First time Car Finance: Figures provided feel too good to be true

TeaRoses

Afternoon,

I was wondering if anyone would mind having a look at my figures and help me believe what I'm seeing. It all feels too good to be true, as last time I checked, my banks were offering me APRs 12% and above. 

Friends and family keep reminding me that PCP is more expensive overall, which is what has me confused. I'm planning on keeping the vehicle longer than the agreement, and have a savings plan in place to settle the loan agreement early, and a backup to meet the final payment. It doesn't help that I have a Blue Light card, and the sales team didn't give me as much information about other finance products, as they can only apply it to PCP.

After 6 months of not-so-great car shopping experiences, I found a dealership I liked, with a service team who are also approachable. 

If someone could check my maths and settle my anxiety, I'd appreciate it.
Thank you


Notes on the figures:
Total payable, I worked out with Excel, as it's not on the paperwork I've received so far.
PCP is based on my order form, as the agreement hasn't been signed yet; however, the dealership confirmed that finance was approved.
For HP comparison, I used the advisory on the website

PCP - Blue Light Discount to base price attached
15,000 miles per year
OTR: 26442.60
Part ex/ Deposit: 3700
48 Months
GMFV: 8370
APR: 7.2%
Monthly payment: 402.25
Total Amount payable: 30985.15*

HP - OTR includes pre-VAT options chosen on PCP.
OTR: 31149
Part ex/ deposit: 3700
48 months
APR: 4.9%
Monthly £629.56
Total Amount Payable: 33918.88*

Exodi

The numbers look about right on my end and I put them through excel -  though small point 3700+(402.25*48)+8370 =31378 not 30985.15

More generally, I hope you can appreciate the only reason PCP appears cheaper (despite having a higher interest rate and carrying a higher balance longer meaning more interest payable over the term) is because the calculations have been done on different finance/OTR amounts. If these were the same, the PCP would have a monthly payment of ~£480.09, and a GMFV of ~£10,383 with a Total Amount Payable of ~£37,127.32.

TeaRoses said:

Friends and family keep reminding me that PCP is more expensive overall, which is what has me confused. 

They're right, it's just that it's not a fair comparison because you get a BLC discount on one but not the other.

akm2018

TeaRoses said:

It all feels too good to be true, as last time I checked, my banks were offering me APRs 12% and above.

Just on this bit - I'm guessing those bank rates are for unsecured loans, which are always more expensive than a secured loan such as car finance. If you don't pay back the car people they get a car; but if you don't pay back a bank loan they get nowt.

DrEskimo

Yea as above - the PCP deal appears to have a higher discount, which is not uncommon as they tend to incentivise them. So would firstly clarify that you can't achieve the same OTR price on the HP deal (are the discounts specific to the PCP basically?).

If you have the funds the thing to do would be to take it on PCP and then settle the finance in full the next day. Then you are only paying £26,442 and saving £4,500 in interest charges.

What do nearly new version/used versions of the car retail at? Could you get it even cheaper than £26,442? 

Exodi

DrEskimo said:

Yea as above - the PCP deal appears to have a higher discount, which is not uncommon as they tend to incentivise them. So would firstly clarify that you can't achieve the same OTR price on the HP deal (are the discounts specific to the PCP basically?).

If you have the funds the thing to do would be to take it on PCP and then settle the finance in full the next day. Then you are only paying £26,442 and saving £4,500 in interest charges.

What do nearly new version/used versions of the car retail at? Could you get it even cheaper than £26,442? 

I'd add that a lot of these agreements caveat an interest penalty for early repayment, but you're talking maybe ~£450 for 3 months interest at the start, but of course still a no brainer to save £4k+ in interest if possible AND crystallise the ~£4.7k BLC saving.

I wouldn't suggest a brand new car either, personally I'd suggest one that is maybe ~5 years old that's already taken the big depreciation hit cars suffer at the start. If the OP doesn't have funds, see if you could get a BLC PCP agreement on that.

TeaRoses

Thank you for picking that up - I think I can live with being £ 500-ish out on rough calculations. I'm gonna polish those up before adding them into my finance tracker.

More generally, I hope you can appreciate the only reason PCP appears cheaper (despite having a higher interest rate and carrying a higher balance longer meaning more interest payable over the term) is because the calculations have been done on different finance/OTR amounts. 

