Need help deciding how to finance a car as a PhD student

19AC

Hi,

I'm about to start my PhD and will be receiving a tax-free stipend of about £15,000 per year. My current car is an old corsa which doesn't have much life left and I'm looking to get a new or used car. Does anyone have any suggestions for someone in my position to get a new car, is it better to get a car on PCP finance or buy an older one out right?

Thanks

DrEskimo

Continue to build up your savings and run the Corsa until it is uneconomical to repair. When that comes, use the savings you have to buy another used car.

If by 'better' you mean 'cheaper' there is no feasible way a brand new car using the most expensive method of borrowing money will cost less than a used car bought outright. Any additional repair/maintenance will be absolutely dwarfed by the additional costs in depreciation and interest.

The stipend is basically equivalent to a salary of £18k per annum, so budget according to that.

PasturesNew

Always try to pay cash for a car, about 4-10 years old.

If it's been paid for then you have no payments to worry about + no other worries if it should get nicked, or break down, or anything.

What's mine's mine and staying mine. No fear of repossessions.

19AC

What about the cost of servicing? Some of the PCP deals have 3 years servicing included and a newer car will likely cost less per year on tax.

DrEskimo

19AC wrote: »

What about the cost of servicing? Some of the PCP deals have 3 years servicing included and a newer car will likely cost less per year on tax.

Again, trivial costs relative to the likely interest you will pay, and the massive difference in depreciation.

Have you got specific examples? What sort of PCP deal were you looking at, and what sort of car would you be able to buy outright if the Corsa gave up tomorrow?

Ebe_Scrooge

19AC wrote: »

What about the cost of servicing? Some of the PCP deals have 3 years servicing included and a newer car will likely cost less per year on tax.

The cost of servicing and tax are a minute amount of the total annual cost of running a car. Also, remember that you've no need to have your own car serviced at a main dealer - you can do it yourself, or get a local mechanic to do it for you at a fraction of the price. If it were me, I'd be going for a decent second-hand car every time.

For what it's worth, every car I've ever bought has been between 4 - 10 years old, the most I've ever paid was my most recent one where I really splashed out and spent £5000. I service them myself, tend to keep them for about 6 or 7 years, and I've never had anything major go wrong - just consumables and everyday wear and tear. If you take your time to look around and buy sensibly, there's no reason you can't get a very reliable car for well under £5000 - as long as you're not a badge-snob :-)

19AC

DrEskimo wrote: »

Again, trivial costs relative to the likely interest you will pay, and the massive difference in depreciation.

Have you got specific examples? What sort of PCP deal were you looking at, and what sort of car would you be able to buy outright if the Corsa gave up tomorrow?

Thanks, I was looking at a maybe a VW polo on finance or Kia, but having read the replies I'm rethinking this! I would be looking around to spend around £5000 to buy outright.

19AC

Ebe_Scrooge wrote: »

The cost of servicing and tax are a minute amount of the total annual cost of running a car. Also, remember that you've no need to have your own car serviced at a main dealer - you can do it yourself, or get a local mechanic to do it for you at a fraction of the price. If it were me, I'd be going for a decent second-hand car every time.

For what it's worth, every car I've ever bought has been between 4 - 10 years old, the most I've ever paid was my most recent one where I really splashed out and spent £5000. I service them myself, tend to keep them for about 6 or 7 years, and I've never had anything major go wrong - just consumables and everyday wear and tear. If you take your time to look around and buy sensibly, there's no reason you can't get a very reliable car for well under £5000 - as long as you're not a badge-snob :-)

Thanks, that's really helpful. Any suggestions for reliable car models and the maximum mileage I should consider?

Cornucopia

This kind of decision is about matching your funds with what you want/need.

As already noted, the cheapest options are around your existing car. Otherwise, you'll need to think about what you can/want to put down as a deposit and how much you want to spend each month.

As a rough guide, even the cheapest new cars are around £100pm on PCP or Lease, which might not sound like a lot, but it works out to around £5k over a 3 year period, including deposit. Then you'll need to decide whether to buy the remaining share of the car, trade it for little or no equity, or walk away.

iwb100

I don't think PCH or PCP is necessarily a bad idea as a PhD student. You have to budget what you want and what you can afford and act accordingly. Using your savings up to buy a 2nd hand car is the most "money saving" option but I know as PhD that isn't always the best option.

I'd recommend looking at PCH/PCP and comparing total costs. You will need to go for a small car with a small engine to keep costs down. And you will need to check which lenders would deem you eligible as not all will. In PCP case consider it a rental rather than a buy. You are paying a monthly fee to use the car just like PCH. Ignore all the stuff about equity at the end because a) its often not the case and b) in your position you wont be committing to buy anyway since you won't know whether you'll have a job or not.

Only commit to a deal that is covered by the length of your PhD income. So if its a 3 year funded PhD you are looking at 3 year deals. In which case PCH is likely to be your best bet.

forgotmyname

Any make or model that has been serviced properly and under 200,000 miles is usually good.

5 year old car with 18 service stamps in the book and not run to within a mile of its max service interval. People forget that the service interval is a maximum not a target.

The owner of my car obviously thought that 12k miles between services was way too much. 6k - 8k between services.

My old car cost me £50 a month over 6 years that I owned it... All services MOTs and repairs, just add insurance. Can you get a deal for less than that?