Car Finance

DCFC79

eng1991 wrote: »

Thank you for the reply. Yes I believe that they have 20 different finance companies they go to and dependent on the credit rating is what price gets offered

Its credit history they see not the rating unless you know different.

DrEskimo

Cornucopia wrote: »

Good post, and I agree with much of what you've said.

However, I don't see how the interest on a bank loan can be "many, many times cheaper" that of an equivalent PCP, but perhaps I have misunderstood.


For me, the comparison looks like this:-

Citroen C4 Cactus PCP: £19270 OTR, 37 Months @ £270
Deposit: £2500, Incentives: £2500

This gives a total cost of credit of £1533, APR 4.9%

A 36 month bank loan for £14270 would give payments of £426pm, and a total cost of credit of: £1079. This makes the very big assumption that the same incentives would apply to Bank finance.

Or trying to match the PCP payments: 60 x £267, for a total cost of £1807.

There are also better PCP deals on the model specified than the one I have posted. Caveat Emptor - as always.

No that's a fair point. I was probably over zealous in my statement "many many times"..!

My more general 'take home message' should have been framed as "Don't use the APR as a direct comparator between different types of loans", which is what I've sometimes seen.

I agree, the precise difference is very dependent on the exact deal. In the case of the Citreon, I'm guessing the GFV is around £7k? Obviously the smaller the GFV, the closer it is to just a standard loan. Also if the interest rate is already smaller, then the difference is less pronounced. Same with the actual amount borrowed.

I frequent Audi forums were users (myself included) were getting PCP's on much more expensive cars (£40k+) on PCP's at ~6%, where the GFV is typically around the 60% mark after 36months. In these cases, the difference in interest accrued between standard loans and PCP is very stark. But then the ability to borrow large sums is also more difficult...!

Regarding incentives, good point also. You are able to take advantage of the incentives by taking the car on PCP, then clearing the finance within 14days. However, the rigmarole of taking out a PCP and possibly taking out a personal loan of high value in quick succession may not sit well with most people....!