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  • FIRST POST
    • Zaijenn
    • By Zaijenn 8th Jul 18, 8:28 PM
    • 1Posts
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    Zaijenn
    Best way to buy car?
    • #1
    • 8th Jul 18, 8:28 PM
    Best way to buy car? 8th Jul 18 at 8:28 PM
    Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to 20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay 200 per month. Is this nuts?

    Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received
Page 1
    • Jonesya
    • By Jonesya 8th Jul 18, 8:37 PM
    • 1,521 Posts
    • 933 Thanks
    Jonesya
    • #2
    • 8th Jul 18, 8:37 PM
    • #2
    • 8th Jul 18, 8:37 PM
    However you buy and finance a new car you'll be paying the depreciation, whether as a sharp fall in value if you buy outright, or hidden away in the deposit, monthly payment and final value in a more complicated PCP.

    If you don't want to pay it, why not get a slightly older car, say at 3 years where it's still new and typically under warranty but where someone else has shouldered more of the burden.
    • Ectophile
    • By Ectophile 8th Jul 18, 11:30 PM
    • 3,353 Posts
    • 2,150 Thanks
    Ectophile
    • #3
    • 8th Jul 18, 11:30 PM
    • #3
    • 8th Jul 18, 11:30 PM
    Unless you can get a really good deal on a new one, it makes more sense to buy a nearly new car, so that someone else has paid the initial depreciation.


    Think carefully before entering into any finance deal. It has to come with a pretty big discount to be cheaper than just buying the car outright. Even on finance, you're still paying for the depreciation - it's factored into the finance costs.


    The "trading in" at the end of a PCP may not mean much in reality. If you don't make the final "balloon" payment, the car isn't yours. All you're really doing is handing the car back and taking out another finance deal. If you're lucky, the car might just be worth a bit more than the balloon payment, and the dealer will give you a few pounds towards a new car. You end up paying month after month and never actually owning a car.
    If it sticks, force it.
    If it breaks, well it wasn't working right anyway.
    • loskie
    • By loskie 9th Jul 18, 6:33 AM
    • 1,407 Posts
    • 832 Thanks
    loskie
    • #4
    • 9th Jul 18, 6:33 AM
    • #4
    • 9th Jul 18, 6:33 AM
    dont do pcp on a used car

    consider leasing if you want new

    or more sensibly buy a used car for around 8k privately
    • Tarambor
    • By Tarambor 9th Jul 18, 9:24 AM
    • 3,840 Posts
    • 2,871 Thanks
    Tarambor
    • #5
    • 9th Jul 18, 9:24 AM
    • #5
    • 9th Jul 18, 9:24 AM
    If you don't want to take the depreciation hit on a new car then getting a new car on PCP is madness because you're financing the depreciation via the PCP.

    The other problem with PCP is the woefully low annual mileage allowances they typically come with unless you pay more. 6,000 miles a year is not uncommon.

    Buy 2 year old nearly new in cash so the highest rate of annual depreciation has already been done with and it'll still have at least 1 year warranty left. 12k would get you a plethora of 1-2 year old cars.
    • foxy-stoat
    • By foxy-stoat 9th Jul 18, 9:31 AM
    • 3,075 Posts
    • 1,725 Thanks
    foxy-stoat
    • #6
    • 9th Jul 18, 9:31 AM
    • #6
    • 9th Jul 18, 9:31 AM
    Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to 20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay 200 per month. Is this nuts?

    Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received
    Originally posted by Zaijenn
    Cars only depreciate when you sell - if you are thinking about keeping it for a short time then buy a car for 8000 - if your planning on keeping it for many years then buy it outright with cash, so you wont pay interest. Do your research for a few weeks to see what the market is, so you dont buy an overpriced car.
    • Herzlos
    • By Herzlos 9th Jul 18, 10:16 AM
    • 8,447 Posts
    • 7,786 Thanks
    Herzlos
    • #7
    • 9th Jul 18, 10:16 AM
    • #7
    • 9th Jul 18, 10:16 AM
    You're paying the depreciation however you finance it.
    To offset that, either buy it older or keep it for longer.


