Should I take a loan out for negative equity on car (PCP), to then get a cheaper car?

DrEskimo

You say you don’t have £5-£6k to spend on a used petrol, but then how are you getting a used EV?

You says it’s a used PCP, what exactly is the terms of the deal? How much is either the Ioniq 5 or eNiro, how long is the loan and what interest rate and what’s the GFV?

I’m a big advocate for EV, been running one myself for the past 6/7 years but worried you are jumping out of the fire into the frying pan from one car finance deal, in hindsight, you probably shouldn’t have done, to another!

MattMattMattUK

theringding said:

MattMattMattUK said:

theringding said:

MattMattMattUK said:

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

44 mile round trip commute. Was looking at a 2022 Ioniq 5 or Kia eNiro, both about £350 a month with 0 deposit.

Rest of finances are ok. By doing this I should have £400-£600 leftover a month.

Why not just get something cheap, a small petrol engine car for a few years, spend £5-6k. It would cost you £120-150 a month in petrol, insurance would be a lot cheaper and you could clear down your debt then start saving whilst you do. You can then buy something newer when your finances are in a better state. 

First, I don't have £5-£6k cash to spend. 

You might not, but a £5-10k loan is going to be cheaper than a £20k loan...

theringding said:
Second, it needs to be reliable, my job isn't the kind where I can take a morning off because my car broke down.

A bit smaller or older does not equal unreliable, the key is to make sure it is well maintained, which matters whether the car is three or thirteen years old.

theringding said:

Third, it needs to be large enough to fit 2 adults, 2 kids, and all the kids stuff (buggies etc).

A Golf, Focus, Nero, Qashqi or similar would be adequate to meet that requirement. 

theringding said:

Fourth, it needs to be ULEZ compliant.

Almost anything petrol newer than twenty years will be compliant, anything newer than fifteen years will absolutely be compliant.

theringding said:
When you take into consideration those requirements it becomes hard to find a decent car for anywhere close to that price.

You still have lots of cheaper options than buying a £20k+ car on finance. You might want a newer, more expensive car, if you can afford that then how you choose to spend your money is up to you, but it does not make sense to limit yourself whilst claiming that you have no other choice.

MattMattMattUK

DrEskimo said:

You say you don’t have £5-£6k to spend on a used petrol, but then how are you getting a used EV?

You says it’s a used PCP, what exactly is the terms of the deal? How much is either the Ioniq 5 or eNiro, how long is the loan and what interest rate and what’s the GFV?

I’m a big advocate for EV, been running one myself for the past 6/7 years but worried you are jumping out of the fire into the frying pan from one car finance deal, in hindsight, you probably shouldn’t have done, to another!

I agree on the EV side, I am not anti-EV, my next car will be one, for me it is the OP's frying pan to fire issue with the finance. Used, three years old on finance the eNero is going to be £20k ish depending on mileage and condition. The OP says £350 a month which would make sense on a 5 year deal with a small deposit and/or final payment, but also still paying £350 a month until the car is more than eight years old. The Ioniq 5 is going to come in at £20-25k, so proportional more monthly, or one with much higher mileage.

Andyjflet

I don't advocate borrowing money at all apart from a sensible mortgage, but if you have to then lower it as much as you can. 

Andyjflet

theringding said:

MattMattMattUK said:

theringding said:

MattMattMattUK said:

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

44 mile round trip commute. Was looking at a 2022 Ioniq 5 or Kia eNiro, both about £350 a month with 0 deposit.

Rest of finances are ok. By doing this I should have £400-£600 leftover a month.

Why not just get something cheap, a small petrol engine car for a few years, spend £5-6k. It would cost you £120-150 a month in petrol, insurance would be a lot cheaper and you could clear down your debt then start saving whilst you do. You can then buy something newer when your finances are in a better state. 

First, I don't have £5-£6k cash to spend. 

Second, it needs to be reliable, my job isn't the kind where I can take a morning off because my car broke down.

Third, it needs to be large enough to fit 2 adults, 2 kids, and all the kids stuff (buggies etc).

Fourth, it needs to be ULEZ compliant.

When you take into consideration those requirements it becomes hard to find a decent car for anywhere close to that price.

Save £5k and buy a car cash, don't borrow more money, especially on a car where values are plummeting.

EssexHebridean

In one respect Andy is correct that borrowing money at all is rarely the best route to take. If however this car is a need not a want - so you have to have a vehicle to get to a place of work, for example, or for your job,  then that is one of the situations that comes under a heading that Martin used to call ‘Good debt”. IIRC this category included a mortgage for a property to live in, a loan to pay for education which will then pay you back in increased earning in the future, and a necessary vehicle.

That doesn’t mean buying a 20k car though - a better bet by far would be to get a small bank loan at the best rate you can secure, then pay it off as quickly as possible. A decent reliable car can be had for a few thousand £’s - borrowing to buy something flash is definitely not what anyone here would describe as in any way “good” debt!