time for a new car - advice

little_green

sorry there are probably lots of threads asking this but looking for advice/tips on car leasing/pcp vs buying outright.

Our car mot is due next month & myself & OH are considering the options. If we were to buy a car our budget would probably be around £2k, however OH is quite keen on finance. I flip in & out of it. One minute I think perhaps finance would be better as it means we can get a newer car hopefully not needing many (any) repairs, but the next I think no, I don’t want the monthly expense & also don’t want to encourage OH at the “living month to month” lifestyle. Our budget for a car on finance would be £200/month (max) ideally less. I hate wasting money unnecessarily so would ideally be looking at a finance deal with 0% (seen a few offers) & definitely sub 5% as why pay interest. What I find confusing with cars is the fact they depreciate in value so rapidly. So for example, whilst someone may be able to afford to buy a car outright, they might chose to take out PCP or lease instead as at the end of the day they can hand it back & have only paid for the period of use. If you buy it outright, drive it for the same number of years at the lease term then decide you want a change, you have to sell it & it’s now worth substantially less than what you paid, so effectively you’ve still lost money.
We’ve previously been quite unlucky with used/older cars & they’ve ended up being costly in repairs (despite having at least a 10month MOT at the time of purchase). Having a newer car minimizes this surely? Though I was chatting to a friend who bought a brand new car & they said something about having to get it serviced annually by an approved garage/dealership (usually where it was bought) & apparently it was £300 for the service alone + the cost of any repairs should there be any required. So I’m thinking well that £300 would probably cost your average mot. Also worth adding myself & my partner know little about cars in practical terms so if we went to view one we wouldn’t be able to pick up on any mechanical discrepancies. We also don’t know anyone who could help with that that would look over the car for us.

What are people’s thoughts on this?

Also I see Halifax do a "Halifax Car Plan Extra" thing .. .not entirely sure I get the gist of it. Can I still do PCP with this ie hand the car back at the end of the term. Or are Halifax effectively buying the car for you (outright) & you pay them back hence your paying them back to pay off the car so you can keep it.

tonyh66

if your paying £200 per month, its £2400 per year. You could buy a car every year for £2400 to avoid MOTs and repairs or keep the car you have and possibly have no repairs to pay for. If you want to put £200 a month in the bank it will more than cover the cost of the repairs at MOT time and possibly get you a little holiday every year.


"Also I see Halifax do a "Halifax Car Plan Extra" thing .. .not entirely sure I get the gist of it. Can I still do PCP with this ie hand the car back at the end of the term. Or are Halifax effectively buying the car for you (outright) & you pay them back hence your paying them back to pay off the car so you can keep it."

this covers both options PCP and HP, effectively you are financing through them instead of the garage, it gives you a better interest rate (probably) than taking garage finance.

alan_d

little_green wrote: »

Our car mot is due next month & myself & OH are considering the options.

Surely the first thing to do, is to put it in for the MOT and see what (if anything) it fails on, as it's likely to be far cheaper to keep this running than spend £2k+ on a 'new' one or get on the tick-tock conveyor-belt.
£50 for the MOT is nothing compared to your other options.
To me it sounds like your OH wants to keep up with the Jones's with a new(ish) car on finance that you can't really afford.
You're right regarding depreciation - the rate they depreciate at is eye-watering. An older car has much less depreciation - and while it will need some repairs, this is waaaay less than you'll lose on something newer.
Often you're better with the devil you know

(I speak as an owner of several older cars )

tacpot12

Having a newer car doesn't minimise on repairs. As well as the cost of servicing, a three year old car might need expensive repairs in a year or two's time, if it has not been properly serviced or driven hard (some hire cars are abused by the hirers).

You are right that anything to do with finance will cost more than buying with your own money. Even zero percent interest deals are still costing you somewhere; there is no such thing as a free lunch.

Your main problem is that you don't know much about cars. The short term answer would be to pay a mechanic to find you a good car, but you will never find anyone who will accept any liability for any car they recommend because even experts can be caught out. Usually the owner of a local small garage of one or two good cars for sale, and will point you in the right direction and will be happy if you return the favour by having the car serviced with them. So just ask around and possibly wait for a good car to come with a recommendation from your garage. Getting your current car through it's MOT is the best option if you can do so at reasonable cost, then upgrade or carry on saving to get something slightly newer.

TheMoonandBack

tonyh66 wrote: »

if your paying £200 per month, its £2400 per year. You could buy a car every year for £2400 to avoid MOTs and repairs or keep the car you have and possibly have no repairs to pay for. If you want to put £200 a month in the bank it will more than cover the cost of the repairs at MOT time and possibly get you a little holiday every year.


"Also I see Halifax do a "Halifax Car Plan Extra" thing .. .not entirely sure I get the gist of it. Can I still do PCP with this ie hand the car back at the end of the term. Or are Halifax effectively buying the car for you (outright) & you pay them back hence your paying them back to pay off the car so you can keep it."

this covers both options PCP and HP, effectively you are financing through them instead of the garage, it gives you a better interest rate (probably) than taking garage finance.