    The only benefit of PCP is the fixed costs, and if the APR is cheap enough, you may make more from investing your cash elsewhere.
    • Cornucopia
    • By Cornucopia 9th Jul 18, 10:29 AM
    • 10,963 Posts
    • 11,507 Thanks
    Cornucopia
    • #8
    • 9th Jul 18, 10:29 AM
    • #8
    • 9th Jul 18, 10:29 AM
    If you don't want to take the depreciation hit on a new car then getting a new car on PCP is madness because you're financing the depreciation via the PCP.
    Originally posted by Tarambor
    As already stated: ALL new cars, and almost all cars generally have high depreciation. Whether you pay in full or through a finance plan, it makes no difference to the extent of the depreciation - the only caveat being that Leasing and PCPs build in a level of certainty about the depreciation at the outset whereas with other purchase methods it is left as an inevitable "surprise" that occurs when the car is sold/exchanged.

    It's simple enough to run the figures and see how a PCP/Lease scheme compares to outright purchase or HP as long as you have an idea of how much depreciation will be suffered by the car over your comparison period. When I've done that in the past, I've found so little in it that I (personally) would prefer the additional options of a PCP whilst interest rates are low, but other people's MMV.

    The other problem with PCP is the woefully low annual mileage allowances they typically come with unless you pay more. 6,000 miles a year is not uncommon.
    Whilst we've seen situations where people's circumstances have changed, it would be a foolish buyer who opted for 6,000 miles when they knew that 12,000 would be more realistic. The price difference between 6,000 and 12,000 miles is not huge.

    Buying a car is an expensive business, and the important message is: caveat emptor. And if you are "buying" a finance product (or products) too, then caveat emptor over that/them too.

    We were offered a PCP deal with Ford to put 6K downand pay 200 per month. Is this nuts?
    Originally posted by Zaijenn
    Personally, I'd be resistant to a 6K deposit, because this is a large lump sum that you will probably lose all or most of. What car was it to have such a high deposit? When we discuss PCPs on MSE, we often rejig the deposit into the monthly payments for a fairer comparison between deals. Assuming your deal was 36 months, then your overall monthly equivalent would be: 366.

    One useful sanity check before agreeing a PCP is to compare Lease rates for the same car (and vice versa). Generally, Lease rates will be slightly cheaper, but if the difference is huge then that's a good reason to reconsider.

    As an example, I'm considering a Renault Kadjar for my next car.

    On a 36 month Lease: 1307 deposit + 217pm (10k miles pa)

    On a 36 month PCP (with 3k discount applied): 6126 deposit + 219pm (mileage limit not specified)

    So the Lease wins by a long way, or in other words, I'd be looking for an unrealistic additional discount of 4800 (I might get 800).
    Last edited by Cornucopia; 09-07-2018 at 11:09 AM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • Arklight
    • By Arklight 9th Jul 18, 11:16 AM
    • 1,586 Posts
    • 2,467 Thanks
    Arklight
    • #9
    • 9th Jul 18, 11:16 AM
    • #9
    • 9th Jul 18, 11:16 AM
    Hi, looking for a bit of advice from someone who knows more than I do about buying a car! My husband and I have just returned to UK after 8 years abroad and want to buy a car. We could afford to buy a car up to 20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments, still get a new car, can trade in for a new one at end of three years. We were offered a PCP deal with Ford to put 6K downand pay 200 per month. Is this nuts?

    Are we better off buying a nearly new 12k car outright? Or should we go hp?! Any advice gratefully received
    Originally posted by Zaijenn
    If you want to buy a brand new car that no one has farted in (apart from the factory workers, the delivery guys and some of the people are the dealership) then you will need to pay a premium.

    If you're asking about depreciation then 50% or so of this happens in the first 3 years, so this is the sweet spot for a car that's still relatively new where someone else has taken the hit from devaluation.

    If you are asking about cost effectiveness then a reliable used car with a year's MOT for 3k - is going to work out best.
    • Mercdriver
    • By Mercdriver 9th Jul 18, 12:09 PM
    • 2,101 Posts
    • 1,415 Thanks
    Mercdriver
    Also bear in mind that after 8 years overseas, you might struggle to get the best rates on finance deals since the APR is often based on the credit search.
    • Cornucopia
    • By Cornucopia 10th Jul 18, 7:25 PM
    • 10,963 Posts
    • 11,507 Thanks
    Cornucopia
    Following the Kadjar example above, I had a look for nearly new deals, and they illustrate quite well how nearly new is not the obvious choice it perhaps could be (or probably once was).

    e.g. 2015 - similar model/same engine as the above figures. 23,500 miles.

