Car Finance Options

Grumpy_chap

To link an Autotrader ad, you only need the part up to the end of the number:
https://www.autotrader.co.uk/car-details/202106073576926

The lowest cost means of ownership is the lowest interest charges, as you say.

If the Dealer offers a finance incentive, you can take that then pay off early to avoid interest.  Best of both worlds.

Negotiate the best cash price before discussing finance.

DrEskimo

Caitykinss said:

As an example, this is one we've arranged to test drive this week:

https://www.autotrader.co.uk/car-details/202106073576926?include-delivery-option=on&make=VOLKSWAGEN&postcode=s727ga&sort=relevance&year-from=2019&advertising-location=at_cars&onesearchad=Used&price-to=19000&year-to=2021&model=T-ROC&radius=50&page=1&fbclid=IwAR3x9w76zarNSVjZ7Sinw9JZMOTyBLswtCFYDGKyOytWKOZ6HP6zs5nOUZA

And this is the one we test drove yesterday:

https://www.autotrader.co.uk/car-details/202106103683963?make=KIA&postcode=s727ga&year-to=2021&price-to=19000&sort=relevance&include-delivery-option=on&onesearchad=New&onesearchad=Nearly New&onesearchad=Used&advertising-location=at_cars&year-from=2019&model=NIRO&radius=50&page=1

I think I just hate the idea of getting anything on finance. I'd much rather save up and just buy outright and know that the car is mine. My OH wants a much better car than we can buy outright (I'd be happy to just spend the £10k, or scrape together £12k). He isn't anywhere near as frugal as me, and thinks absolutely nothing of finance. He's a magpie and likes his luxuries and is absolutely set on getting an SUV. He also loves the idea of getting a shiny new car every couple of years, and honestly think he would go for a lease option if I'd let him (I won't!). We've come to a compromise really, because I know we can afford to take out some kind of finance, but I'd rather it be one where I'm paying minimal interest over as short a term as possible, so we own the car as quickly as possible. I don't want the monthly payments to become a permanent outgoing. 

Well first thing is to keep an eye on the market and check that the car you want is a good price. Used cars of the same mileage/age/spec/options will vary and you want to try and get it at the lower end.

When it comes to comparing costs between different cars and different ways to finance, you want to split the total costs into two main areas, depreciation and interest.

If you were to purchase the T-ROC (1.0 basic trim with a manual gearbox isn't something I would pay around £18k for, but to each their own!) then you are looking at probably around £8k in depreciation and around £350 in interest costs for a low 3.0% APR personal loan. That would be £230/month over 3yrs. At the end, you expect to own a 5yr old T-ROC worth about £10k I would imagine. So in terms of total cost of ownership, it's about £8,350, or £230/month.

Now if your other half wanted say, the T-ROC, but the all singing all dancing R model brand new on PCP, well the best discount I can see is around £36,500 (RRP around £41,000 I think?). This has a final payment of £18,260, so VW are expecting depreciation to be around £18,240 over 36months/10,000miles, and it's going to cost you around £3,000 in interest at 4.6% APR with £10,000 upfront. So that's a total cost of over £21,000, or around £583/month when you include both the monthlies on the PCP and the upfront deposit. Let's say the car is worth a £3,000 more (trades in at £21,000 instead of the predicted £18,260), then it's still £18,000 over the 36months in total cost. 

So the question really becomes, is that new car on PCP with the much higher depreciation and interest charges worth twice the cost over a used lower trim/engine/spec? What is your husband willing to sacrifice to spend over £10,000 on over the next 36months to drive a new car on finance instead?

Finally, have you considered an EV, and not driving an SUV? They are horrible inefficient and not very practical...A smaller used estate or hatchback EV could save you a tonne on running costs and depreciation costs!

Grumpy_chap

Caitykinss said:

As an example, this is one we've arranged to test drive this week:

https://www.autotrader.co.uk/car-details/202106073576926

And this is the one we test drove yesterday:

https://www.autotrader.co.uk/car-details/202106103683963

I think I just hate the idea of getting anything on finance. I'd much rather save up and just buy outright and know that the car is mine. My OH wants a much better car than we can buy outright (I'd be happy to just spend the £10k, or scrape together £12k). He's a magpie and likes his luxuries and is absolutely set on getting an SUV. 

Both of those cars you have linked seem to be entry level choices.

For more luxuries, you may be better with a mid- higher-level car.  This can also be done with the cash budget:
https://www.autotrader.co.uk/car-details/202104020896114

Caitykinss

Thank you so much for all your detailed responses!

We'd love an EV, but don't think we're quite there infrastructure-wise. I think the car we get after this one will most likely be an EV. That's one of the reasons we liked the look of the Niro Hybrid.

OH is absolutely set on an SUV - in his dreams he wants a massive tank Range Rover that you can't fit into normal parking spaces. I'd be happy to (and would prefer if I'm honest) to go with something smaller, and we have looked at the CX-3 and like it a lot, although OH wants something bigger and loves the look of the CX-5 . I'll suggest looking at the CX-3 as a fully cash purchase, I'd not realised we'd be able to afford it, so thank you for that.

I'm trying to find a compromise that will keep us both happy - something he can get excited about, while I'm not balking at the cost. That's where the T-Roc came in, as seeming more of a middle ground. 

The absolute most important thing for me is that it's reliable, and has the potential to last us 10 years if we need it to.

DrEskimo

Caitykinss said:

We'd love an EV, but don't think we're quite there infrastructure-wise. I think the car we get after this one will most likely be an EV. That's one of the reasons we liked the look of the Niro Hybrid.

I wouldn't get too hung up on the infrastructure aspect. Some areas are fine, so it depends on where you are, but if you can charge at home you will only need to consider using public chargers if you travel more than the maximum range of the car.

I've done it maybe 3 times in the last 2.5yrs of owning an EV. Public chargers have been fine. Would happily rent a nice car if I needed it. The savings in running cost are quite ridiculous when you do most of your charging at home over night (1p/mile in EV vs. 12p/mile in ICE).

Shakin_Steve

You answered your own question in the first post. You have £10,0000, £12,000 at a push and need another £8,000 for a decent car. You can afford payments of £250 per month. An £8,000 loan from your bank (or wherever you choose) at 9.9% APR would cost £256 a month over three years, after which time you can do whatever you wish with the car. If you can get a loan at a lower rate, your payments would obviously be less. 

This is your preferred option, you say, it would be mine too. It's simple, the car is yours and no worries about complicated financial instruments that, you say, you don't really understand.

Shakin_Steve

And remember, when offering/explaining PCP deals, the dealer is not looking to do you any favours.