Best way to buy car?

Zaijenn

Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to £20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay £200 per month. Is this nuts?

Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received:eek:

Jonesya

However you buy and finance a new car you'll be paying the depreciation, whether as a sharp fall in value if you buy outright, or hidden away in the deposit, monthly payment and final value in a more complicated PCP.

If you don't want to pay it, why not get a slightly older car, say at 3 years where it's still new and typically under warranty but where someone else has shouldered more of the burden.

Ectophile

Unless you can get a really good deal on a new one, it makes more sense to buy a nearly new car, so that someone else has paid the initial depreciation.


Think carefully before entering into any finance deal. It has to come with a pretty big discount to be cheaper than just buying the car outright. Even on finance, you're still paying for the depreciation - it's factored into the finance costs.


The "trading in" at the end of a PCP may not mean much in reality. If you don't make the final "balloon" payment, the car isn't yours. All you're really doing is handing the car back and taking out another finance deal. If you're lucky, the car might just be worth a bit more than the balloon payment, and the dealer will give you a few pounds towards a new car. You end up paying month after month and never actually owning a car.

loskie

dont do pcp on a used car

consider leasing if you want new

or more sensibly buy a used car for around £8k privately

System

If you don't want to take the depreciation hit on a new car then getting a new car on PCP is madness because you're financing the depreciation via the PCP.

The other problem with PCP is the woefully low annual mileage allowances they typically come with unless you pay more. 6,000 miles a year is not uncommon.

Buy 2 year old nearly new in cash so the highest rate of annual depreciation has already been done with and it'll still have at least 1 year warranty left. £12k would get you a plethora of 1-2 year old cars.

foxy-stoat

Zaijenn wrote: »

Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to £20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay £200 per month. Is this nuts?

Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received:eek:

Cars only depreciate when you sell - if you are thinking about keeping it for a short time then buy a car for £8000 - if your planning on keeping it for many years then buy it outright with cash, so you wont pay interest. Do your research for a few weeks to see what the market is, so you dont buy an overpriced car.

Herzlos

You're paying the depreciation however you finance it.
To offset that, either buy it older or keep it for longer.


The only benefit of PCP is the fixed costs, and if the APR is cheap enough, you may make more from investing your cash elsewhere.

Cornucopia

Tarambor wrote: »

If you don't want to take the depreciation hit on a new car then getting a new car on PCP is madness because you're financing the depreciation via the PCP.

As already stated: ALL new cars, and almost all cars generally have high depreciation. Whether you pay in full or through a finance plan, it makes no difference to the extent of the depreciation - the only caveat being that Leasing and PCPs build in a level of certainty about the depreciation at the outset whereas with other purchase methods it is left as an inevitable "surprise" that occurs when the car is sold/exchanged.

It's simple enough to run the figures and see how a PCP/Lease scheme compares to outright purchase or HP as long as you have an idea of how much depreciation will be suffered by the car over your comparison period. When I've done that in the past, I've found so little in it that I (personally) would prefer the additional options of a PCP whilst interest rates are low, but other people's MMV.

The other problem with PCP is the woefully low annual mileage allowances they typically come with unless you pay more. 6,000 miles a year is not uncommon.

Whilst we've seen situations where people's circumstances have changed, it would be a foolish buyer who opted for 6,000 miles when they knew that 12,000 would be more realistic. The price difference between 6,000 and 12,000 miles is not huge.

Buying a car is an expensive business, and the important message is: caveat emptor. And if you are "buying" a finance product (or products) too, then caveat emptor over that/them too.

Zaijenn wrote: »

We were offered a PCP deal with Ford to put 6K downand pay £200 per month. Is this nuts?

Personally, I'd be resistant to a £6K deposit, because this is a large lump sum that you will probably lose all or most of. What car was it to have such a high deposit? When we discuss PCPs on MSE, we often rejig the deposit into the monthly payments for a fairer comparison between deals. Assuming your deal was 36 months, then your overall monthly equivalent would be: £366.

One useful sanity check before agreeing a PCP is to compare Lease rates for the same car (and vice versa). Generally, Lease rates will be slightly cheaper, but if the difference is huge then that's a good reason to reconsider.

As an example, I'm considering a Renault Kadjar for my next car.

On a 36 month Lease: £1307 deposit + £217pm (10k miles pa)

On a 36 month PCP (with £3k discount applied): £6126 deposit + £219pm (mileage limit not specified)

So the Lease wins by a long way, or in other words, I'd be looking for an unrealistic additional discount of £4800 (I might get £800).

Arklight

Zaijenn wrote: »

Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to £20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay £200 per month. Is this nuts?

Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received:eek:

If you want to buy a brand new car that no one has farted in (apart from the factory workers, the delivery guys and some of the people are the dealership) then you will need to pay a premium.

If you're asking about depreciation then 50% or so of this happens in the first 3 years, so this is the sweet spot for a car that's still relatively new where someone else has taken the hit from devaluation.

If you are asking about cost effectiveness then a reliable used car with a year's MOT for £3k - is going to work out best.

Mercdriver

Also bear in mind that after 8 years overseas, you might struggle to get the best rates on finance deals since the APR is often based on the credit search.

Cornucopia

Following the Kadjar example above, I had a look for nearly new deals, and they illustrate quite well how nearly new is not the obvious choice it perhaps could be (or probably once was).

e.g. 2015 - similar model/same engine as the above figures. 23,500 miles.

Main Dealer Cash price: £13,495

Suggested PCP finance: £0 Deposit + 36 x £292pm (10k miles)

Providing a more realistic deposit: £1300 + 36 x £249.

So... it costs more to use a 3 year old car for 3 years on PCP, than it costs to lease a brand new one. The MGFV at £6k is not even all that small, should you wish to buy the car at the end of the PCP term. (The MGFV for the brand new car was £8164). This doesn't entirely make sense to me, and the end-of-term "value" of the new vehicle is vastly less than the cash price of the 3 year old vehicle.