Little-green, the above quote is the answer:)

Whatever you do will cost money. A new/newer car will still need servicing, tyres etc. Possibly (If you pay to maintain it exactly as the manufacturer states)major failures would be less likely and covered by a warranty.
But what you are effectively saying is “rather than maybe spend a few hundred on servicing and MOTing my old car every year, I’ll spend £2400 a year on just having a car.”
Once the novelty wears off the direct debits still go out every month.

little_green

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TheMoonandBack wrote: »

But what you are effectively saying is “rather than maybe spend a few hundred on servicing and MOTing my old car every year, I’ll spend £2400 a year on just having a car.” Once the novelty wears off the direct debits still go out every month.

that really just put it in perspective & hit home! Re the current car it’s unlikely to be cheap on the mot, I’d expect £300+ FYI it’s a 16 year old car hence my reluctance to put more money into it. To add though it I were to pay 2400 a year having a car that’s new & shiny vs the same amount having a car that’s old & needs repaired why wouldn’t I choose the first option? I guess ideally i wouldnt be forking out the £2k each year it'd be one off for a few years .. but itself is a risk…

I will look into local mechanics who could help. Thanks for the responses so far.

Tokk

little_green wrote: »

[
that really just put it in perspective & hit home! Re the current car it’s unlikely to be cheap on the mot, I’d expect £300+ FYI it’s a 16 year old car hence my reluctance to put more money into it. To add though it I were to pay 2400 a year having a car that’s new & shiny vs the same amount having a car that’s old & needs repaired why wouldn’t I choose the first option? I guess ideally i wouldnt be forking out the £2k each year it'd be one off for a few years .. but itself is a risk…

Okay let's lay down some numbers...

Let's say your current motor needs £400 to get through its MOT this year. And you pay it.

£2k-£400=£1600 left in the savings account.

Over the next year, you then pile the £200 a month you would've been putting into the finance deal into that savings pile.

£1600+£2400=£4k

So you've then planned the demise of current motor a year in advance and a much bigger "outright buy" pot to play with.
You could even, at that point, take out a £2k bank loan to be paid off over that next year and you're into £6k territory which can buy a hell of a lot - either something out of your normal price/prestige bracket or something fairly boring but a few years old and fairly low mileage.
Or.. let's say at MOT time then its still perfectly reasonable to do so again and save another year?

If you simply want something new right now that's fine (we all do, I think?) but can you justify it? Is it a sensible course of action?
Only you can decide that...

AdrianC

little_green wrote: »

What I find confusing with cars is the fact they depreciate in value so rapidly. So for example, whilst someone may be able to afford to buy a car outright, they might chose to take out PCP or lease instead as at the end of the day they can hand it back & have only paid for the period of use. If you buy it outright, drive it for the same number of years at the lease term then decide you want a change, you have to sell it & it’s now worth substantially less than what you paid, so effectively you’ve still lost money.

However you finance a new car, you're still paying for the same thing - the amount the car's lost in value. Plus interest, of course, on the entire value of the car, if somebody else's money bought it.

The main difference is whether you're paying off the borrowing over the time you have the car, or whether you're just paying the depreciation and leaving the expected future value until later.


Then there's whether you get the chance to own the car or not at the end.

In broad terms:
Loan - pay the lot off, keep the car.
PCP - pay just the depreciation, get the option to keep the car.
Lease - pay just the depreciation, no option to keep the car.


So if the car's going to lose £10k in value over three years, then you're paying that £10k, one way or another. Nobody else is subsidising it for you. They're providing you with the full value of that car, one way or another, in order to make a profit for themselves.

System

If you want a newer car even because it'll just be a nicer place to be in when driving or even you just fancy a change then there's nothing wrong with that, it is a perfectly valid reason to. Just don't fool yourself that you're doing it to save money because you aren't.

E30M3

My financial advisor said it's best for me to keep my money with him than with a car on my drive. So let someone else (the finance company) deal with the depreciation value.
I like my cars, so for me a car is more than getting from A to B.
I do get peace of mind from securing my monthly outgoings and knowing that there are no hidden surprises as I will be covered by manufacturers warranty for the time I will have the car.
I also prefer pure leasing to PCP as the balloon payment at the end of PCP I found restrictive.

I've used this broker a few times, including renewing my 3 year lease this week for a new vehicle.
https://www.nationwidevehiclecontracts.co.uk/
Take a look around and see what is in your budget.

Try and hit the deals! My ex wanted a Fiat 500, at the time for her miles the mid-spec car was £210 PCM, but there was a deal on for the top spec @ £166 PCM, yes, £50ish a month cheaper.

AdrianC

E30M3 wrote: »

My financial advisor said it's best for me to keep my money with him than with a car on my drive. So let someone else (the finance company) deal with the depreciation value.

Commission on your investments, and commission on the finance he arranged?