PCP or HP - help

Moley27272

I'm planning on buying a used EV car and the option of PCP or HP has come up. I can't decide how to finance the car purchase.  I have 10k to put down as a deposit, leaving around another 10k to finance. Because EVs are fast changing I don't feel I will take up the offer of a balloon payment at the end of the term of 48 months. I see myself as buying a new car. I need some advice on.
Should I pay such a large deposit ? APR is between 9 and 12 percent. I'm trying to keep the monthly payments reasonable at around £200 a month.
The saving I am making on not buying petrol is not far off £200 a month. So my loss is just the deposit. Am I missing something ? 

Or is HP better ? I would be paying a larger monthly payment, its almost double PCP monthly payment,  but then own a car at the end of the term. 
Thank you for any advice
M

Nearlyold

What is your annual mileage and what is the mileage allowance on the PCP?

Moley27272

my annual mileage is around 9-10,000. I put the pcp mileage allowance to 13,000, Thought I would make more use of the car. It makes little difference on the monthly payments. Obviously effects the balloon payment. Is this relevant ?

WellKnownSid

How used is the used car - age, mileage?  How long is the remaining warranty?

Moley27272

I'v not found the exact car yet. I'm looking up to 3 years old, around 20,000 miles. As I'm looking at VW, they come with an 8 year or 100,000 mile battery warranty which is critical for me. So it must be serviced by a main dealer for this warranty. 

WellKnownSid

As a rule you don’t want a PCP term that goes beyond the manufacturers warranty period. A major failure out of warranty plus remaining finance exceeding the car’s value is a recipe for financial pain.

Find out if you can extend the manufacturer’s warranty perhaps as part of the deal.

Battery failures do happen in EVs but they are quite rare and probably overblown apart from some weak points in some designs.  That said, there are plenty of other big ticket items like heat pumps and inverters that can go wrong and unlike ICE cars you can’t run them to your local Halfords if you need powertrain surgery.  So don’t assume the 8yr battery warranty is your get out of jail card.

ontheroad1970

Never PCP for used is the general rule.  You will be better off with a bank loan where you could get rates around 6% and the loan not tagged to the car.  Remember that on PCP the interest is being charged on the balloon payment which never goes down.

photome

I would never PCP on a used car ( unless it came with perks and you intend to pay it off instantly). 

If you are looking at VW finance the max deposit on PCP is 30% I think, so you wouldnt be able to put down 10k on a 20k car

facade

You can sort of assume that the GFV will be the trade in value if you sell the HP car.

Work out

PCP: deposit + (monthly payment x 48)

HP: deposit + (monthly payment x 48) - GFV

(This is the money you are "throwing away" over the 4 years. Obviously if you keep the car you add the GFV back in to both, but it won't affect which is cheaper)

If there is only a couple of hundred pounds in it, go for HP.

If your financial circumstances change, and you can't afford it HP is easier to deal with.

Also consider GAP insurance

Herzlos

HP is almost always better - you're paying down the entire capital so paying less interest, and it's more flexible should you want to pay it off earlier or change car or whatever.

With a PCP you're paying interest on the whole thing but only repaying capital on the balance without the balloon payment, which reduces the monthly payment but costs more in the long run.
It does make some sense if you think the cars going to be worth much less than the balloon payment at the end, because you can just walk away and the finance company will take the loss, but they are likely to be in a better position to judge than you will.

Herzlos

HP is almost always better - you're paying down the entire capital so paying less interest, and it's more flexible should you want to pay it off earlier or change car or whatever.

With a PCP you're paying interest on the whole thing but only repaying capital on the balance without the balloon payment, which reduces the monthly payment but costs more in the long run.
It does make some sense if you think the cars going to be worth much less than the balloon payment at the end, because you can just walk away and the finance company will take the loss, but they are likely to be in a better position to judge than you will.