best car finance with large deposit

Branchini1979
Branchini1979 Posts: 26
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Good afternoon people,

I have been looking at deals for new/used cars with the various car finance options.
I have looked at some, particualrly PCP and they seem to penalise you if you have a larger deposit.
E.g. Get deposit contribution, and money off only if you pay £500 deposit. (i suppose it is beneficial for them to lock you in finance as long as poss.
I would like a car that is around 3 yr old and under 20000 miles so cars i like are around £7000-9000. I have £4000 deposit. What finance option would you recommend.

Thank you all

Comments

  • DrEskimo
    DrEskimo Posts: 2,337
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    PCP don't penalise higher deposits, they are just designed for people that don't have them. PCP doesn't really make sense as a financial product for people that have a lot of capital upfront, or can make larger monthly payments, as they just end up being charged more interest.

    You are free to put down as much as you like, as long as it's not more than the difference between the invoice price and balloon payment (i.e. if car is £10k and balloon payment is £5k, I you can't put down more than £5k..I think...? someone correct me if I'm mistaken!). In order to reduce the monthly payments, it defers a large portion of the amount owed to the end, where you can decide to pay it or not. However, since you still pay interest on the final payment, and this doesn't decrease over the term of the loan, you end up paying more in interest.

    So as a finance product, it's the most expensive way to borrow money to buy a car.

    In your position, I would just apply for the cheapest personal loan you can get. Around 3% is lowest on offer ATM. You will probably have to borrow £7,500 though, as most won't offer low rates on smaller amounts. I would get £7,500 and then look at whether you can overpay in the first month and reduce it down to £3k-£5k that you actually need to borrow.

    A personal loan would be the cheapest in terms of interest, and buying a used car, rather than new will also be the cheapest in terms of depreciation costs.
  • System
    System Posts: 178,077
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    Community Admin
    edited 4 June 2018 at 4:59PM
    0% credit card might be within the realms of possibility. Use the money you have combined with the card, stick the card in a drawer, set up a monthly direct debit to ensure its cleared in full by the end of the 0% term.

    If you do need a loan look for one at least £7500 even though you may not need that amount as its the threshold for the really cheap interest rates. Once you've got the loan, buy the car, use what money you have left over plus the money you have to make a capital repayment to reduce the term, not the monthly repayments. That'll minimise the interest you have to pay.

    Once you've done that open a regular saver account and put £200 a month into it so that when it comes time to change car again hopefully you have enough value in your current one and pot of money large enough that you don't need to borrow.
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