posted here last year.

https://forums.moneysavingexpert.com/discussion/5623142

System

iamdriver wrote: »

I am about to pick up my new car and will likely take out the PCP offered (to get the deposit contribution). However I would like to immediately pay off the PCP but may need to take out a personal loan to do this (interest rate is lower than PCP). I wouldn't need to borrow more than £10,000. I wondered what my credit rating would be like cancelling the PCP immediately after applying and whether I might not even get the loan if I applied with PCP finance already in place. Would it be better to get the loan first?

Ignore the credit score, its a made up fictitious number that no lender uses. Unless you're intending applying for more credit in the next 6 months it'll have no impact.

As to PCP vs loan? Loan is better. PCP is a trap where you pay out for 3/4 years and at the end of it don't have any money for the balloon payment so still needing a car you sign up for another PCP deal. Circumstances change and you find it almost impossible to get out of the deal until the last few months and when you do you've got no car. Basically very very few people actually end up with a car at the end of the PCP deal for all the money they've paid out.

Personally unless you need a new car get a loan and buy a 2/3 year old one. You'll save a lot more money than you will doing what you intend as you won't have the first 2 years depreciation you're paying for which can be between 1/3 and 1/2 of the new price of the car.

Niv

pimento wrote: »

Well the car is mine for a start.

Here's my original thread from when I posted here last year.

https://forums.moneysavingexpert.com/discussion/5623142

Ok, thanks for responding and linking your thread.


For me the situation is slightly different and PCP works out cheaper than getting a loan for a new car, I also have the balloon payment available now so I can buy the car at the end.


Basically, PCP is ok (APR pending) if you buy the car at the end otherwise its a mugs game? That's what I thought at the start anyway and that thought hasn't changed. I have no intention of 'renewing' the deal / car.

AstroTurtle

It depends on many factors.


I Prefer PCP for my high mileage cars so I can swap them mid-term and just get another.


If your an average mileage person a loan may be better as the car wont devalue as fast.

pimento

Niv wrote: »

Ok, thanks for responding and linking your thread.


For me the situation is slightly different and PCP works out cheaper than getting a loan for a new car, I also have the balloon payment available now so I can buy the car at the end.


Basically, PCP is ok (APR pending) if you buy the car at the end otherwise its a mugs game? That's what I thought at the start anyway and that thought hasn't changed. I have no intention of 'renewing' the deal / car.

OK. Make sure you don't damage it, or get it 'dinged' in the supermarket car park or scrape the alloys on the kerb. All damage will make the value lower at the end of the term if you're trading it for a newer model.

I liked the freedom of knowing the car was mine to do what I wanted with. The PCP was three years and the loan for the whole car is four and a half but if I want to sell it or trade it in after three years I'm no worse off than I would have been with the PCP and I'm not paranoid about minor damage.