What do we do about new car?

Dot2dot2

Hello I’m new here and hoping someone can advise.

We bought the first new car we have ever owned (VW Tiguan) four years ago and are coming to the end of our PCP. We will have a balloon payment of about £9K at the end of the term, which we have the savings to cover. But that would be all our savings.

We have been to multiple garages who have all given us a valuation that would give us £6-7k equity in the car if we part exchanged. We could probably get a bit more if we sold it privately but not much.

I’ve read the MSE pages about car buying but the whole market is so weird at the moment we are really struggling.

We want to cut our costs (as our future income is uncertain at present) but still have a reliable, safe car with a big boot that doesn’t lose *all* its value over the next few years. This seems to be asking for the moon on a stick.

New cars are in incredibly short supply and the second hand market is really inflated. Basically no one we have spoken to seems to actually want to sell us anything!

Which of these options make the most sense?:
- Pay the balloon payment and keep the car. We’re worried about repair costs as it gets older and the loss of our savings.
- Trade in at VW and end up with same monthly payment but a lower spec or smaller car.
- Trade in at a more affordable maker (e.g. Kia) and end up with same monthly payment for a similar spec car but a car that’s less expensive to start with (and therefore leaving us with less equity in a few years’ time).
- Go for a Volvo we’ve found with 600 miles on the clock and £5K off the price. This would increase our monthly payments. The plus here would be if we could keep it going for longer - say 10 years instead of 4 or 5. Do Volvos still go on forever?
- Buy something much older and reduce our monthly payments. This was our original idea but the trouble is I can’t find anything because second hand prices are so high at the moment. We can’t go for anything so old it risks breaking down regularly. We have small children and my husband relies on the car for work.

Our ideal would be a petrol estate and they are like hen’s teeth. I don’t think we could manage with a hatchback. What am I missing here? I feel like we’re being idiots about this but I don’t know what to do.

Sorry that was long - thank you!

Ebe_Scrooge

A lot of it is down to personal preference, and how much you value the status of having a shiny new car.  For what it's worth, here are my thoughts:

1.  Am I right in assuming your VW is 4 years old?  If that's the case, it's got a shed-load of life in it yet.  You could pay the balloon payment and get rid of the ongoing debt, and I'd be mightily surprised if the car didn't last for at least another 10 years without needing any major repairs.

2.  You say you've got £6-7K equity in the car?  That will buy you a lot of second-hand car, even in the current market.  There's no reason you couldn't get a very reliable motor for that sort of money, and again you'd be rid of the debt (important if you say your future income is uncertain), as well as retaining your savings.

Dot2dot2 said:

Go for a Volvo we’ve found with 600 miles on the clock and £5K off the price. This would increase our monthly payments. The plus here would be if we could keep it going for longer - say 10 years instead of 4 or 5. Do Volvos still go on forever?

Volvos do still have a good reputation.  But do you really want to be increasing your monthly payments given the uncertainty over your future income?  And like I said at the start, I'd be very surprised if your current car didn't last easily another 10 years at the very least.

It's an old chestnut, but very true - the price of a car has very little bearing on its lifespan.  For what it's worth, I've always bought used cars in the £3000 - £5000 sort of bracket, I think the newest one I ever bought was 6 years old, and they've always given me faultless service.  Yes, you need to budget for tyres, brakes, all the usual consumables - but that's no different to a brand-new car.  Yes, there'll be the odd thing that wears out or breaks down, but I've never had anything catastrophic go.  Look after it well, keep it well-maintained, and modern cars will go on for ages - I'd be disappointed if I ever got less than 150,000 miles out of any car, most of mine have gone way in excess of that.

Oh, forgot to add :

Dot2dot2 said:

but still have a reliable, safe car with a big boot

A Skoda is always worth considering - a thousand mini-cab drivers can't be wrong :-)  A mate of mine has an Octavia - it's a saloon, but the boot is bloomin' enormous!

iwb100

What are you paying monthly for the Tiguan right now? Given you have equity left does that not reduce your payment anyway? 

You seem a little confused on how PCP works. 

What you need to decide primarily is what your aim is. If it’s as cheap as possible then sell your Tiguan now and find something reliable on auto trader etc…

Or do you want a new car really but just for less money?

You can quite easily work out monthly payments using the various calculators manufacturers provide with their latest deals.

Your Tiguan balloon payment seems quite low, have you done a lot of miles? There are of course cheaper options within the VW group you can look at that would be the same as your Tiguan but the downside is the wait for new cars and your income uncertainty. 

If it was me I’d compare taking a cheaper new car PCP with what I could get second hand with the equity. And keep my money where it is - whilst your Tiguan would be a good option long term it would leave you without the savings and you might need them….

caprikid1

What mileage is on the car, has it been reliable ?

