Financing a Used Car Purchase

Connoisseurus_Rex

Looking to buy a used car (20-25k) and wanted to get some advice on the best way to pay for it.

First up, pay at least £100 of the deposit on a credit card for the protection - sure.

I could pay cash, but PCP would get me a (small) deposit contribution and a 2 year service plan. So my initial thought was is it better to lose a chunk of cash in one go, or make monthly payments, albeit it on an interest rate of 13-14%. I see lots of suggestions to take the benefits of PCP and simply pay it off early as a good compromise.

The high interest rate makes it pretty unappealing, so I was wondering if it would make more sense to take out a bank loan, settle the PCP and instead repay the bank loan at closer to 6%.

Thoughts on that as a plan?

Obviously it would also hinge on me getting approved for a loan so soon after taking out a PCP plan, does that seem impossible/unlikely/likely? Earning £75k and (I appreciate this is only indicative) MSE Credit Club has me at 9.5/10 from an Excellent credit score and 100/100 affordability score. Only existing debts are a Plan 1 student loan and 2 rewards credit cards that are paid off every month.

Grumpy_chap

Connoisseurus_Rex said:

Looking to buy a used car (20-25k) and wanted to get some advice on the best way to pay for it.

First up, pay at least £100 of the deposit on a credit card for the protection - sure.

I could pay cash, but PCP would get me a (small) deposit contribution and a 2 year service plan. So my initial thought was is it better to lose a chunk of cash in one go, or make monthly payments, albeit it on an interest rate of 13-14%. I see lots of suggestions to take the benefits of PCP and simply pay it off early as a good compromise.

The high interest rate makes it pretty unappealing, so I was wondering if it would make more sense to take out a bank loan, settle the PCP and instead repay the bank loan at closer to 6%.

Thoughts on that as a plan?

Obviously it would also hinge on me getting approved for a loan so soon after taking out a PCP plan, does that seem impossible/unlikely/likely? Earning £75k and (I appreciate this is only indicative) MSE Credit Club has me at 9.5/10 from an Excellent credit score and 100/100 affordability score. Only existing debts are a Plan 1 student loan and 2 rewards credit cards that are paid off every month.

If you could pay cash so the only reason for the PCP is the incentives (deposit contribution plus service plan), why not take the PCP, gain the incentives and then pay down the PCP to settle early with the cash that is available?  I am confused why you then mention taking a bank loan to settle the PCP.

What type and age of used car do you expect to seek for the £20k - £25k budget?  If the used car will be very young in the first couple of years, it may be worth checking the price differential between that and brand new.  Discounts and incentives can sometimes be more favourable for brand new.  The online price comparators such as Car Wow can give an initial indication of brand new real prices.

CliveOfIndia

Connoisseurus_Rex said:

First up, pay at least £100 of the deposit on a credit card for the protection - sure.

You don't need to pay £100 on credit card, any amount (even 1p in theory) would give you S75 protection.

Connoisseurus_Rex said:

I could pay cash ...

.... if it would make more sense to take out a bank loan, settle the PCP and instead repay the bank loan at closer to 6%.

Why would you want to pay interest if you have the cash?  If you get some benefit from taking out the PCP then do that.  Use the cash to settle the PCP (you may have to pay an early settlement penalty, but check to see if the incentives outweigh the penalty).  Then rebuild your savings by making a monthly payment to yourself equivalent to what you would have had to pay to the loan.  The end result is that you'll have more savings that you started with, as you're effectively paying yourself 6% (or whatever) interest.

Connoisseurus_Rex said:

MSE Credit Club has me at 9.5/10 from an Excellent credit score and 100/100 affordability score.

Those scores are meaningless, especially as they're not even visible to a lender.  But that's a moot point really - I can't see any benefit in taking a loan if you have the cash available.

Connoisseurus_Rex

Grumpy_chap said:

Connoisseurus_Rex said:

Looking to buy a used car (20-25k) and wanted to get some advice on the best way to pay for it.

First up, pay at least £100 of the deposit on a credit card for the protection - sure.

I could pay cash, but PCP would get me a (small) deposit contribution and a 2 year service plan. So my initial thought was is it better to lose a chunk of cash in one go, or make monthly payments, albeit it on an interest rate of 13-14%. I see lots of suggestions to take the benefits of PCP and simply pay it off early as a good compromise.

The high interest rate makes it pretty unappealing, so I was wondering if it would make more sense to take out a bank loan, settle the PCP and instead repay the bank loan at closer to 6%.

Thoughts on that as a plan?

Obviously it would also hinge on me getting approved for a loan so soon after taking out a PCP plan, does that seem impossible/unlikely/likely? Earning £75k and (I appreciate this is only indicative) MSE Credit Club has me at 9.5/10 from an Excellent credit score and 100/100 affordability score. Only existing debts are a Plan 1 student loan and 2 rewards credit cards that are paid off every month.

If you could pay cash so the only reason for the PCP is the incentives (deposit contribution plus service plan), why not take the PCP, gain the incentives and then pay down the PCP to settle early with the cash that is available?  I am confused why you then mention taking a bank loan to settle the PCP.

What type and age of used car do you expect to seek for the £20k - £25k budget?  If the used car will be very young in the first couple of years, it may be worth checking the price differential between that and brand new.  Discounts and incentives can sometimes be more favourable for brand new.  The online price comparators such as Car Wow can give an initial indication of brand new real prices.

I suppose to hang on to the cash and pay the finance off at a more favourable rate. Maybe doesn't make as much sense as I thought though.

Will take a look at carwow now, thanks