Cost effective way of buying a car on finance?

JustAnotherSaver

I've always been anti finance and i admit to knowing absolutely nothing about it. Literally nothing.

My sisters car is causing too many problems. Turbo went at a repair cost of £900 and then she's had it back at the garage every other week about 5 times now as it will go in to limp mode. Usually after a motorway journey it seems (higher revs causing issue?). Pipes popping off, valves needing replacing. This is what she's told at least. It happened again this weekend and she's said enough is enough.

She's also been anti finance from the get go, but this past experience and a lack of cash in the bank has changed her mind. She wants something fairly new-ish (everyones opinion of newish will be different, i know) and has asked for my help with it - but obviously i can't as i've no knowledge on the topic.

I was recently talking to a workmate about it as i was trying to arm myself with some knowledge as i may go down this route if i can't sort my own car out and he was talking to me about how the place he bought from kept trying to pester him with this PCP stuff which he must've said no to about 10 times in 5 minutes. I've seen this term mentioned on here but i know nothing about it.

I read a thread on financing a few weeks ago where someone was talking about expense and another member said how finance works for them as they fish out 0% deals. I wasn't aware you could get 0% on finance - as i say, i know nothing about it.

Ideally she'd like some sort of comeback after the current experience - so if a car goes bad then she contacts the garage or finance company and says get this sorted. She also wants to own the car at the end of it, she doesn't want to loan a car.

So looking for information on how to do this in the most cost effective way. How does it all work and is there anything you should look for? Any jargon to go for, anything to stay away from?

I don't know if bank loans are better - but then i don't know if there's any of that comeback i just mentioned if anything goes wrong with the car. To give a bit of info on what she's been looking at - the last car she messaged me about was a 2012 1.6 Focus for £7k on 60k miles. She'd be in and about that price range, nothing above £10k. The same would also apply for me should i go down the finance route so i'm interested in this also as it should help me out too.

DrEskimo

Finance doesn't come with 'comeback'. It's the same process regardless of whether you own it or have finance owing on it (if anything finance just adds another party to communicate with).

You're after a car with warranty (although a non warranty item could still go wrong and require paying for). If she can't afford to buy a car under warranty then she will need finance to help purchase it. Just know that in the vast majority of cases, borrowing money adds costs.

JustAnotherSaver

DrEskimo said:

Just know that in the vast majority of cases, borrowing money adds costs.

Which is why we have both always been so against it.

But in the price range that is affordable without taking out loans and the like, there is an increased risk of the car being an absolute lemon and nothing but a money pit.

I think the top priority for the pair of us is to have a car that you're not going to be worried on every single journey that it's going to pack in on you and you'll end up crawling home.

The differences come beyond that - i want a car with some reasonable oomph where she just doesn't want anything too slow or turbo (since her turbo going has put her off).

To tick these boxes i'm thinking we'll both be looking in and about the price range i quoted earlier (obviously depends what you're buying - £7k will get you a lot of something but sod all of something else) but neither of us can just go in to our bank account and empty out £6k, £7k, £8k on a car in one lump. Well technically i can but it wouldn't leave much behind and i don't want to get caught short on anything. She actually can't come close to affording that.

Which is why she asked me about financing and loans, whichever would be the best route, what to look for, what to avoid etc.

Grumpy_chap

Are you looking to buy two cars between you - one for you and one for your sister?  Or are you looking for one car that you have shared use of?

Ectophile

Always look very closely at the interest rate.  A high rate can leave you paying twice what the car was actually worth at the start of the deal.

Unfortunately, the interest rate on a used car may be higher than on a brand new one.  A 2012 car is already 8 years old.  If it was a 3 year finance deal, then it will be 11 by the time the finance ends.  That's not exactly "newish".  If it turns out to be a lemon, she'll end up paying out for repair bills, and still have to keep paying the finance every month.  At that point, the old car she got rid of might not look so bad.

DrEskimo

JustAnotherSaver said:

DrEskimo said:

Just know that in the vast majority of cases, borrowing money adds costs.

Which is why we have both always been so against it.

But in the price range that is affordable without taking out loans and the like, there is an increased risk of the car being an absolute lemon and nothing but a money pit.

I think the top priority for the pair of us is to have a car that you're not going to be worried on every single journey that it's going to pack in on you and you'll end up crawling home.

The differences come beyond that - i want a car with some reasonable oomph where she just doesn't want anything too slow or turbo (since her turbo going has put her off).

To tick these boxes i'm thinking we'll both be looking in and about the price range i quoted earlier (obviously depends what you're buying - £7k will get you a lot of something but sod all of something else) but neither of us can just go in to our bank account and empty out £6k, £7k, £8k on a car in one lump. Well technically i can but it wouldn't leave much behind and i don't want to get caught short on anything. She actually can't come close to affording that.

