Loan or PCP- credit check and fixed APR question

Paws1_2

I would be really grateful for some advice, please. I am having to part-exchange my 3 year old Land Rover from diesel to petrol hybrid (long story). Normally I would keep my car for a good 6 or 7 years and buy outright but it has not been possible this time. 
I have been pre-approved for a bank loan which should cover me to buy a nearly new or pre-reg model with mine as part-exchange. However, my dealer has said there is a PCP £4,500 offer on a brand new, much higher spec model  - making an otherwise unaffordable option, affordable  My thoughts are to take the PCP and keep my part-exchange money for the balloon payment at the end - meaning a very similar deal to the loan.  

I have never considered a PCP offer before - I feel rather wary of it. But on the face of it, it seems a good offer with an option to give the car back if I have problems (I had numerous ones with my current car) or a very similar price to taking the bank loan if I want to keep it.  

My concerns are - I have already been pre-approved for the bank loan - so does that mean any PCP credit check will think I am asking for the money for the car, in addition to the pre-approved bank loan amount? It seems that could be a lot of potential credit asked for, even though I have not actually taken the loan. I clearly don't want to do anything to damage my credit rating. 
Is the 3.4% APR quoted on the Land Rover site likely to be the amount offered (the same APR as my pre-approved bank loan) or is it subject to change? I couldn't see anything about the % just being a representation but I know that this is often the case with loans.

Any thoughts would be welcome :-) 

DrEskimo

The PCP is secured on the car, so unless you accept the personal loan, getting accepted for the PCP shouldn't be a problem.

However check the actual amount of interest paid, don't just compare APR. You will find a PCP amounts to much higher interest costs due to the fact you have a final balloon payment that doesn't decrease over the term.

If you can, the cheapest option would be to take the car on PCP then settle the loan soon after, but since you need to borrow that may be difficult.

Of course there is always getting a much cheaper car than a brand new Range Rover on finance...a cheaper used car will cut your depreciation and finance costs dramatically. 

Paws1_2

Thanks Dr Eskimo - that is really helpful :-) 

I know there are cheaper options but I saved so hard to buy my car (Discovery sport) outright and really don't want to have to buy a lower model - I can afford to finance it but very sad as I had not planned to do so.

I am happy to buy nearly new (my current car was an ex-demo), but I want the petrol hybrid version (discovery sport not Range Rover) as it is my ideal family car other than the issues I have had with the diesel model. Ironically the nearly new price is comparable with the brand new PCP offer, with the PCP slightly cheaper which seems strange.  

DrEskimo

Paws1_2 said:

Thanks Dr Eskimo - that is really helpful :-) 

I know there are cheaper options but I saved so hard to buy my car (Discovery sport) outright and really don't want to have to buy a lower model - I can afford to finance it but very sad as I had not planned to do so.

I am happy to buy nearly new (my current car was an ex-demo), but I want the petrol hybrid version (discovery sport not Range Rover) as it is my ideal family car other than the issues I have had with the diesel model. Ironically the nearly new price is comparable with the brand new PCP offer, with the PCP slightly cheaper which seems strange.  

But you saved to buy your car 3yrs ago. You bought it and have had it. Why does that mean you should have the same again today? You would have needed to save the last 3yrs, which I understand wasn't possible?

Which brings up the whole problem with the logic of 'I can afford the finance'. What that means is that you hope you can meet the monthly obligation as long as your incomings or outgoings don't change. Something that absolutely no one can ever know, as evidenced by the fact you are looking at finance right now!

At least you owned your last car outright and didn't have debt obligations though. When you have finance you have no choice. It has to be paid even if your circumstances no longer allow for it.

It's not uncommon for new cars with discounts/deposit contributions to be cheaper than nearly new. Those nearly new are just what are on the market as you happen to look today, and odds are they are the overpriced ones that dealers hope to sell to those that don't research new prices. If you wait log enough, I'm sure a well priced one will come on the market, but likely won't hang around long.

I would still cut your losses and buy a cheaper car without finance though, but ultimately that's your choice. As I say, look at the actual cost when comparing finance. Not just the APR.

Paws1_2

Thanks for your thoughts - I do have savings £15,000 but I have earmarked them for home improvements amongst other things which are important family things to us. And yes, I really like my car and I spend a lot of time driving so I do want the same model. 
Normally I only save towards a car in the final three years of ownership - hence, I keep my cars for around 6 or 7 years. I have been in my job for over 10 years so I don't expect things to change although of course you never know. I haven't made up my mind - I have a few dealer appointments and will see what the offers are against nearly new models.

DrEskimo

Paws1_2 said:

Thanks for your thoughts - I do have savings £15,000 but I have earmarked them for home improvements amongst other things which are important family things to us. And yes, I really like my car and I spend a lot of time driving so I do want the same model. 
Normally I only save towards a car in the final three years of ownership - hence, I keep my cars for around 6 or 7 years. I have been in my job for over 10 years so I don't expect things to change although of course you never know. I haven't made up my mind - I have a few dealer appointments and will see what the offers are against nearly new models.

Do you mind if I ask why the move from diesel to to hybrid?

Have you considered EV? There are some lovely premium SUV models now (e-tron, EQC and Model X). Depreciation currently is quite low relative to ICE counter parts and running costs are nice and low. I switched around year and a half ago and would never look back!

Paws1_2

Thanks - a very good point - I have thought about EV (one of the only reasons I’m thinking PCP and handing car back after 3 years might be a possibility). I’m just not sure the infrastructure is there (at the moment) for some of the motorway driving I need to do - I work from home mainly but in pre-Covid times I would commute to my main campus 350 mile round trip a couple of times a month. I don’t think the infrastructure is far off though. 

I’ve been recommended sites like drive the deal and coast to coast and the quotes are very competitive so I’m going to see if it gives me some leverage. Thanks again for your help. 

Time2Go_25

Paws1_2 said:

I know there are cheaper options but I saved so hard to buy my car (Discovery sport) outright and really don't want to have to buy a lower model - I can afford to finance it but very sad as I had not planned to do so.

Make sure your Discovery has indicators that work and doesn't automatically pull to the right when joining dual carriage ways and motorways as I've noticed the majority of these and range rovers have that tendancy.