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  • FIRST POST
    • tlca1947
    • By tlca1947 13th Jun 19, 7:21 PM
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    tlca1947
    Car Loan- PCP, bank loan or just keep current car?
    • #1
    • 13th Jun 19, 7:21 PM
    Car Loan- PCP, bank loan or just keep current car? 13th Jun 19 at 7:21 PM
    Hello

    I need some help deciding on what my best option is in regards to my car. My head has been frazzled by competing sales people!

    I currently have a MINI ONE (2016 plate) bought on a PCP finance, I have £3,500 ish left to pay (baloon payment of £6k ish). I have been paying for 36 months, and I am £82 away from paying half the money. I pay £250 a month. There is no way I will be able to pay the balloon payment, so in a years time will either just give the car back or get a new PCP.

    MINI have offered me a deal where I can Voluntary Terminate (will cost £82) my contract and set up a new PCP with them now (8.7 % APR, £199.98 a month on a 2015 plate MINI cooper). Are there are benefits to voluntary terminating my contract now, or should I wait till my agreement is up?

    I also went to SEAT and from them I could VT my current car and then buy a car with a 2% bank loan. Payments with them would be £200 a month. So i'd own the car at the end of 45 months, as oppose to still owing a balloon payment of £3k with the mini.

    MINI have nearly convinced me that no one owns a car anymore and that PCP makes much more financial sense. I have read conflicting advice on web forums!

    Essentially, do I keep my current PCP and wait till the end of contract, get a new PCP, or buy a car with a much cheaper APR bank loan.

    I hope this makes sense! My head is going to explode with options!
Page 1
    • Ben8282
    • By Ben8282 13th Jun 19, 8:31 PM
    • 3,489 Posts
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    Ben8282
    • #2
    • 13th Jun 19, 8:31 PM
    • #2
    • 13th Jun 19, 8:31 PM
    Personally I don't approve of PCP for individuals, mainly for the very reason that you have stated. The balloon payment. I would prefer to take out a loan for the full cost of the car, repay it and then own the car.
    • molerat
    • By molerat 13th Jun 19, 8:59 PM
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    molerat
    • #3
    • 13th Jun 19, 8:59 PM
    • #3
    • 13th Jun 19, 8:59 PM
    Why not get a loan to pay off the balloon. The dealer will tell you all sorts of lies to get you to carry on giving them money. Most PCP deals are designed to keep you tied in forever.
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    • JayRitchie
    • By JayRitchie 13th Jun 19, 9:12 PM
    • 283 Posts
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    JayRitchie
    • #4
    • 13th Jun 19, 9:12 PM
    • #4
    • 13th Jun 19, 9:12 PM
    What age and model would the Seat be? Do any of the options include servicing?
    • tlca1947
    • By tlca1947 13th Jun 19, 9:25 PM
    • 9 Posts
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    tlca1947
    • #5
    • 13th Jun 19, 9:25 PM
    • #5
    • 13th Jun 19, 9:25 PM
    SEAT is a Ibiza 1.0 TSI FR 2016 plate which has done 16k. I'd be buying it for £8,699 with a £8500 bank loan at 2.5% APR from the bank so paying £8,974 back. So £474 interest. Compared to £2,488 interest on the MINI.

    Now figure wise, obviously there is a clear winner there! But from what MINI say I'll likely be able to upgrade the car again in 3 years, and so the interest isn't really an issue because I'll just get a new deal again (having paid £199.98 x 36months so £7,199.38- so less than the Ibiza!).

    The MINI up for grabs is a 2015 1.5 5dr MINI cooper with 8k miles on the clock. It's got a few extras in terms of spec too.

    I love my MINI, and would really like to have the cooper however I want this to be HEAD not heart decision. If interest really isn't something to worry about with a PCP then I'll go with the MINI but if it is then the SEAT is the clear winner.

    neither come with servicing. Mini comes with 1 year warranty, seat 3 months warranty.
    • Cornucopia
    • By Cornucopia 13th Jun 19, 9:33 PM
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    Cornucopia
    • #6
    • 13th Jun 19, 9:33 PM
    • #6
    • 13th Jun 19, 9:33 PM
    Are there are benefits to voluntary terminating my contract now, or should I wait till my agreement is up?
    Originally posted by tlca1947
    For most people, there will be no advantage to VT unless they are in financial difficulty. The issue is that you have paid a deposit (probably), interest and capital repayments, and if you walk away from the deal early, your costs in respect of those things is proportionately higher.