    Main Dealer Cash price: 13,495

    Suggested PCP finance: 0 Deposit + 36 x 292pm (10k miles)

    Providing a more realistic deposit: 1300 + 36 x 249.

    So... it costs more to use a 3 year old car for 3 years on PCP, than it costs to lease a brand new one. The MGFV at 6k is not even all that small, should you wish to buy the car at the end of the PCP term. (The MGFV for the brand new car was 8164). This doesn't entirely make sense to me, and the end-of-term "value" of the new vehicle is vastly less than the cash price of the 3 year old vehicle.
    Last edited by Cornucopia; 10-07-2018 at 7:40 PM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • parking_question_chap
    • By parking_question_chap 12th Jul 18, 6:28 PM
    • 1,795 Posts
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    parking_question_chap
    I would just go for the used 12k option and save the 8k.

    A well engineered car will last 20+ years easy as long as its looked after.
    • Car 54
    • By Car 54 12th Jul 18, 6:55 PM
    • 3,541 Posts
    • 2,166 Thanks
    Car 54
    I would always have advised paying cash (if you can, or via a bank loan), and not buying new.
    However ...
    Last year I bought an ex-demonstrator Jaguar. I was ready to pay cash (plus trade-in) but I was offered a "contribution" of 1,500 if I took a PCP deal.
    I took the deal, and paid it off in full after 2 months. Lost about 200 in interest, but 1,300 better off overall.
    • MEM62
    • By MEM62 13th Jul 18, 11:22 AM
    • 1,822 Posts
    • 1,440 Thanks
    MEM62
    We could afford to buy a car up to 20,000 outright but we are concerned that because cars deprecate so fast, this would not be wise. So we are thinking about some kind of finance plan so that we pay a deposit, and have managble monthly payments
    Originally posted by Zaijenn
    OK. So you are concerned over the financial losses due to depreciation and your solution to that is to finance the car so that you add interest to the cost of the car and make your loss even greater.

    Forgive me but I'm struggling with your logic.
    • Cornucopia
    • By Cornucopia 13th Jul 18, 11:41 AM
    • 10,963 Posts
    • 11,507 Thanks
    Cornucopia
    OK. So you are concerned over the financial losses due to depreciation and your solution to that is to finance the car so that you add interest to the cost of the car and make your loss even greater.

    Forgive me but I'm struggling with your logic.
    Originally posted by MEM62
    In which case, the answer has already been given: there is no trick to avoiding depreciation on new and nearly-new cars. It cannot be done. The only option is to carefully compare and consider the costs of buying outright, buying on HP/Bank Loan, or of getting the car on PCP or Leasing. And to consider the value (if any, to you personally) of PCPs and Leases with their in-built hedging against excess depreciation vs. the open-ended commitment of other options.

    The Interweb says that the people keep their cars for an average of 6 years, so it would be interesting to properly compare costs of ownership over that period. I'm guessing it will favour 5 year HP deals, especially where the interest rate is low.
    Last edited by Cornucopia; 13-07-2018 at 11:46 AM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • MEM62
    • By MEM62 13th Jul 18, 12:52 PM
    • 1,822 Posts
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    MEM62
    In which case, the answer has already been given: there is no trick to avoiding depreciation on new and nearly-new cars. It cannot be done. The only option is to carefully compare and consider the costs of buying outright, buying on HP/Bank Loan, or of getting the car on PCP or Leasing. And to consider the value (if any, to you personally) of PCPs and Leases with their in-built hedging against excess depreciation vs. the open-ended commitment of other options.

