Car bought on PCP

Hello

I would appreciate any advice. I have a small car I bought new using PCP. I pay quite a low amount of £150 per month and am halfway through the 4 year term of the agreement. At the end of the agreement, I either have to pay the balloon payment of £4333 and the car is mine, or return the car and owe nothing or use the car and what I've paid towards a new car. I had the same deal with my last car which after 3 years, I changed to my current car.

The question is, I am starting to plan for the future and would like to be mortgage free within the next 10 years as I am 50 and need to start planning for retirement etc. I feel I need to sort out the car finance so it is not hanging over me. I need the car for work (driving around making home visits is my job) so I cannot be without one. If I save hard and pay off the £4333 at the end of the term, it will be mine. However, then my car will be older and will need more maintenance and money spent on it. Or do I keep getting a new car every 3-4 years. My payments have actually dropped between the first car and second car, which is a good thing.

Any advice I would appreciate. Thanks

Comments

  • tacpot12
    tacpot12 Posts: 7,893
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    If your car suit you and you feel that that maintenance costs are going to be reasonable, I would pay the balloon payment and keep the car.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • motorguy
    motorguy Posts: 22,452
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    tacpot12 wrote: »
    If your car suit you and you feel that that maintenance costs are going to be reasonable, I would pay the balloon payment and keep the car.

    +1

    Pretty much the secret to longevity of modern cars is good maintenance and keeping it well serviced.

    I'm planning on doing similar with my 2016 Passat - its 2016 and i've taken it out on a personal loan rather than PCPing a new one.

    I'll keep it well serviced and maintained and run on at it as long as i can.
  • Ectophile
    Ectophile Posts: 7,276
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    Until the car is totally clapped out, the money you'll spend maintaining it will be considerably less than your PCP costs.

    An older car may need new suspension, steering or braking bits to get it through the MOT every year. But this rarely goes over a few hundred pounds.

    I wouldn't expect to get many serious bills for at least 100 000 miles or 10 years.
    If it sticks, force it.
    If it breaks, well it wasn't working right anyway.
  • Nagme
    Nagme Posts: 377
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    We're on a pcp too, ours runs out March and the balloon is £9k. We've looked on auto trader and the best car we can get for £9k is... ours. So if we can afford to, we'll pay the balloon payment. One owner from new, well maintained, know all the history. I'd say if it's a good car, keep onto it.
  • HHarry
    HHarry Posts: 872
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    Don't get to worried about the amount of maintenance an older car needs - it certainly won't be £150 a month.

    I have a 13 year old Berlingo van with 103k miles. Last year (and the year before) it cost me £200 to get it through the MOT. This year it went straight through. There are usually some other bits to do throughout the year, and the occasional big bill for a clutch, but it really doesn't cost much to run.

    If you've had from new and looked after it, then keep it.
  • Thank you all for your replies. As a result, I have set up an online savings account to start saving towards paying off the balloon payment in 2 years. As you say, 1 owner from new, full service history and I know the history. That counts for a lot in this day and age. Many thanks again.
  • Marvel1
    Marvel1 Posts: 7,157
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    I had my old car for 12 years, no major maintenance needed.
  • Rainbowgirl84
    Rainbowgirl84 Posts: 1,175
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    My twelve year old Astra is averaging ~£150 to get through it's MOT over the last four years or so. Doesn't make financial sense to get rid of it and buy newer.
  • System
    System Posts: 178,077
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    edited 18 July 2017 at 4:02PM
    Merlincat wrote: »
    However, then my car will be older and will need more maintenance and money spent on it. Or do I keep getting a new car every 3-4 years. My payments have actually dropped between the first car and second car, which is a good thing.

    Any advice I would appreciate. Thanks

    What are you basing the "it'll older so will need more maintenance and money spent on it" on? My Mondeo I bought at 2 years old. Its now 7 years old at 122,000 miles and other than servicing all it has had is two suspension bushes. And that is a car that has the amount of mileage on that you'd expect of a 10 year old vehicle.

    Getting a new car every 3-4 years you're setting fire to your money. Whatever the new price is you'll be financing the first few years depreciation and that can be as much as 60% of the list price. Going back to my Mondeo I bought it at 2 years old for 30% of its new price saving almost £16,000. And that will be money YOU will be paying out as monthly payments in perpetuity if you go down the "get new, renew every 3-4 years" route.

    With FIRE (Financial Independence, Retire Early) the aim is to minimise your outgoings. If you're spending £1800 a year on finance that will be far far more expensive an amount than you will spend on repairing your car in any one year and in fact £1800 is a good 2-3 times more than you can buy a reliable banger for.

    There is NEVER EVER a time where keeping the car you have and fixing it will be more expensive than buying a new car just on the depreciation hit of year 1 and 2, let alone the interest on any finance you use. And that includes if you have to do a major repair on your older car such as a replacement engine or gearbox. Actually I lie, there is one time where you would be better off buying a new car and that is if you're lucky enough to get a car which is in so much demand with such a long waiting list that you can sell it after a year for more than you bought it for, such as the new Ford Mustang V8. However if you're not buying something exotic or prestige the chances of that are between nil and nothing.
  • My twelve year old Astra is averaging ~£150 to get through it's MOT over the last four years or so. Doesn't make financial sense to get rid of it and buy newer.

    My 18 year old car the same :money:

    Also just bought a 1 year old car on PCP, damn sight cheaper than a new one, I'll be paying the balloon off and keeping it. Only bcoz our previous car was just written off in an accident at 7 years old. Otherwise we wouldn't have had a newer one.
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