    MINI have nearly convinced me that no one owns a car anymore and that PCP makes much more financial sense.
    Not really. And in any case, this (MSE) isn't about following trends for the sake of it. In this case, it's all about the numbers.

    I'd suggest working out the cost of your new options in terms of (deposit + repayments)/term - that will give you a true cost per month.

    As for the VT. It's a no-brainer. Keep the car unless you really, really hate it. (Or at the very least do the true cost calculation above for both options so that you'll know the cost per month of keeping the car and VTing it).
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    • JayRitchie
    • By JayRitchie 13th Jun 19, 9:46 PM
    • 283 Posts
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    JayRitchie
    • #7
    • 13th Jun 19, 9:46 PM
    • #7
    • 13th Jun 19, 9:46 PM
    SEAT is a Ibiza 1.0 TSI FR 2016 plate which has done 16k. I'd be buying it for £8,699 with a £8500 bank loan at 2.5% APR from the bank so paying £8,974 back. So £474 interest. Compared to £2,488 interest on the MINI.

    Now figure wise, obviously there is a clear winner there! But from what MINI say I'll likely be able to upgrade the car again in 3 years, and so the interest isn't really an issue because I'll just get a new deal again (having paid £199.98 x 36months so £7,199.38- so less than the Ibiza!).
    Originally posted by tlca1947
    I think the difference is that you own nothing after 3 years with the Mini having spent £7,200 over 3 years, but you own a 7 year old car for an extra £1,700 with the Seat. I don't know enough about either car to have an opinion as to whether it is worth it.

    Looking at the CarGiant website I think you might be able to get a cheaper Seat Ibiza of the same age or a little newer which might change the equation.
    • tlca1947
    • By tlca1947 13th Jun 19, 10:07 PM
    • 9 Posts
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    tlca1947
    • #8
    • 13th Jun 19, 10:07 PM
    • #8
    • 13th Jun 19, 10:07 PM
    Thanks everyone.

    This has given me food for thought. I originally thought it was better to bail on my PCP now (as its in negative equity) but I’m thinking now I just keep the car (I have no issue with it) and get a loan on the balloon payment in a years time. Essentially I’ll be buying a 4 year old car for 6k (plus the 9k I’ve already spent!) which is probably more sensible than just giving the car back now after spending 9k on it!
    • tonyh66
    • By tonyh66 14th Jun 19, 5:28 AM
    • 1,460 Posts
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    tonyh66
    • #9
    • 14th Jun 19, 5:28 AM
    • #9
    • 14th Jun 19, 5:28 AM
    PCP is almost always in negative equity until very near the end of the payments.
    • DrEskimo
    • By DrEskimo 14th Jun 19, 7:28 AM
    • 735 Posts
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    DrEskimo
    If you are planning on buying the car at the end, you might as well look at options for buying it now/re-financing it for a straight personal loan/overpaying as much as possible whenever possible.

    PCP loans will cost the most amount of interest due to the fact that the GFV doesn't decrease over the term. You will save a load on interest cost if you can move away from it.
    • lightbulbtime
    • By lightbulbtime 14th Jun 19, 7:59 AM
    • 31 Posts
    • 51 Thanks
    lightbulbtime
    I think there are two main reasons to take into consideration when choosing.

    1. Will you always be able to afford the payments?
    2. Are you just keeping up with the Jones’s? (why change if you love the car you have?)

    PCP is great for those that change their car every couple of years time after time. So regardless of whether you bought the car via a loan or went through PCP, you don’t really own anything either way. Unless you pay off the car loan that is.

    And that’s when peace of mind can come in. I’ve had a van for the past 5 years, bought it when I was making plenty money through my company and then bought it out of the company when I closed it. And since I had the money, I paid it outright. Best decision ever!

    I’m no longer making great money, in fact I’m on here because things are so tight I needed help to sort myself out. But throughout all this I’ve never had to worry about my van, it’s mine and no one can take it away! That is priceless for someone in my position.

    And as molerat said earlier, PCP deals (also known as sub-prime auto loans, bankers didn’t learn anything from sub-prime mortgages eh!) are designed to keep you as a repeat customer and keep you spending money.
    • tlca1947
    • By tlca1947 14th Jun 19, 8:37 AM
    • 9 Posts
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    tlca1947
    Cheers guys.

    I will be able to afford the repayments. I'm really not that bothered about the car I drive, in a keeping up with the Jones's sense, but I do about 100 miles a day so I need a car that is reliable and not going to leave me stranded on the m6 (where I spend much of my life.)

