PCP deposit

jimrod_2

I'm looking at purchasing a used car using an independent finance agreement with Admiral rather than the dealers own finance, as I have been pre-approved for a much better rate with Admiral. I can't work out how it works with the deposit though. Do I need to pay this direct to the dealer, or does the finance company take it?

neilmcl

The deposit is for the car purchase so will go to the dealer. Are you sure a PCP is the best way forward, they are never a good deal when it comes to buying a used car. What is the APR?

jimrod_2

Thank you for this. APR is 7.9%. I'm funding it this way because it is going to be a work vehicle and I will be claiming business mileage allowance, which I've calculated will be sufficient to cover the finance payments, fuel, maintenance, etc. I don't have a significant deposit or vehicle to part exchange, so this is the only I can afford a suitable vehicle. At the end of the 3 year term I can hand the vehicle back, hopefully with some equity and start again with a new vehicle

DrEskimo

jimrod_2 said:

Thank you for this. APR is 7.9%. I'm funding it this way because it is going to be a work vehicle and I will be claiming business mileage allowance, which I've calculated will be sufficient to cover the finance payments, fuel, maintenance, etc. I don't have a significant deposit or vehicle to part exchange, so this is the only I can afford a suitable vehicle. At the end of the 3 year term I can hand the vehicle back, hopefully with some equity and start again with a new vehicle

It's the only way you can afford that vehicle, but it doesn't mean paying a load of interest to boot is the financially best way to do it. How much actual interest in £ will it cost you?

Your not handing it back if it has equity, you are trading it in. The exact same way you could trade the car in if you bought it outright without PCP. Don't be fooled into thinking it is somehow some magic advantage of paying loads of interest on a used PCP....

jimrod_2

DrEskimo said:

jimrod_2 said:

Thank you for this. APR is 7.9%. I'm funding it this way because it is going to be a work vehicle and I will be claiming business mileage allowance, which I've calculated will be sufficient to cover the finance payments, fuel, maintenance, etc. I don't have a significant deposit or vehicle to part exchange, so this is the only I can afford a suitable vehicle. At the end of the 3 year term I can hand the vehicle back, hopefully with some equity and start again with a new vehicle

It's the only way you can afford that vehicle, but it doesn't mean paying a load of interest to boot is the financially best way to do it. How much actual interest in £ will it cost you?

Your not handing it back if it has equity, you are trading it in. The exact same way you could trade the car in if you bought it outright without PCP. Don't be fooled into thinking it is somehow some magic advantage of paying loads of interest on a used PCP....

I will be paying about £3,000 in interest, borrowing £16,999 over 3 years with a £500 deposit. I'm fully aware that it is not a magic solution, but it is the only way I can keep my monthly payments below a certain amount and get the use of a suitable vehicle to do my job. I have looked into personal loans and HP, as these were my preferred options, but the monthly payments are greater than my budget

Grumpy_chap

jimrod_2 said:

I will be paying about £3,000 in interest, borrowing £16,999 over 3 years with a £500 deposit.
it is the only way I can keep my monthly payments below a certain amount and get the use of a suitable vehicle to do my job. 

Or you could simply get a cheaper car.
What are your requirements of a "suitable" vehicle?

DrEskimo

jimrod_2 said:

DrEskimo said:

jimrod_2 said:

Thank you for this. APR is 7.9%. I'm funding it this way because it is going to be a work vehicle and I will be claiming business mileage allowance, which I've calculated will be sufficient to cover the finance payments, fuel, maintenance, etc. I don't have a significant deposit or vehicle to part exchange, so this is the only I can afford a suitable vehicle. At the end of the 3 year term I can hand the vehicle back, hopefully with some equity and start again with a new vehicle

It's the only way you can afford that vehicle, but it doesn't mean paying a load of interest to boot is the financially best way to do it. How much actual interest in £ will it cost you?

Your not handing it back if it has equity, you are trading it in. The exact same way you could trade the car in if you bought it outright without PCP. Don't be fooled into thinking it is somehow some magic advantage of paying loads of interest on a used PCP....

I will be paying about £3,000 in interest, borrowing £16,999 over 3 years with a £500 deposit. I'm fully aware that it is not a magic solution, but it is the only way I can keep my monthly payments below a certain amount and get the use of a suitable vehicle to do my job. I have looked into personal loans and HP, as these were my preferred options, but the monthly payments are greater than my budget

Is a £17k car really necessary?

Alternatively you could wait and build your savings up so you borrow less with a personal loan for the same monthly cost. I'm guessing the PCP is about £300/month.

If you saved £7k and then borrowed £10k at 3% APR it would also cost £300/month but only cost you £477 in interest in total, saving you over £2,500. Also no mileage restrictions, and you will have no final payment to worry about, leaving you free to trade in at the end, or keep it for another day, week or even year.

jimrod_2

Grumpy_chap said:

jimrod_2 said:

I will be paying about £3,000 in interest, borrowing £16,999 over 3 years with a £500 deposit.
it is the only way I can keep my monthly payments below a certain amount and get the use of a suitable vehicle to do my job. 

Or you could simply get a cheaper car.
What are your requirements of a "suitable" vehicle?

I need a 7 seater with less than 20k miles and under 3 years old, suitable for doing 30k miles per year over at least 3 years. There are cheaper cars available but I have no confidence in some of the cheaper vehicles available to be able to perform reliably

Grumpy_chap

jimrod_2 said:

I need a 7 seater with less than 20k miles and under 3 years old, suitable for doing 30k miles per year over at least 3 years. 