Personally I would just take out a low cost personal loan over 4 years and looks to sell it then. That should give you some very cost effective motoring in a car you like and know.

molerat

If you really want to change have you looked on Arnold Clark or WBAC to get a price ?  Odd that 4 years ago they predicted a residual of higher than the current market value considering the way the car prices are at the moment.

iwb100

molerat said:

If you really want to change have you looked on Arnold Clark or WBAC to get a price ?  Odd that 4 years ago they predicted a residual of higher than the current market value considering the way the car prices are at the moment.

They didnt. Guaranteed future value is £9K according to OP and he’s saying there is about 6 or 7K equity in the deal right now. In other words the car is worth 6-7 grand more than OP has left to pay. So If they sell or PX it they have that cash to spend or save or invest in a new deal. 

iwb100

caprikid1 said:

What mileage is on the car, has it been reliable ?

Personally I would just take out a low cost personal loan over 4 years and looks to sell it then. That should give you some very cost effective motoring in a car you like and know.

In doing that I’d say OP should weigh likely value of the car after four more years of then driving it. They will have paid interest for 8 years to own the car at that point. And what will car be worth then?

Whilst it would achieve their aim with the car there is equity in the vehicle that they could realise now and buy something to leave them borrowing free whilst protecting their savings. Yes car would be older but it would leave them free of monthly commitment. Or they could use equity to arrive at much lower monthly commitments but for a new car and have the hassle free motoring.

Buying it isn’t a terrible idea obviously, but it just seems to me overall that would have been an expensive route for them. 

theoretica

Keeping the Tiguan is a decision you can change, by trading it in or selling it later.  Trading it in, you can't easily reverse.  How long would it take you to rebuild your savings using your current car payments?

DrEskimo

The second hand market is crazy, but you currently have the opportunity to buy a 4yr old Tiguan that only you have personally used since it was brand new for £9k, when it's worth over £15k on the open market.

I would say that's a bit of a no brainer personally....as above, right after you buy it you can always go and trade it in to whoever will pay the most and get the money back.

Use a 0% CC or cheap personal loan for some of the £9k if needed.

motorguy

Dot2dot2 said:

Hello I’m new here and hoping someone can advise.

We bought the first new car we have ever owned (VW Tiguan) four years ago and are coming to the end of our PCP. We will have a balloon payment of about £9K at the end of the term, which we have the savings to cover. But that would be all our savings.

We have been to multiple garages who have all given us a valuation that would give us £6-7k equity in the car if we part exchanged. We could probably get a bit more if we sold it privately but not much.

I’ve read the MSE pages about car buying but the whole market is so weird at the moment we are really struggling.

We want to cut our costs (as our future income is uncertain at present) but still have a reliable, safe car with a big boot that doesn’t lose *all* its value over the next few years. This seems to be asking for the moon on a stick.

New cars are in incredibly short supply and the second hand market is really inflated. Basically no one we have spoken to seems to actually want to sell us anything!

Which of these options make the most sense?:
- Pay the balloon payment and keep the car. We’re worried about repair costs as it gets older and the loss of our savings.
- Trade in at VW and end up with same monthly payment but a lower spec or smaller car.
- Trade in at a more affordable maker (e.g. Kia) and end up with same monthly payment for a similar spec car but a car that’s less expensive to start with (and therefore leaving us with less equity in a few years’ time).
- Go for a Volvo we’ve found with 600 miles on the clock and £5K off the price. This would increase our monthly payments. The plus here would be if we could keep it going for longer - say 10 years instead of 4 or 5. Do Volvos still go on forever?
- Buy something much older and reduce our monthly payments. This was our original idea but the trouble is I can’t find anything because second hand prices are so high at the moment. We can’t go for anything so old it risks breaking down regularly. We have small children and my husband relies on the car for work.

Our ideal would be a petrol estate and they are like hen’s teeth. I don’t think we could manage with a hatchback. What am I missing here? I feel like we’re being idiots about this but I don’t know what to do.

Sorry that was long - thank you!

Personally, i'd take out a cheap loan for the residual value (or part pay using some of your savings).  Theres loans available from 2.8% APR which is as cheap as chips.

The car should be reliable for years, with just the usual maintenance.

Find a good local independent garage and use them for any repairs, etc.

iwb100

DrEskimo said:

The second hand market is crazy, but you currently have the opportunity to buy a 4yr old Tiguan that only you have personally used since it was brand new for £9k, when it's worth over £15k on the open market.

I would say that's a bit of a no brainer personally....as above, right after you buy it you can always go and trade it in to whoever will pay the most and get the money back.

Use a 0% CC or cheap personal loan for some of the £9k if needed.

No brainer apart from they’d need more borrowing or to use all their savings with uncertainty over their income. That’s the bit that would worry me.