Car Finance

PRDMKT

My current car is coming to the end of it's life and I am looking at my options moving forward, traditionally a small bank loan would get me a decent car ~ 3 years old with minimum mileage, however, this no longer seems to be the case.

I am confused to what people are doing currently? leasing looks attractive but I hate the premise of it- is it even safe? 

I assume I am not the only one facing this dilemma so look forward to seeing other peoples opinions on the matter. 

BR,
Cam

jlfrs01

I think the main problem here isn't how to finance a car but rather the fact that the cost of 2nd hand vehicles has risen so much since COVID. PCH's or leases are generally available for new vehicles only, PCPs can be arranged for 2nd hand cars so that would be a more comparable option to a loan. To me, a PCP for a 2nd hand car doesn't make much sense - you'd be locked into an annual mileage cap (or pay a penalty if handing the car back), and have to pay for any non wear and tear damage if handing it back, plus the interest rate would most likely be higher than a conventional loan. With the balloon payment at the end, if you don't cover the contracted mileage and are under, you could buy it at the end and sell on for a profit.
With a loan you'd have control over where it is serviced and at the end you'd own it outright and can do as many or as few miles as you want. 

CliveOfIndia

jlfrs01 said:

I think the main problem here isn't how to finance a car but rather the fact that the cost of 2nd hand vehicles has risen so much since COVID. PCH's or leases are generally available for new vehicles only, PCPs can be arranged for 2nd hand cars so that would be a more comparable option to a loan. To me, a PCP for a 2nd hand car doesn't make much sense - you'd be locked into an annual mileage cap (or pay a penalty if handing the car back), and have to pay for any non wear and tear damage if handing it back, plus the interest rate would most likely be higher than a conventional loan. With the balloon payment at the end, if you don't cover the contracted mileage and are under, you could buy it at the end and sell on for a profit.
With a loan you'd have control over where it is serviced and at the end you'd own it outright and can do as many or as few miles as you want. 

I agree with this completely.  PCP deals are undoubtedly very popular with a lot of people, but to my mind you're still running a brand-new car - which is expensive, however you care to dress up the finance.

Personally I've always bought older second-hand cars outright.  As long as you take your time to do a bit of research, check the car thoroughly, there's no reason you can't get a very serviceable runabout for relatively little money - I think the most expensive car I ever bought was £5000, and that gave me 6 or 7 years of hassle-free motoring.  OK, prices are higher at the moment, but the same principle applies.

The other very salient point raised by the previous poster is that you're not tied in.  No worries about going over the agreed mileage, routine servicing and most repairs I can do myself, use a local mechanic for anything that's outside of my capabilities.  Minor knocks, dings, scrapes, cosmetic damage - don't worry about it, just patch it up as best you can yourself and carry on.

Much, much cheaper overall.  But it's horses for courses - my cars have always given me very good service, but I don't get the kudos of driving around in a shiny new motor.  Not that I want to, but it seems to matter to some people.

Yes, there is the argument that you shouldn't expect to have many repairs to do on a new car, and the warranty will cover anything that does need doing.  But there are always exceptions - and if I count up the total cost of ownership of every car I've had over the time I've owned them, it's peanuts compared to a new car.

Well, you asked for opinions - that's just mine, but others will have different but equally valid viewpoints

foxy-stoat

Depends on how much you have saved up to go towards replacing your current car and how much the next one will cost, you finance the difference by bank loan or 0% money transfer offer from your credit card maybe.

I think of private leasing is just hiring a car that you cannot afford to own - is it safe?  yeah, I don't think anyone has got physically hurt.....maybe financially hurt if it got damaged and not repaired while your hiring it.

PCP is renting a car that you cannot afford to own, with an option to purchase after a few years.  Crunch the numbers, it may work out for you.

HP is ok, but crunch the numbers also against other loan options, as long as its a few years old and low mileage - GAP insurance back to invoice is a must - good way to beat depreciation in the event of a total loss before you have paid for it.

MEM62

PRDMKT said:

I am confused to what people are doing currently?  

I save for my cars during the lifetime of my current one and pay cash.  I have never seen the point in borrowing and paying interest to buy an asset with a value that falls like a stone. You cannot stop the depreciation element but you can void the additional cost of the interest.   

foxy-stoat said:

PCP is renting a car that you cannot afford to own, with an option to purchase after a few years.  

Absolutely.  And many just roll the arrangement over car after car.  Years of monthly payments and never actually owning anything.  
 

Ryan_Holden

It might be better to start with what's the budget you wanted to spend, what do you have on hand in cash, and what kind of car do you want?

ader42

“ a decent car ~ 3 years old with minimum mileage”

what is decent? One person might think this:

https://www.autotrader.co.uk/car-details/202305237679516

another might think this:

https://www.autotrader.co.uk/car-details/202308050456166