Saving for a car

DrEskimo

Giddy72 wrote: »

So, I shall be keeping the car, for sure!

Thanks for your kind offer of helping through this minefield!

I have 36 monthly payments of 389.65 followed by a single payment of 7,913.50 (which is what I am saving for I have 1,980 so far...) - The APR is 3.9%

No problem. Although note I said I would try and help...there is no guarantee I will actually be of any help...!

What price did you agree on for the car? I'm guessing around £20,300, something like that? Did you have anything else, like part-exchanging another car against it?

fiisch

DrEskimo wrote: »

Yes this was my tactic for buying my last new car. CarWow quote, which I got my local dealer to match.

As mentioned, it's not so much the APR that has put me off, but the actual interest charged. The quoted APR is actually not a good indicator of how expensive the loan is, since it is made up of two parts essentially; a traditional capital and interest repayment loan on the difference between the invoice and the GFV, and a interest only repayment loan on the GFV.

As an example my last PCP was a £47k Audi S5 that I got discounted to £38.5k. I put £6k as a upfront payment (not calling it a deposit..!) so was financing £32.5k. The quoted APR was 5.8% and this was on a 24month term.

A standard bank loan to borrow £32.5k at 5.8% over 24months would cost you £1,947.65.

However, on my PCP loan with a GFV of £27k, I ended up making 23 payments of £381.14. Those payments, plus the £27k final payment totals £35,766.22, which is £3,266.22 in interest!

That's makes the PCP loan 67.7% (£1,319.22) more expensive than the 'standard' loan, even though they are both at the same APR rate and over the same term and borrowing the same amount of money.

That's why quoting the APR can be misleading, and overpaying the PCP can result in much higher savings than the APR would suggest. But this is of course entirely dependent on the price, the GFV, the APR and how much you are financing.

As aside, please say you didn't pay the dealer the ridiculous prices for those awful insurance product and add-ons...? The GAP is often marked up 4x the market value (and generally a worse product), and the paint protection is IMO borderline fraudulent...

Going OT here, but I have come to the conclusion that there are much much better ways to buy/finance a car that doesn't result in paying the dealership thousands in interest charges. Namely buying nearly new/used with personal loans will be many times cheaper, will give you 99% of the same experience, and will leave you in a better position financially each time relative to PCP on brand new (i.e. needing to borrow less each time you want to change).

Dear God no! I am an amateur car-detailer, so I know how terrible the Lifeshine offerings are(!), and as someone who works in insurance, I am very anti-insurance(!!) and choose not to take Gap.

(Going way OT here, but my reasoning is that I can pick a car insurance policy that will replace a new car like-for-like in year 1, and by year 3 the gap is fairly small. If I am involved in accident that writes off a new car, I am doubtful whether money will be much of a concern to me anymore. That only leaves the theft risk...)

I have also reached a similar conclusion to you DrEskimo. I have got to the point where our car finances cost nearly as much as our mortgage and - even as a petrolhead - I realise that is pretty silly, especially when we've "only" got a Honda and bloody Seat outside!

I've recently noted a 3-4year old Audi RS7 with >15,000 miles on the clock can be had for less than £40k... Not money saving necessarily, but could well be my next indulgence.

Giddy72

DrEskimo wrote: »

No problem. Although note I said I would try and help...there is no guarantee I will actually be of any help...!

What price did you agree on for the car? I'm guessing around £20,300, something like that? Did you have anything else, like part-exchanging another car against it?

No. £500 deposit then the repayments then the lump sum

kidmugsy

We've given up buying two year old cars. Our last buy was a ten year old. A well looked after ten year old might last as long as a two year old did when I was young.