Which is why she asked me about financing and loans, whichever would be the best route, what to look for, what to avoid etc.

There is absolutely no guarantee that spending more on a car will mean it will be trouble free. It's less likely, but not impossible. 
They have just done the work, so unless they are terribly unlucky they can continue with the car and start saving the loan payment to a savings account ready to put towards a car when they finally do want to change.
If they have no savings now, it does beg the question where the monthly cost fo a loan is suddenly going to appear from, so would be good to test that for a while without committing to a debt first...

If they want a new car then that comes at a cost. However if they are simply wanting to change car in the hope to get something that will 100% be reliable and reduce costs, then that is not likely to happen. They have already paid for the repairs so may as well keep it. The cost to change to a higher cost car along with finance costs will far outweigh the costs of any more repairs on their current car. It will amount to a false economy.

daveyjp

The only trick with finance is to ensure you get as low a rate as possible and pay it off quickly.  Don't take a long loan out on an older car outside of warranty as you end up paying a loan on a car which may need expensive repairs.

If you want a good chance if reliability look east.  Toyota, or for better value for money Suzuki.

JustAnotherSaver

DrEskimo said:

They have already paid for the repairs so may as well keep it.

You'd think so...but i can see where she's coming from.

£900 for turbo fix. You think job done. Drive it a few days and then boom you're in limp home mode.

Back in at garage, some pipe came off. Quick fix and away you go.

Couple week later, motorway, limp home mode again.

Book it in with garage and it's some sort of valve. Give it a few days and you can have the car back.

Gets it back, runs it a while and then boom, limp home mode again. Whatever else has gone related to the repair they did. Another quick fix.

Repeat ... more limp home ... more booking in, more on your way, more hitting the motorway again (coincidence maybe, who knows) and them voila more repeating of the limp home mode and the need of booking in.

As i say, she's at 5 or 6 times now SINCE the turbo fix. I can see why she wants rid of it.

From what is said then i am guessing that most people will finance a 1-3 year old car then at many thousands rather than an 8 year old car. £7k may be loose change to some but that's a wedge to me to put in to a car outright.

Grumpy chap - she's looking. I'm considering (if my current car keeps acting up and is a problem to fix).

AdrianC

JustAnotherSaver said:

I was recently talking to a workmate about it as i was trying to arm myself with some knowledge as i may go down this route if i can't sort my own car out and he was talking to me about how the place he bought from kept trying to pester him with this PCP stuff which he must've said no to about 10 times in 5 minutes. I've seen this term mentioned on here but i know nothing about it.

There's two basic types of financing...
1. You own the car.
A loan, basically. Pay it off, you own the car and can do whatever with it.

2. You don't own the car.
PCP, lease, HP, etc etc. The big difference is whether you can ever own it. Lease - never, it just goes back. PCP - you can choose to buy it or hand it back. HP - yes, you'll own it.

Bear in mind most of the deals on new cars are manufacturer-subsidised. That makes them a lot cheaper than deals on used cars, because nobody's subsidising shifting metal for second-hand cars... And when I say "second-hand", I mean everything that isn't spanking-brand-new. Including "pre-reg", "1yo", etc etc.

ontheroad1970

Some lease companies do offer the ability to buy the car, but they are usually poor value from what I've seen reports of on this forum.  The lowest APRs you will find for used cars will be via the personal loan route.  With a good credit history you can get 3% orr even a little lower.  And also, the loan is not secured on the car.  

JustAnotherSaver

AdrianC said:

JustAnotherSaver said:

I was recently talking to a workmate about it as i was trying to arm myself with some knowledge as i may go down this route if i can't sort my own car out and he was talking to me about how the place he bought from kept trying to pester him with this PCP stuff which he must've said no to about 10 times in 5 minutes. I've seen this term mentioned on here but i know nothing about it.

There's two basic types of financing...
1. You own the car.
A loan, basically. Pay it off, you own the car and can do whatever with it.

2. You don't own the car.
PCP, lease, HP, etc etc. The big difference is whether you can ever own it. Lease - never, it just goes back. PCP - you can choose to buy it or hand it back. HP - yes, you'll own it.

Bear in mind most of the deals on new cars are manufacturer-subsidised. That makes them a lot cheaper than deals on used cars, because nobody's subsidising shifting metal for second-hand cars... And when I say "second-hand", I mean everything that isn't spanking-brand-new. Including "pre-reg", "1yo", etc etc.

So the cheaper deals are on never-before-owned cars, you wouldn't even put barely used 10k milers from the dealer in that category?

In her case then, could the better option be a bank loan ... depending what the % is?