Car Loan- PCP, bank loan or just keep current car?

tlca1947 · 13 June 2019 at 8:21PM

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!

Ben8282 · 13 June 2019 at 9:31PM

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 · 13 June 2019 at 9:59PM

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.

JayRitchie · 13 June 2019 at 10:12PM

What age and model would the Seat be? Do any of the options include servicing?

tlca1947 · 13 June 2019 at 10:25PM

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 · 13 June 2019 at 10:33PM

tlca1947 wrote: »

Are there are benefits to voluntary terminating my contract now, or should I wait till my agreement is up?

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).

JayRitchie · 13 June 2019 at 10:46PM

tlca1947 wrote: »

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!).

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 · 13 June 2019 at 11:07PM

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 · 14 June 2019 at 6:28AM

PCP is almost always in negative equity until very near the end of the payments.

DrEskimo · 14 June 2019 at 8:28AM

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 · 14 June 2019 at 8:59AM

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.

Car Loan- PCP, bank loan or just keep current car?

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