New Car or Slightly Used Purchase - To Finance or Not?

bealine99

I am a year beyond normal retirement age.  For the past 30 years or so, I have always had new cars, either financed on PCP or Leased.   My present car's lease runs out in December when the car will be collected for disposal with no option to purchase it.

It is my intention to purchase either a new car, or a slightly used (ex-demonstrator or similar) one as this will probably be the last car I shall own, or at least it will be a car I intend to keep for a very long time.   As I have reduced working down to Part-Time (as a hobby) and want to be able to stop working as and when I want, I don't want to enter into a new monthly Direct Debit commitment.

From our retirement savings, I could afford to buy the car outright and that was always our intention.   However, you do seem to get better offers if you buy the car on an HP or PCP agreement.

Does the team think it would be more beneficial to pay cash on the nail, or should I enter into a new finance deal and then settle the finance deal a few months down the line?

Goudy

A while ago you could sign up for HP/PCP, get the discount/deposit contribution, then cancel the finance and pay cash but the finance companies and dealers cottoned on and started to invoice customers the full cash price after they cancelled the finance which means the finance benefits disappear.

You can still take the finance with benefits but instead of cancelling, wait until you pick up the car and ask the finance company for a settlement figure in the first month, then pay that.

Most make this very easy and have web portals to register and login to that will generate an up to date settlement figure and tell you how to pay it.

If you do this they can only charge you 56 days interest maximum by law and you keep the finance benefits.

This 56 days interest is a lot lower than your usual discounts for taking the finance so you are usually quids in.

If you are going to do this you can do something to help.
Take the finance over a short a period as possible. Instead of 3 or 4 years, take it over 12 months.

You'll be settling so you aren't worried by the size of the monthly payments and the longer the deal, the more interest you pay, which means this 56 days interest will be more.
The shorter the deal, the less interest you pay meaning the 56 days interest is less.

Also, put down the max deposit the finance company allow.
Again, you initially borrow less, meaning less interest overall, meaning the 56 days is less.

I hope that makes sense?

You won't have any problems doing this, many do this. I've done it myself a few times without problems.

daveyjp

Goudy said:

A while ago you could sign up for HP/PCP, get the discount/deposit contribution, then cancel the finance and pay cash but the finance companies and dealers cottoned on and started to invoice customers the full cash price after they cancelled the finance which means the finance benefits disappear.

Have you a link to where this has happened?

Goudy

Yes, the link is me.

I've tried it and when I phoned the finance company to cancel the finance within 14 days they told me I wouldn't receive the deposit contribution, in fact they told me I'd owe them for it plus interest on the amount.

I argued the point but was pointed to a clause in the finance agreement that said something like:
You have the right to withdraw from the agreement within 14 days (See point whatever "Right to Withdraw").
If you wish to do so you must repay any of the allowances in relation to this agreement including any finance deposit, contribution and other sums or allowances together with interest within 30 days of notifying us of your right to withdraw.

The call handler cheekily told me how customers can keep these allowances, ie settle after and not cancel.

The deposit contribution isn't a discount or money off the invoice, it's what it says on the tin.

It's a deposit that the finance company pay and if you ultimately don't take product, they don't have to contribute the allowances.

Grumpy_chap

To choose between brand new and nearly new (pre-reg), the important thing is to establish whether the pre-reg is actually cheaper.  It is possible to get a good guide as to the "real" cost for a brand new car by using the online comparators.  Sometimes the brand new can be so nearly as cheap as the pre-reg that the pre-reg makes little sense.

Best deals on brand new are often tied to finance.  This can be circumvented by taking the finance and then clearing early (early settlement).

For brand new, especially if options mean a factory build order, the OP may need to act promptly if the new car is to be available for January just after the current lease car goes back.

400ixl

That is not universal by any means though. Worth being aware of, but many do not remove any financial benefits and therefore the 56 days interest can be avoided. Any financial contract should be read in detail for such clauses prior to signing and then the appropriate action taken.

Herzlos

Goudy said:

If you are going to do this you can do something to help.
Take the finance over a short a period as possible. Instead of 3 or 4 years, take it over 12 months.

You'll be settling so you aren't worried by the size of the monthly payments and the longer the deal, the more interest you pay, which means this 56 days interest will be more.
The shorter the deal, the less interest you pay meaning the 56 days interest is less.

If you haven't made any payments yet, then the term is irrelevant as the 56 days interest is just a function of the outstanding balance and the APR.

Whilst normally a shorter term saves you interest because you're paying the capital back quicker, you're not actually paying any capital back here before clearing the finance.

EssexExile

New or nearly new? It depends if you want exactly the right car or whether you'd be happy with whatever they have in stock.

Cash or credit? The last two times I've bought a new car I've had the cash ready but I got a better price for taking their 0% hire purchase.

ontheroad1970

Goudy said:

Yes, the link is me.

I've tried it and when I phoned the finance company to cancel the finance within 14 days they told me I wouldn't receive the deposit contribution, in fact they told me I'd owe them for it plus interest on the amount.

I argued the point but was pointed to a clause in the finance agreement that said something like:
You have the right to withdraw from the agreement within 14 days (See point whatever "Right to Withdraw").
If you wish to do so you must repay any of the allowances in relation to this agreement including any finance deposit, contribution and other sums or allowances together with interest within 30 days of notifying us of your right to withdraw.

The call handler cheekily told me how customers can keep these allowances, ie settle after and not cancel.

The deposit contribution isn't a discount or money off the invoice, it's what it says on the tin.

It's a deposit that the finance company pay and if you ultimately don't take product, they don't have to contribute the allowances.

Cancelling is not the same thing as settling the finance.  If you cancel the agreement then all terms of the agreement are cancelled including the deposit contribution and you then have to pay full amount.  If you settle the contract by paying the amount under the agreement, then the agreement hasn't been cancelled.