Since I set a limit that I was comfortable with, rather than what I could stretch to, I've not focused on the monthly comparison.

I've been a bit more focused on the cost overall; I've never quite minded how a finance agreement is set up, so long as I get the items I want at the best price possible.

Everything just felt a bit too affordable, compared to other loans I've looked at. I've been slightly worried that my calculations were 1000s out, and I was missing something huge that needed including - quite a relief really

TeaRoses

akm2018 said:

TeaRoses said:

It all feels too good to be true, as last time I checked, my banks were offering me APRs 12% and above.

Just on this bit - I'm guessing those bank rates are for unsecured loans, which are always more expensive than a secured loan such as car finance. If you don't pay back the car people they get a car; but if you don't pay back a bank loan they get nowt.

Quite possibly - I just had a look at the car loans section of my banking apps a while ago. And the postal offers haven't changed, so assuming they're still gonna be high.

TeaRoses

DrEskimo said:

Yea as above - the PCP deal appears to have a higher discount, which is not uncommon as they tend to incentivise them. So would firstly clarify that you can't achieve the same OTR price on the HP deal (are the discounts specific to the PCP basically?).

The dealership I've chosen has an agreement with the manufacturer, so they don't take the financial hit. Part of that agreement is that the discount is on PCP loans only. Which, to be fair, at around 4k per car sold on the scheme, it soon adds up.

And with Exodi's corrections to my calculations, if the PCP runs the full term, I'm only going to be out a couple of hundred compared to paying cash, which overall is an amount I'm not going to lose sleep over.

DrEskimo said:

What do nearly new version/used versions of the car retail at? Could you get it even cheaper than £26,442? 

Exodi said:

I wouldn't suggest a brand new car either, personally I'd suggest one that is maybe ~5 years old that's already taken the big depreciation hit cars suffer at the start. If the OP doesn't have funds, see if you could get a BLC PCP agreement on that.

There are 4 used models within 75 miles of my house, at the moment they're priced around 18k, I've had a look at the closest ones, and they're great. However, they have super low mileage compared to what I'm going to put on one.

After lots of discussion with my trusted mechanic, I've ordered a new one.

The depreciation isn't something I'm worried about - I get quite attached to my cars, and having the peace of mind that for the whole lifespan, I can service and repair based on how it's used is worth it. Hoping for 10+ years (fingers crossed)
My last car, which was 4 years old, approved used, and low-mileage, needed major work just over a year after purchase, which, according the the repair garage, was due to deterioration from previous lack of use (it went from being a weekend runaround, to heavy commuter).

DrEskimo

TeaRoses said:

DrEskimo said:

Yea as above - the PCP deal appears to have a higher discount, which is not uncommon as they tend to incentivise them. So would firstly clarify that you can't achieve the same OTR price on the HP deal (are the discounts specific to the PCP basically?).

The dealership I've chosen has an agreement with the manufacturer, so they don't take the financial hit. Part of that agreement is that the discount is on PCP loans only. Which, to be fair, at around 4k per car sold on the scheme, it soon adds up.

And with Exodi's corrections to my calculations, if the PCP runs the full term, I'm only going to be out a couple of hundred compared to paying cash, which overall is an amount I'm not going to lose sleep over.

DrEskimo said:

What do nearly new version/used versions of the car retail at? Could you get it even cheaper than £26,442? 

Exodi said:

I wouldn't suggest a brand new car either, personally I'd suggest one that is maybe ~5 years old that's already taken the big depreciation hit cars suffer at the start. If the OP doesn't have funds, see if you could get a BLC PCP agreement on that.

There are 4 used models within 75 miles of my house, at the moment they're priced around 18k, I've had a look at the closest ones, and they're great. However, they have super low mileage compared to what I'm going to put on one.

After lots of discussion with my trusted mechanic, I've ordered a new one.

The depreciation isn't something I'm worried about - I get quite attached to my cars, and having the peace of mind that for the whole lifespan, I can service and repair based on how it's used is worth it. Hoping for 10+ years (fingers crossed)
My last car, which was 4 years old, approved used, and low-mileage, needed major work just over a year after purchase, which, according the the repair garage, was due to deterioration from previous lack of use (it went from being a weekend runaround, to heavy commuter).

Yes but the difference in costs is substantial…you would need over £8k worth of repairs before breaking even! 

But if that’s worth it for you to have a brand new one, then your call!