    Based on all that has been said, I have done some calculations.

    Option 1: Keep my car on current finance deal (7.7% APR) and finance balloon payment at end. This would mean that by 2022 I would have paid £9,500ish (12 payments of £250 plus the loan repayments of a £6,161 option to purchase price). I would own a 6 year old car that had done 90k miles.
    Option 2: Keep my car, and re-finance now: This seems to work out at roughly the same price as option 1. I get a loan for 9k (settlement figure) and pay £250 for 38 months. I own a 6 year old car with 90k miles.
    Option 3: Go for the MINI cooper. by 2023 paid £9,599 (still owe 3,978) but just give car back and start again with another finance deal and not worry about that £3,978.
    Option 4: Seat Ibiza (which from my research is a good deal for the spec and mileage of the car). by 2023 spend £9034 owe nothing else. Own a 7 year old car that has done 76k miles. Part exchange it for another car worth about 9k and finance hopefully less than this time. Be ok with the fact I have rented my current car for 3k for the past 3 years, and just hand it back.

    Now to me, option 4 is the clear leader. Unless I am missing something...
    • MEM62
    • By MEM62 14th Jun 19, 8:54 AM
    • 2,898 Posts
    • 2,570 Thanks
    MEM62
    MINI have nearly convinced me that no one owns a car anymore and that PCP makes much more financial sense. I have read conflicting advice on web forums!
    Originally posted by tlca1947
    You must be a salesmans' dream. A salesman (and car salesmen in particular) will tell you anything that he has to, whether it is true or not, to get you to agree to a deal and if you are gullible enough to believe the above statement you are putty in his hands.
    • Nasqueron
    • By Nasqueron 14th Jun 19, 8:58 AM
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    Nasqueron
    If you want to think with your head - you have this car, you know how well (or not) you have cared for it, how the service history is etc. Given that, it's a clear no brainer to keep the car, assuming you cared for it, rather than throwing more money at a new car which costs you more in the long run. Do you know you can get a 2% or 2.5% bank loan or is that just what you have been offered without a proper credit check? Can you work more, sell stuff, earn extra money, save more through cutting back spending etc to cover the balloon? Or maybe get a smaller loan for it? 7.5k for example and ensure the car is given a proper service? Remember also you haven't mentioned the mileage of your car and if it's within your agreement as that will affect the trade in/GMV.

    You say you want to think with head not heart yet all the options, except keeping your car involve risk (you don't know how the cars have been looked after - a 4 year old car with 8k miles? Smacks of lots of short runs to the supermarket and never being run anywhere) and being in debt for a long time. A 6 year old car is nothing these days except to snobs, I see 51 plate cars on the road still running, let alone the old reg style. That car could last you another 12 years easily with the right care


    Incidentally PCP is perfectly fine if you understand it, particularly if you get 0% finance and have the money ready to pay the balloon. Mine was new on PCP at 0%, rather than spend all my cash in one go it say in bank accounts earning interest and then I paid off the balloon at the end
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    “I think that the Government are right to apply to join the European Economic Community...” -Winston Churchill 1961
    “The future of Europe if Britain were to be excluded is black indeed.”
    - Winston Churchill 1963
    • tlca1947
    • By tlca1947 14th Jun 19, 9:42 AM
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    tlca1947
    If you want to think with your head - you have this car, you know how well (or not) you have cared for it, how the service history is etc. Given that, it's a clear no brainer to keep the car, assuming you cared for it, rather than throwing more money at a new car which costs you more in the long run. Do you know you can get a 2% or 2.5% bank loan or is that just what you have been offered without a proper credit check? Can you work more, sell stuff, earn extra money, save more through cutting back spending etc to cover the balloon? Or maybe get a smaller loan for it? 7.5k for example and ensure the car is given a proper service? Remember also you haven't mentioned the mileage of your car and if it's within your agreement as that will affect the trade in/GMV.

    You say you want to think with head not heart yet all the options, except keeping your car involve risk (you don't know how the cars have been looked after - a 4 year old car with 8k miles? Smacks of lots of short runs to the supermarket and never being run anywhere) and being in debt for a long time. A 6 year old car is nothing these days except to snobs, I see 51 plate cars on the road still running, let alone the old reg style. That car could last you another 12 years easily with the right care

    Incidentally PCP is perfectly fine if you understand it, particularly if you get 0% finance and have the money ready to pay the balloon. Mine was new on PCP at 0%, rather than spend all my cash in one go it say in bank accounts earning interest and then I paid off the balloon at the end
    Originally posted by Nasqueron
    I have cared for it really well- fully serviced, no real wear and tear. Its done 45,000 miles- which is 4k over the excess mileage. I have been offered a 2.5% bank loan yes. I could save for the next year and get out a smaller loan. That is actually a very good suggestion.

