Car Finance, what IS the best way?

born_again

Steve_GP220 wrote: »

I But I get the impression that the dealers or the sales-person don't like these deals. Is that because they don't make much out of the deal?

No dealers & salesmen love PCP. It's a easy sale and nice payout for them.

If you get offered a good PCP deal and were looking to pay cash. Take the deal and pay it off straight away.
Will totally (insert sales persons expletive) as they lose the commission on the sale of finance. :rotfl:

DrEskimo

Steve_GP220 wrote: »

My thing with PCP is, I'd take it to keep the payment low, and then over the 36-42 mths period make random payments to the balloon so that by the time the PCP period was up, the final payment would already be paid. But then I'd have the hassle of selling the car instead of just handing it back. Where as I could put all those random payments to one side to get a decent deposit on my next car!

Buying a car with a personal loan, then trading it in after a few years is exactly the same as taking a car on PCP finance and trading it in at the end. One is finance secured on the car, one is a unsecured loan. It is very rare to just hand the car back. Typically you just sell it to the dealer as a trade in, just the same as P/X a car you own.

If you are looking at PCP you need to look past the APR. You cannot compare rates between personal loans and PCP, as the different payment structures leads to different interest costs. Look at the actual amount of interest you pay and compare these.

Personally I buy used with cash, and use finance deals to get additional incentives like above. I start with brand new discounts and work from there to determine what a good price is for the used car, along with researching the car market for the car I want for a while until I find a good buy. Variation is high in the car market. You want to be at the tail end of the distribution!

DD265

I just did a money transfer from a credit card (5% fee, interest free 20 months which is long enough to pay it off) then took out HP on a 5yo car to get a better deal. Will be using the money transfer to pay off the HP within the cooling off period.

fred246

I would have thought that by 60 years of age you would know what you want from a car. Buying an asset at the height of it's value and then keeping it while it's value drops like a stone and then selling it at a low point only to buy another at it's peak is madness. What do you think happens when it is 3 or 4 years old? It's only just run in!

Steve_GP220

Oh I know what I want from a car, as in motoring wise. It's just the finance I struggle with. I tend to buy enthusiast cars. I am and always have been a bit of a petrol head. Thank god by the the time we go all electric I will have quit driving. I just sold a Mini GP, and am looking at M2s at the moment. My past cars have been Jaguar XKR, Focus RS, Skyline GTR. My cars are basically regular weekend cars which I hold onto for 3 to 4 years. I NEVER make money on cars and don't expect to. I tend to look at the costs monthly and accept that cars, especially the ones I buy, are money pits. I'm afraid I don't opt for the super efficient and practical. But the finance questions cover all purchases whatever the car. Hence my post.

fred246 wrote: »

I would have thought that by 60 years of age you would know what you want from a car. Buying an asset at the height of it's value and then keeping it while it's value drops like a stone and then selling it at a low point only to buy another at it's peak is madness. What do you think happens when it is 3 or 4 years old? It's only just run in!

AdrianC

Steve_GP220 wrote: »

So, my attention is drawn to PCP. A deposit, regular payment and then either pay the balloon at the end or give the car back. Some say you can use the car as a deposit on another car and go through the same cycle but for the life of me I cant see how this works. That final payment is owed to the finance company so there is nothing left for the deposit, surely?

It's very simple.
You borrow the full value of the car, less the initial payment ("deposit").
You then repay over a much longer period than the term of the deal, designed so that at the end of the deal, you still owe roughly what the car is predicted to be worth.
You then either pay that ("balloon"/GMFV), and buy the car from them, or you hand it back.

If the car is worth more than the balloon, you can get somebody else to buy it out of the finance, and give you the difference - that goes towards your initial payment for the next car.

If the car is worth less, not your problem - hand it back and walk away. Which does put you on a finance treadmill...

It gets hidden-expensive if you want to get out of the deal early. Forget the 50% VT - that includes the balloon, and if you've chosen something that depreciates so fast... So the finance will give you a settlement figure. What many people do is hand the car back and the value goes towards that - and the -ve equity can then be rolled into their next finance...

Example: £30k car, £5k initial. You're borrowing £25k. The balloon is £15k - so you're repaying £10k over three years, plus interest on the whole £25k.

If the car is worth £20k at the end, then you've got £5k towards your next car.
If it's worth £10k, not your problem.

But let's say you want out after repaying £5k, so you still owe £20k - but the car's only worth £18k at the time. You need to find £2k. If you roll that into another PCP like the first, then you're financing £27k, and repaying £12k over the term...

But I get the impression that the dealers or the sales-person don't like these deals. Is that because they don't make much out of the deal?

Exact opposite... Plenty of commission on finance! More than on selling the car in the first place.

Or because at the end of the term they have the hassle of dealing with a car handed back?

Which means a nice steady supply of used cars. Or it just goes off to auction if they don't want it. No skin off their noses either way.

Or is it still 'cash is king?

Not for many years.

Does anyone here have any thoughts as to the best way to go? Or at least an opinion, or advice.

Only you know what'll work best for you.

DrEskimo

There isn't a need to complicate things. A car comes with many costs; depreciation, servicing, fuel, maintenance, MOT, VED, etc etc. Using finance just adds another cost on top.

If you are looking to minimise costs, you need to look at each cost separately. Depreciation can be minimised by buying used, fuel and VED can be minimised by buying more efficient cars, etc. Finance can be minimised by getting a cheaper rate and borrowing smaller amounts over shorter terms.

Just compare the cost of interest of each type of finance and determine which costs the least amount.

mgfvvc

Steve_GP220 wrote: »

I tend to buy enthusiast cars. I am and always have been a bit of a petrol head. Thank god by the the time we go all electric I will have quit driving.

Try a Tesla performance model before writing off electric cars as slow and dull. Some of the Teslas have 0-60 times to compare with a Ferrari. The Jaguar i-Pace looks brilliant for an SUV. (Disclaimer: I drive a dull petrol engined family car at the moment and have yet to drive any of the electric cars I see on youtube.)

Steve_GP220

mgfvvc wrote: »

Try a Tesla performance model before writing off electric cars as slow and dull. Some of the Teslas have 0-60 times to compare with a Ferrari. The Jaguar i-Pace looks brilliant for an SUV. (Disclaimer: I drive a dull petrol engined family car at the moment and have yet to drive any of the electric cars I see on youtube.)

Of course! And as time goes by more performance models will appear. BUT, sad I know, the smell of the pit lane will never be the same again! How can electric compete with that sound of a burbling V8 or the scream of a turbo charged straight six? RIP the internal combustion engine!

Steve_GP220

DrEskimo wrote: »

There isn't a need to complicate things. A car comes with many costs; depreciation, servicing, fuel, maintenance, MOT, VED, etc etc. Using finance just adds another cost on top.

If you are looking to minimise costs, you need to look at each cost separately. Depreciation can be minimised by buying used, fuel and VED can be minimised by buying more efficient cars, etc. Finance can be minimised by getting a cheaper rate and borrowing smaller amounts over shorter terms.

Just compare the cost of interest of each type of finance and determine which costs the least amount.

Thee kind of cars I have driven all my life tend to be the most expensive to run, the most expensive to park, the most expensive to tax and insure. So all I have left to consider in the actual finance of the vehicle. But I get your point.