New car buying advice

Msteve39

Good morning 
I'm looking to get a new car but wondered what the best finance option is? Ideally I'm looking to replace the car every 3-4 years and it is quite confusing what options for this are the best 

Will_Riker

PCP is a popular option if you're looking to replace the car every 3 years or so.  You need to make sure you understand the T&Cs of any deal you might be tempted to sign up for.  And there are some downsides, such as mileage restrictions and the condition the car has to be returned in.  But it can work well if that's the sort of thing you're looking for.

Of course, it could be argued that buying a new car car every 3 years goes against the whole MSE ethos - but that's a whole different discussion

challengesahead

bank loan interest rate are lower most of the time compared to auto finance ones.

daveyjp

As borrowing money is nearly always more expensive that what can be lost in interest (0% on new vehicles being an exception) from saving my approach has always been to borrow as much as I can from myself.

Save first, borrow less than 50% of the cost of the vehicle and pay off any loan in less than 2 years, save what you had been paying for the loan for two years.  

When you change the car you then use your savings as a loan to yourself, pay it back over 3-4 years and you may then not need a loan ever again.

Goudy

The simple answer to your question is whatever suits you AND is cheapest.
Everyone has different circumstances, so not every option is suitable or available to all.

If you are in need of a new car and perhaps are tied to a lower monthly payment, a PCP deal might be the better option.
If you have a big deposit/trade in and access to a cheapish personal loan, that might be the way.

You need to research all the options, but if you posted a bit more information about what deposit, targets for monthly payments etc, you have, that might help.


As you aren't planning on keeping the car longer than 3 or 4 years, that may sway you towards PCP or leasing.

Leasing is pretty obvious, you are basically renting a car.

PCP allows you to defer a percentage of the payments, usually around what the car would be worth after 3 or 4 years (depending on the length of contract).
This keeps your set payments fairly low but can attract slightly higher interest rates. They are even higher on used car PCP deals though.
You can often get a deposit contribution towards the deal, this can sometimes off set some the higher interest.

You have options before you get to that point, hand it back (like a lease) to the finance company, though you will be charged if it doesn't meet the criteria set out in the contract. 

Trade it in. This usually means punting it around various dealers who may or may not offer you more then the deferred payment (though if they want your business, they usually do). Those set criteria no longer apply, but the worse the car is, the higher the miles, they less it's worth at trade in.

Pay the deffered payment and keep the car. 
I must stress if you do nothing, they will (try) take this from your bank account on the final month of the contract.

Something else worth mentioning with PCP deals, don't just focus on the monthly payments.
It's easy to get lost in what's on offer for X amount a month and dealers know this and can push for longer deals and more expensive cars that end up on deals over longer periods that cost more money.

Try and workout before hand, how long and how much a month before you get carried away.

daveyjp

PCP are advertised to make it look like payments are low, but always bear in mind if you want to change in 3-4  years you will need another deposit.

Ectophile

The only time I ever bought a new car, it was paid by debit card.  But that was 13 years ago.  I still have the car, but I will need to replace it soon.