    Interesting, for some reason I have 90k as being a car that is likely to have a lot of issues and cost me a lot in repairs. Why would short runs be a problem for a car? Sorry if that is a really obvious question!
    • tlca1947
    • By tlca1947 14th Jun 19, 9:44 AM
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    tlca1947
    You must be a salesmans' dream. A salesman (and car salesmen in particular) will tell you anything that he has to, whether it is true or not, to get you to agree to a deal and if you are gullible enough to believe the above statement you are putty in his hands.
    Originally posted by MEM62
    ha! I am literally a salesman's dream. But, a newly self aware salesman's dream, hence the 1000000 hours of agonizing over this decision.
    • Smellyonion
    • By Smellyonion 14th Jun 19, 10:01 AM
    • 247 Posts
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    Smellyonion
    8.7k for a 1.0 2016 seat Ibiza?
    Seems expensive to me.


    I would walk away, get yourself a bank loan, shop around and get something cheaper.


    I would also love to know where you can get a bank loan for 2%!
    • tlca1947
    • By tlca1947 14th Jun 19, 10:07 AM
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    tlca1947
    8.7k for a 1.0 2016 seat Ibiza?
    Seems expensive to me.


    I would walk away, get yourself a bank loan, shop around and get something cheaper.


    I would also love to know where you can get a bank loan for 2%!
    Originally posted by Smellyonion
    Halifax; the woman who did it for me, said it was a very unusual (but obvs great for me!) rate. I have a pretty decent credit rating so I'm assuming it's that.
    • Nasqueron
    • By Nasqueron 14th Jun 19, 10:30 AM
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    Nasqueron
    I have cared for it really well- fully serviced, no real wear and tear. Its done 45,000 miles- which is 4k over the excess mileage.
    Originally posted by tlca1947

    That will mean an excess charge if you hand it back (the VT mileage issue is a bit hit and miss) but you know how the car has been treated well, why risk that for a car that might be a money pit?



    I have been offered a 2.5% bank loan yes.
    Originally posted by tlca1947

    That's not what I asked

    Offered subject to credit check? Remember only 51% of applicants have to get an advertised rate, what if they give you 5%?



    I could save for the next year and get out a smaller loan. That is actually a very good suggestion
    Originally posted by tlca1947

    Take action now, post a statement of affairs on the debt free page, maybe they can help you save more and spend less - 6k is obviously steep but each bit helps reduce the debt



    Interesting, for some reason I have 90k as being a car that is likely to have a lot of issues and cost me a lot in repairs. Why would short runs be a problem for a car? Sorry if that is a really obvious question!
    Originally posted by tlca1947

    Owner's manual should have schedule of work that is likely needed, all I can see on a quick hunt on google is spark plugs at 90k but I am not a mechanic
    “the concept of a United States of Europe is right.” Winston Churchill 1930
    “I think that the Government are right to apply to join the European Economic Community...” -Winston Churchill 1961
    “The future of Europe if Britain were to be excluded is black indeed.”
    - Winston Churchill 1963
    • tlca1947
    • By tlca1947 14th Jun 19, 10:37 AM
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    tlca1947
    That will mean an excess charge if you hand it back (the VT mileage issue is a bit hit and miss) but you know how the car has been treated well, why risk that for a car that might be a money pit?






    That's not what I asked

    Offered subject to credit check? Remember only 51% of applicants have to get an advertised rate, what if they give you 5%?






    Take action now, post a statement of affairs on the debt free page, maybe they can help you save more and spend less - 6k is obviously steep but each bit helps reduce the debt






    Owner's manual should have schedule of work that is likely needed, all I can see on a quick hunt on google is spark plugs at 90k but I am not a mechanic
    Originally posted by Nasqueron

    I've had the credit check- sorry i'm not very clear. I literally have the paper work in front of me a £8500 loan with 2.5% APR

    My settlement fee is pretty close to what market value is for the car.

    I have decided, I am going to use the bank loan to pay the settlement fee.

    PHEW DECISION MADE!

    THANK YOU EVERYONE!!
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