Your current proposal is to buy a £17k car and pay and extra £3k interest on top.  Total outlay £20k (£550/month) and you hope to have some residual left at the end.

£11k would get you into a 2018 CMAX, Zafira, Grand Picasso (diesels included).  Put down the same £500 deposit and assume the same 8% interest rate (seems high - could do better) on the £10.5k balance so the interest will cost £1.3k total outlay is £12.3k and your monthly outlay £340. 

Put the balance of the remaining monthly payments (£550-£340) of £210 on deposit and by the end of three years, you have guaranteed £7.5k equity ready for the next vehicle plus, with a fair wind, still £4k-£5k equity in the car you purchased. 

Total available for the next car £12k so you can purchase outright and have no interest to pay in the second 3-year cycle.  WOW - 2 for the price of 1 (or BOGOF as the marketing people say)!!!!

Carry on another 3 years setting aside the £550 monthly and buy the time you get along to buying car number 3, you will have £20k sitting ready to spend, so get something better than the £17k car you currently have your eye on.

jimrod_2

Grumpy_chap said:

jimrod_2 said:

I need a 7 seater with less than 20k miles and under 3 years old, suitable for doing 30k miles per year over at least 3 years. 

Your current proposal is to buy a £17k car and pay and extra £3k interest on top.  Total outlay £20k (£550/month) and you hope to have some residual left at the end.

£11k would get you into a 2018 CMAX, Zafira, Grand Picasso (diesels included).  Put down the same £500 deposit and assume the same 8% interest rate (seems high - could do better) on the £10.5k balance so the interest will cost £1.3k total outlay is £12.3k and your monthly outlay £340. 

Put the balance of the remaining monthly payments (£550-£340) of £210 on deposit and by the end of three years, you have guaranteed £7.5k equity ready for the next vehicle plus, with a fair wind, still £4k-£5k equity in the car you purchased. 

Total available for the next car £12k so you can purchase outright and have no interest to pay in the second 3-year cycle.  WOW - 2 for the price of 1 (or BOGOF as the marketing people say)!!!!

Carry on another 3 years setting aside the £550 monthly and buy the time you get along to buying car number 3, you will have £20k sitting ready to spend, so get something better than the £17k car you currently have your eye on.

8% interest is the best I can get. My credit rating is only good and I have shopped around, following all the advice on MSE and elsewhere. Best loan I can get is 11.9%, again having seriously searched all the comparison sites, etc. 

And because it is PCP my monthly outlay is around £365 with approx £6000 "baloon" payment. I am not hoping to have a residual value, it is just a possibility. I have slightly overestimated my annual mileage just to be on the safe side, so the actual mileage at the end of the agreement should be less than predicted.

I have also looked at all different makes and types of cars, but I have decided on VW Touran as I think it is the best blend of size, practicality, reliability, and has very good fuel economy compared to rivals. It also seems like a nice car to drive and spend time in; two things that I have to do a lot of for my job, so this is important to me

DrEskimo

jimrod_2 said:

Grumpy_chap said:

jimrod_2 said:

I need a 7 seater with less than 20k miles and under 3 years old, suitable for doing 30k miles per year over at least 3 years. 

Your current proposal is to buy a £17k car and pay and extra £3k interest on top.  Total outlay £20k (£550/month) and you hope to have some residual left at the end.

£11k would get you into a 2018 CMAX, Zafira, Grand Picasso (diesels included).  Put down the same £500 deposit and assume the same 8% interest rate (seems high - could do better) on the £10.5k balance so the interest will cost £1.3k total outlay is £12.3k and your monthly outlay £340. 

Put the balance of the remaining monthly payments (£550-£340) of £210 on deposit and by the end of three years, you have guaranteed £7.5k equity ready for the next vehicle plus, with a fair wind, still £4k-£5k equity in the car you purchased. 

Total available for the next car £12k so you can purchase outright and have no interest to pay in the second 3-year cycle.  WOW - 2 for the price of 1 (or BOGOF as the marketing people say)!!!!

Carry on another 3 years setting aside the £550 monthly and buy the time you get along to buying car number 3, you will have £20k sitting ready to spend, so get something better than the £17k car you currently have your eye on.

8% interest is the best I can get. My credit rating is only good and I have shopped around, following all the advice on MSE and elsewhere. Best loan I can get is 11.9%, again having seriously searched all the comparison sites, etc. 

And because it is PCP my monthly outlay is around £365 with approx £6000 "baloon" payment. I am not hoping to have a residual value, it is just a possibility. I have slightly overestimated my annual mileage just to be on the safe side, so the actual mileage at the end of the agreement should be less than predicted.

I have also looked at all different makes and types of cars, but I have decided on VW Touran as I think it is the best blend of size, practicality, reliability, and has very good fuel economy compared to rivals. It also seems like a nice car to drive and spend time in; two things that I have to do a lot of for my job, so this is important to me

A personal loan at 11.9% APR will cost you similar amounts in interest as this PCP at 7.9% with the final balloon payment.

There are a lot of things that would be nice to have, it doesn't mean you should buy them. If your only accepted for high interest loans and have little money aside to buy a car these all point towards the fact you're possibly not in a position to be spending £17k on a car. All it will do is stick you in a cycle of spending most of your earnings on car depreciation and interest payments rather than actually being able to build any meaningful wealth by means of cash savings, longer term investments or pension contributions.

But...it's your money and your choice. To answer your original question the money goes to the dealer. It's typically used as a holding deposit as well on the car, so they will just receive the outstanding balance from the finance company on or near the day of collection.