Car purchase - use loan or savings?

basill

robatwork wrote: »

I doubt many car dealers will let you purchase a £15000 car on credit card
And the answer is savings.

I used savings to buy my car, the maximum allowed on credit card was £2000 so I paid £500 deposit and the first £1500 that way. debit card for the rest. Reward points :-)

B

Nasqueron

MrMrMr wrote: »

One car looking is 0% but it's more likely another one which isn't so.

Don't think any savings are 3.4% anywhere near really are they?

Just worried that this will use a lot of savings buying outright, and then have to build up again.

Interest looks to work out average of about £20/month for a loan for me.

You can get more than 3.4% yes, though tends to be limited to current account customer bonuses e.g. I have a 5% saving account with Santander but limited to 1 year, 200 a month. I have a stocks and shares ISA as well but that's a bit up and down, currently on about 4% earning but only started last year

System

Simply do the maths.

Loan interest is higher than savings, buy with savings.
Loan interest is lower than savings, buy with loan.

DO NOT DO PCP. Its a trap.

Trap 1: You get to the end of the deal, you're faced with walking home or getting another car on PCP because you don't have the money to meet the balloon payment or buy another.

Trap 2: The other trap is you get to 3/4 years old and they'll allow you to take out another PCP deal on another shiny new car which you go for because you're getting bored of the one you have and why should you drive around in a 3/4 year old car when you can drive a brand new one for the same monthly payment?

With PCP ones as you don't own car, and may hand back, can you modify them? As in maybe little add one, row bar, alloys, add phone holder bracket etc or do you have to hand exact same car back to same specs?

No. You have to hand them back stock, standard as bought so you'd have to undo every mod and repair anything that fitting them involved, i.e if holes had to be drilled. Only one I think you'd get away with would be a tow bar.

Also with PCP go over the pitiful mileage allowance and they charge you per mile.

Nasqueron

Tarambor wrote: »

Simply do the maths.

Loan interest is higher than savings, buy with savings.
Loan interest is lower than savings, buy with loan.

DO NOT DO PCP. Its a trap.

Trap 1: You get to the end of the deal, you're faced with walking home or getting another car on PCP because you don't have the money to meet the balloon payment or buy another.

Trap 2: The other trap is you get to 3/4 years old and they'll allow you to take out another PCP deal on another shiny new car which you go for because you're getting bored of the one you have and why should you drive around in a 3/4 year old car when you can drive a brand new one for the same monthly payment?



No. You have to hand them back stock, standard as bought so you'd have to undo every mod and repair anything that fitting them involved, i.e if holes had to be drilled. Only one I think you'd get away with would be a tow bar.

Also with PCP go over the pitiful mileage allowance and they charge you per mile.

How is it a trap when everything is explained up front? Only a fool would not know that they have to pay off the balance at the end (so point 1 is invalid - customers forgetting about the balloon is not a trap). 2 isn't a trap, again, explained up front, you either trade in the car at GMV (minus any deductions) or keep the car. Again, if people read what they sign it's all explained.


Finally on mileage, you agree that before the sale as it affects the GMV and if you are keeping the car it's irrelevant

foxy-stoat

Nasqueron wrote: »

Only a fool would not know that they have to pay off the balance at the end

Again, if people read what they sign it's all explained.

If people who take out any sort of credit agreement and only read the contract when they want to terminate it are fools, then there are plenty on here !

System

Nasqueron wrote: »

How is it a trap when everything is explained up front?

You get a car that is not only more than you have to spend but is way more than the money you have to spend. You pay a deposit which may be all the money you've saved and then you pay per month for the car. Because you're paying every month for a car you can't afford you can't save up and before you know it you get to the end of the term. You're now at the dealership handing back the car and you've no money for a balloon payment to buy it and you've no money for a deposit and no money to buy another car so your only option if you don't want to have no money and no car is to sign up for another PCP deal. You get to the end of that, rinse and repeat ad infinitum..

you either trade in the car at GMV (minus any deductions) or keep the car.

So you trade in the car to start another PCP deal. How do you keep the car when you've got no money to cover the balloon payment because you've been paying out for a car you couldn't afford every month? Take out a loan where it costs the same or more per month to pay for a 4 year old car than taking out another PCP deal?

It never fails to amaze me how people fail to see what a trap PCP is. For the manufacturers its the best thing since sliced bread - a never ending stream of fools who'll be buying a new car from them every 3/4 years in perpetuity.

tonycottee

I would always use savings unless I could find a 0% deal form where I bought the car.

MrMrMr

Thanks all. Majority saying savings. I just thought I'd put myself about at risk as then have to build the savings back up slowly.

The argument on PCP I can see both ways. The industry is going this way. For some it means a new car, new warranty, no MOT, no depreciation etc and this can be a good thing for some.

Nasqueron

Tarambor wrote: »

You get a car that is not only more than you have to spend but is way more than the money you have to spend. You pay a deposit which may be all the money you've saved and then you pay per month for the car. Because you're paying every month for a car you can't afford you can't save up and before you know it you get to the end of the term. You're now at the dealership handing back the car and you've no money for a balloon payment to buy it and you've no money for a deposit and no money to buy another car so your only option if you don't want to have no money and no car is to sign up for another PCP deal. You get to the end of that, rinse and repeat ad infinitum..


So you trade in the car to start another PCP deal. How do you keep the car when you've got no money to cover the balloon payment because you've been paying out for a car you couldn't afford every month? Take out a loan where it costs the same or more per month to pay for a 4 year old car than taking out another PCP deal?

It never fails to amaze me how people fail to see what a trap PCP is. For the manufacturers its the best thing since sliced bread - a never ending stream of fools who'll be buying a new car from them every 3/4 years in perpetuity.

None of that is a trap. A trap by definition is to "trick or deceive (someone) into doing something contrary to their interests or intentions." All the above stuff you consider to be the "trap" is presented up front and you sign multiple contracts / statements saying what you can afford and what you agree to pay.

What you are confusing with a trap is people who either delude themselves on what they can afford or lie about their finance. Neither of which is a trap.

PCP is a great product if you read the terms and conditions and understand what you are signing. Not doing that doesn't make it a trap, it makes you a fool

robatwork

Nasqueron wrote: »

PCP is a great product if you read the terms and conditions and understand what you are signing. Not doing that doesn't make it a trap, it makes you a fool

It sounds like you've convinced yourself, and you're the only person who needs convincing.

Personally I wouldn't go near PCP, but something like 75% of all new car sales are via that route now. Are you sure you want a car in 4/5 years from the same manufacturer?