Best way to buy car?

parking_question_chap

I would just go for the used £12k option and save the £8k.

A well engineered car will last 20+ years easy as long as its looked after.

Car_54

I would always have advised paying cash (if you can, or via a bank loan), and not buying new.
However ...
Last year I bought an ex-demonstrator Jaguar. I was ready to pay cash (plus trade-in) but I was offered a "contribution" of £1,500 if I took a PCP deal.
I took the deal, and paid it off in full after 2 months. Lost about £200 in interest, but £1,300 better off overall.

MEM62

Zaijenn wrote: »

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

OK. So you are concerned over the financial losses due to depreciation and your solution to that is to finance the car so that you add interest to the cost of the car and make your loss even greater.

Forgive me but I'm struggling with your logic.

Cornucopia

MEM62 wrote: »

OK. So you are concerned over the financial losses due to depreciation and your solution to that is to finance the car so that you add interest to the cost of the car and make your loss even greater.

Forgive me but I'm struggling with your logic.

In which case, the answer has already been given: there is no trick to avoiding depreciation on new and nearly-new cars. It cannot be done. The only option is to carefully compare and consider the costs of buying outright, buying on HP/Bank Loan, or of getting the car on PCP or Leasing. And to consider the value (if any, to you personally) of PCPs and Leases with their in-built hedging against excess depreciation vs. the open-ended commitment of other options.

The Interweb says that the people keep their cars for an average of 6 years, so it would be interesting to properly compare costs of ownership over that period. I'm guessing it will favour 5 year HP deals, especially where the interest rate is low.

MEM62

Cornucopia wrote: »

In which case, the answer has already been given: there is no trick to avoiding depreciation on new and nearly-new cars. It cannot be done. The only option is to carefully compare and consider the costs of buying outright, buying on HP/Bank Loan, or of getting the car on PCP or Leasing. And to consider the value (if any, to you personally) of PCPs and Leases with their in-built hedging against excess depreciation vs. the open-ended commitment of other options.

The Interweb says that the people keep their cars for an average of 6 years, so it would be interesting to properly compare costs of ownership over that period. I'm guessing it will favour 5 year HP deals, especially where the interest rate is low.

I am not aware of any mechanism of financing that would reduce the loss. (Even with PCP where you walk away at the end you have effectively picked up the bill for depreciation plus interest) The older the vehicle is a the point of acquisition the more it will have already depreciated but beyond a certain point you are then balancing this against repair bills.

Many years ago my father's accountant found, what he believed, to be the cheapest way of motoring. He would buy five or six-year old Volvo's and run them until something major broke scrap it and then start again. The cars would be regularly serviced and properly cared for whilst in his ownership and often ran for many years and high mileages before he scrapped them.

I currently have a company car that I may give up soon as the tax liability dictates that it is hardly a benefit anymore. If I do I will probably buy a three or four year old Volvo, BMW or similar and run it to 100K, sell it on and start again.

Cornucopia

MEM62 wrote: »

I am not aware of any mechanism of financing that would reduce the loss.

As I said: it cannot be done. PCP/Lease is about managing the risk, fixing the maximum amount of depreciation, and knowing what it will be at the outset. Of course, these things may or may not be important for each individual buyer. For me, I can definitely see the temptation of driving a £23000 car for £225pm + £1300 down.

The older the vehicle is a the point of acquisition the more it will have already depreciated but beyond a certain point you are then balancing this against repair bills.

Indeed, though see my earlier comments about nearly-new. (This confirms my unfortunate experience, in which of all the cars I've owned, the one with by far the worst depreciation was a nearly-new car - IIRC it was 18 months old when I bought it for £18k, and it lost over £10k in just over a year, when a too small garage at a new house forced its sale. Hawking it around provided a couple of slightly better offers, but it was still a vast loss - about 55%).

YorkshireBoy

Car_54 wrote: »

I would always have advised paying cash (if you can, or via a bank loan), and not buying new.
However ...
Last year I bought an ex-demonstrator Jaguar. I was ready to pay cash (plus trade-in) but I was offered a "contribution" of £1,500 if I took a PCP deal.
I took the deal, and paid it off in full after 2 months. Lost about £200 in interest, but £1,300 better off overall.

Just done exactly the same, on the same marque (2 x £750 contribution totalling £1,500), except the ink had barely dried on my signature when I called up to 'withdraw' from the agreement. Cost me around £7 (2 days interest at £3.xx per day).

DrEskimo

Cornucopia wrote: »

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.

My guess is that either the used car is loaded with options (which are not reflected in the GFV of a new car), or it's a dealer chancing his arm on making a large profit off someone who hasn't done their homework.

I'm looking at a cheap second car to do low miles with and considering a Zoe. Brand new they are like £22k, but CarWow have them discounted to £12k.

I've seen a couple of 1yr old ones for £10k and just waiting for one with the right colour. But there are no shortage of overpriced ones on AT...18m old ones with 10k on the clock priced at £16k and £14k....again...just dealer hoping to make a large profit off an unsuspecting punter....hard to think what else it could be, because they obviously have the trade value of the car, and it's going to be close to £7k!

All about doing your homework and waiting for that one that's sensibly priced. Of course it goes without saying, you would be pretty nuts to pay as much as £2,700 in interest on that used Kadjar using PCP, when you can borrow £10k for as little as £500 at the moment!!

That's my main problem with PCP in general. The actual interest you pay is closer to sub-prime loans...

Cornucopia

Yes, I think there are (at least) those two factors in the price of the Used car: dealer profiteering (there is only one dealer for Renault across most of Kent) and higher interest rates on finance for used cars vs. new.

That caution that buyers need to employ is all part of the challenge of buying a car.

I like the sound of that Zoe for £12k, though.

DrEskimo

Cornucopia wrote: »

Yes, I think there are (at least) those two factors in the price of the Used car: dealer profiteering (there is only one dealer for Renault across most of Kent) and higher interest rates on finance for used cars vs. new.

That caution that buyers need to employ is all part of the challenge of buying a car.

I like the sound of that Zoe for £12k, though.

Yea I hired one for a few days from a place in MK. Was pleasantly surprised!
If you can charge at home, and don't need to do daily journeys >100miles, then they really are cheap as chips to run. Surprisingly fun to drive too....

Best quote from CarWow was from Peterborough Renault for £12,140. You will have to wait to put an order in though. Looking at around November realistically.