PCP query re balloon payment

Suzycoll

Hi all you lovely people 

Here's my dilemma

My PCP on Toyota car expires in August . Toyota is in v good condition 4 years old 23000 miles on clock. Balloon payment to pay in August is £3250 approx. ( I have the money put by to pay it , will take a large amount of my savings).

I'm looking at a Renault deal at 0% for 24 months on a car value of £26,700. They pay my finance off and I part ex the Toyota (Renault given a good part ex price &  happy with the overall deal) .When this PCP finishes in 2 years the balloon payment is just over 16k.

That's my biggest worry really is the large balloon payment in two years ! 

Now, I'm thinking shall I just keep the Toyota as its a sound car and nothing  wrong with it - and I will still have  my £3250 in savings?. Do I really want to saddle myself with a 26k loan ? Then I'm thinking after a couple of years I will be looking for a new car again and the Toyota wont be worth much ? 

I know its obviously a third world problem and a personal choice. The most important thing to me is to have a reliable car at all times.
Thoughts anyone ? 
PS been looking at other dealers & APR on PCP deals ridiculous rates atm

macman

Why would a 4 year old low-mileage Toyota with only 23k miles on the clock not be reliable? It should still have another year to run on the existing warranty? They're consistently among the most reliable brands on the market.
If £3,250 is 'a large part of your savings' now, then how do you intend to make the balloon payment of £16k in just 24 months? Most PCP's are 3 or 4 years.
Car dealers love sweet-talking you into PCP's, because they hook you in and keep you coming back every 3 years or so for more. Remember  they make far more on the finance commission than the margin on the sale.

Grumpy_chap

Assuming the Toyota meets your needs (size etc), then keep the Toyota.  

You have only done 23k miles in 4 years so it will go for much longer than another couple of years before you need to change it.  In another two years, the Toyota will be 6 years old and around 35k miles (assuming your use pattern stays similar).  That is far from a car that "won't be worth much".

Looking at this another way.  
Make the balloon payment on the Toyota for £3,250 and, if it is worth zilch in two years, that has cost £135 per month in depreciation.  The Toyota will be worth a lot more than zero in two years.
Buy the Renault for £26,700.  Deduct the £16k balloon and the £3,250 for the Toyota, that is £7,450 over two years at zero percent interest, so payment of £310 per month plus, in two years, you need to find £16k  to keep the Renault, or funds to buy another car.

Keep the Toyota.

Nearlyold

macman said:

Why would a 4 year old low-mileage Toyota with only 23k miles on the clock not be reliable? It should still have another year to run on the existing warranty? They're consistently among the most reliable brands on the market.
If £3,250 is 'a large part of your savings' now, then how do you intend to make the balloon payment of £16k in just 24 months? Most PCP's are 3 or 4 years.
Car dealers love sweet-talking you into PCP's, because they hook you in and keep you coming back every 3 years or so for more. Remember  they make far more on the finance commission than the margin on the sale.

macman is spot on can't think of any reason why it would be a good idea (financially) to buy the Renault. Don't worry about the Toyata "not being worth much" in the future you'll lose far more buying the £26700 Renault.

Ayr_Rage

If you can afford annual Toyota dealer servicing then the warranty will continue until the vehicle is 10 years old or has recorded 100,000 miles.

I agree with the "keep the Toyota" sentiment.

The bonkers car market cannot go on forever, chip supply will return, second hand prices will fall and decent PCP deals will reappear.

macman

Look at it another way.  The new Renault at £26k will depreciate by about £2.67k by the time you've driven it off the dealer's forecourt and before you get it into 2nd gear...
Your 6 year old 35k miles Toyota will still be worth more than 'not much' in 2 years time. What is it's current trade in value? Do the maths. 

MrFrugalFever

macman said:

Why would a 4 year old low-mileage Toyota with only 23k miles on the clock not be reliable? It should still have another year to run on the existing warranty? They're consistently among the most reliable brands on the market.
If £3,250 is 'a large part of your savings' now, then how do you intend to make the balloon payment of £16k in just 24 months? Most PCP's are 3 or 4 years.
Car dealers love sweet-talking you into PCP's, because they hook you in and keep you coming back every 3 years or so for more. Remember  they make far more on the finance commission than the margin on the sale.

Incorrect, not anymore and even less so on a brand new car. The only winners here are the finance companies.

vacheron

Suzycoll said:

The most important thing to me is to have a reliable car at all times.

You have a car from a historically relaible manufacturer with a proven track record of 4 years of reliability and which has done quite low annual mileage.

Why spend 2 more years of higher repayments and a 5 figure baloon payment to purchase a car from a historically less reliable manufacturer which could turn out to be a lemon?

Looking at a standard bathtub curve, your best guarantee of reliability would be to keep the car you have.

 

MalMonroe

Hi, the beginning of your post could have been written by me, I also have a Toyota on PCP that ends in August and I've saved up enough to pay the balloon payment (not quite as much as yours but a lot of cash for me). Once that's paid I'll just carry on saving and I'll not be paying anything monthly for the car because it will be mine. It's road-tax free, too - which doesn't apply to newer models of my car. I could pay it off early but I just don't want to.

The car I have is now 7 years old - I didn't buy it new but it's still only got 23,500 miles on the clock - mainly thanks to covid - and I'm aware that that's the age when cars start to go wrong, things drop off and need repairing, etc. But it's had a proper toyota service every year and passed the MOT each year too and so I am fairly confident that it's going to last me another few years. If not, I'll be asking Toyota why.

I've had one Renault in the past and I have to say that although some people may love them, I couldn't get along with the one I had, a Clio - and couldn't wait to get rid of it. I won't have another. 

Toyota, for me, is a reliable car - I've had Yaris (2) in the past and now have an Aygo. It's as reliable as any other car. And I have full breakdown cover (even though we still hardly go anywhere!) so I know that if anything should happen, I won't be stranded. I don't expect anything to happen though because of the full annual service. (Necessary, even though we've hardly been anywhere.)

I agree with other comments, Toyota is a reliable motor. And do you really need a car costing over £26k when your Toyota should serve you well for another few years and it will be yours, with nothing else to pay but the usual things, tax, insurance, MOT, service, breakdown, etc.?

Just my thoughts of course but I am looking forward to paying off my PCP, owning a decent car for once and not having to pay any more instalments. Instead a monthly instalment will be going into my savings account. Best of both worlds then, savings and a car. 

Suzycoll

Thanks Mal and everyone

Good solid advice - appreciate it all

Kind regards 

martinbainbridge1975

Suzycoll said:

Thanks Mal and everyone

Good solid advice - appreciate it all

Kind regards 

My dad has a Toyota that is 10 year old this year, it only has 48000 miles on, never had a single advisory on an MOT, passed every single one.

all he does is service it, mot it, put tyres on and regular maintenance like brakes etc then drives it. It is his 4th Toyota the only time it would not start is when the battery needed replacing. RAC sorted that within an hour.

Pay off the toyota, if you have a warranty extension option look at it, certainly would not swap for a renault