Buying outright, bank loan or PCP

Gshep0406

Hi there I am currently looking to buy a new car, after spending all my savings on a new house and paying a monthly mortgage I am wondering what's the best way to buy a new car.

I currently drive a vw polo worth about £2,000. I would use this as either a deposit for a new car, part exchange or sell it to help cover the cost of a bank loan.

I am basically wondering what the best option is.

Would it be to part exchange my car and wait a couple of months to save up and buy a car out right ?

To sell my current car and secure a bank loan to pay for a new car ?

Or would It be to use my current car as a deposit for a new car using the pcp scheme.

I like the idea of PCP and being able to have low monthly payments and be able to get a new car every 3 years. However I feel like there is probably some underlying factors that will catch me out. I'm not bothered about whether the car is mine or not. Just looking at a financial point of view as I dont want to buy a car to then loose value over years. Dont know if the saying goes like this but 'buy what appreciates and rent what depreciates'

Any advice would be great thanks :beer:

foxy-stoat

Most day to day cars depreciate over time, even renting a new car on PCP you are paying for the depreciation.

If you must have and want a new car every 3 years then PCP it, as long as you can afford the deposit each time and you read the contract and understand it then there should be no surprises.

If you are buying a used car then go for a bank loan, single figure interest rates over 2 or 3 years, not be tempted to spread it out over 5, part exchange your car is easier than trying to sell it privately but you will pay for the privilege.

If you can save the purchase price for your car in a few months then wait and save up.

noclaf

foxy-stoat wrote: »

If you are buying a used car then go for a bank loan, single figure interest rates over 2 or 3 years, not be tempted to spread it out over 5, part exchange your car is easier than trying to sell it privately but you will pay for the privilege.

In a similar boat to the op, this is exactly my plan. Once current car becomes uneconomical to continue maintaining, take a small loan maybe £5k, add a bit of cash on top and buy a car of my choice outright then keep it for a few years. It means my own cash stays in bank as I build it up for a property deposit. That's the master plan anyway!🤪

lr1277

I personally wouldn't get a PCP car because in case it is crashed beyond economic repair, you still owe the PCP company the full value of the car.


I don't know if this is possible, but get GAP insurance that covers what you owe the PCP company and also your initial deposit. Otherwise the GAP insurance will only cover what you owe the PCP company and not leave you enough to get your next car and you will be carless.


So you should factor in GAP insurance payments as part of your calculations.



About a week ago, there was a thread on this exact subject, but I can't remember its title.


HTH.

AdrianC

The big difference is flexibility. If you're taking on a PCP (or any other similar deal), then do so on the basis that you'll conform to the terms. You'll keep the car to term, and you'll keep roughly to the mileage.

That apart, a lot depends on what you intend to do at the end of the PCP term - if you don't expect to keep it, then the option to cap your depreciation exposure by just handing it back may be valuable. You still benefit from lower-than-expected depreciation, of course, because you can PX it.

Then it's just down to the total cost...

JackeeBoy

How quickly can you save £2k? I ask because, if it's not too much money for you, you might as well run this car into the ground and then use an interest free credit card to buy another for around £5k or so.

If you mean new as in BRAND new it's a simple matter of how much you can afford and what's the cheapest option in the end. If there is not a particular interior or exterior colour you are looking for, than buy a new car that's a few months old and save thousands on it.

DD265

I've had PCP, but own my current car outright. I definitely prefer owning out right - as has been said there's more flexibility and you aren't answering to a finance company.

I would try and work out what kind of car you want, then cost up the various options to buy it. I didn't find PCP to have low monthly payments at all, but then I was doing 25k miles a year which drives the price right up.

onomatopoeia99

Go back a few steps to why you want a new car now, when you've taken on a mortgage and have no savings.

Why can't your current car do the job for a few years while you rebuild your savings?

Indout96

Are you after a new or second hand car ?
I bought my present car under 3 year PCP when it was 4 years old and make the payments each month and then put the extra away each month to pay the final payment.
At the time my bank offered 3.9% and PCP was offered at 5.8% so yes this way cost more but I looked at it as more of an insurance premium in case the car turned out to be a money pit I could just return it and use the final payment saved for a new deposit.
So far 2.5 years in, it is a car I love and has been perfect so I will be keeping it. payments have been very little over what the bank would have charged so I am happy.

motorguy

foxy-stoat wrote: »

Most day to day cars depreciate over time, even renting a new car on PCP you are paying for the depreciation.

If you must have and want a new car every 3 years then PCP it, as long as you can afford the deposit each time and you read the contract and understand it then there should be no surprises.

If you are buying a used car then go for a bank loan, single figure interest rates over 2 or 3 years, not be tempted to spread it out over 5, part exchange your car is easier than trying to sell it privately but you will pay for the privilege.

If you can save the purchase price for your car in a few months then wait and save up.

Totally agree with this advice.

Cheap personal loans available from 2.9% APR (maybe less)

motorguy

lr1277 wrote: »

I personally wouldn't get a PCP car because in case it is crashed beyond economic repair, you still owe the PCP company the full value of the car.


I don't know if this is possible, but get GAP insurance that covers what you owe the PCP company and also your initial deposit. Otherwise the GAP insurance will only cover what you owe the PCP company and not leave you enough to get your next car and you will be carless.


So you should factor in GAP insurance payments as part of your calculations.



About a week ago, there was a thread on this exact subject, but I can't remember its title.


HTH.

Sorry, but most of this is simply wrong.

You wont owe the finance company the full value of the car if you crash it at some point down the line - you will simply (like any HP agreement) owe them the settlement figure for the car at that time.

GAP insurance is a simple and easy way to minimise risk - you can get GAP insurance cheaply that covers RTI (return to invoice price) so you'd effectively get your deposit back too. This is common practice.

If you're buying ANY new car with ANY funding method, GAP insurance cost should be factored in - unless of course you're happy to have an insurance company pay out market used value on something you bought new a few months previous.