    The Interweb says that the people keep their cars for an average of 6 years, so it would be interesting to properly compare costs of ownership over that period. I'm guessing it will favour 5 year HP deals, especially where the interest rate is low.
    Originally posted by Cornucopia
    I am not aware of any mechanism of financing that would reduce the loss. (Even with PCP where you walk away at the end you have effectively picked up the bill for depreciation plus interest) The older the vehicle is a the point of acquisition the more it will have already depreciated but beyond a certain point you are then balancing this against repair bills.

    Many years ago my father's accountant found, what he believed, to be the cheapest way of motoring. He would buy five or six-year old Volvo's and run them until something major broke scrap it and then start again. The cars would be regularly serviced and properly cared for whilst in his ownership and often ran for many years and high mileages before he scrapped them.

    I currently have a company car that I may give up soon as the tax liability dictates that it is hardly a benefit anymore. If I do I will probably buy a three or four year old Volvo, BMW or similar and run it to 100K, sell it on and start again.
    • Cornucopia
    • By Cornucopia 13th Jul 18, 1:03 PM
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    Cornucopia
    I am not aware of any mechanism of financing that would reduce the loss.
    Originally posted by MEM62
    As I said: it cannot be done. PCP/Lease is about managing the risk, fixing the maximum amount of depreciation, and knowing what it will be at the outset. Of course, these things may or may not be important for each individual buyer. For me, I can definitely see the temptation of driving a 23000 car for 225pm + 1300 down.

    The older the vehicle is a the point of acquisition the more it will have already depreciated but beyond a certain point you are then balancing this against repair bills.
    Indeed, though see my earlier comments about nearly-new. (This confirms my unfortunate experience, in which of all the cars I've owned, the one with by far the worst depreciation was a nearly-new car - IIRC it was 18 months old when I bought it for 18k, and it lost over 10k in just over a year, when a too small garage at a new house forced its sale. Hawking it around provided a couple of slightly better offers, but it was still a vast loss - about 55%).
    Last edited by Cornucopia; 13-07-2018 at 1:07 PM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • YorkshireBoy
    • By YorkshireBoy 13th Jul 18, 4:12 PM
    • 30,320 Posts
    • 18,225 Thanks
    YorkshireBoy
    I would always have advised paying cash (if you can, or via a bank loan), and not buying new.
    However ...
    Last year I bought an ex-demonstrator Jaguar. I was ready to pay cash (plus trade-in) but I was offered a "contribution" of 1,500 if I took a PCP deal.
    I took the deal, and paid it off in full after 2 months. Lost about 200 in interest, but 1,300 better off overall.
    Originally posted by Car 54
    Just done exactly the same, on the same marque (2 x 750 contribution totalling 1,500), except the ink had barely dried on my signature when I called up to 'withdraw' from the agreement. Cost me around 7 (2 days interest at 3.xx per day).
    • DrEskimo
    • By DrEskimo 13th Jul 18, 4:38 PM
    • 295 Posts
    • 215 Thanks
    DrEskimo
    Following the Kadjar example above, I had a look for nearly new deals, and they illustrate quite well how nearly new is not the obvious choice it perhaps could be (or probably once was).

    e.g. 2015 - similar model/same engine as the above figures. 23,500 miles.

    Main Dealer Cash price: 13,495

    Suggested PCP finance: 0 Deposit + 36 x 292pm (10k miles)

    Providing a more realistic deposit: 1300 + 36 x 249.

    So... it costs more to use a 3 year old car for 3 years on PCP, than it costs to lease a brand new one. The MGFV at 6k is not even all that small, should you wish to buy the car at the end of the PCP term. (The MGFV for the brand new car was 8164). This doesn't entirely make sense to me, and the end-of-term "value" of the new vehicle is vastly less than the cash price of the 3 year old vehicle.
    Originally posted by Cornucopia
    My guess is that either the used car is loaded with options (which are not reflected in the GFV of a new car), or it's a dealer chancing his arm on making a large profit off someone who hasn't done their homework.

    I'm looking at a cheap second car to do low miles with and considering a Zoe. Brand new they are like 22k, but CarWow have them discounted to 12k.

    I've seen a couple of 1yr old ones for 10k and just waiting for one with the right colour. But there are no shortage of overpriced ones on AT...18m old ones with 10k on the clock priced at 16k and 14k....again...just dealer hoping to make a large profit off an unsuspecting punter....hard to think what else it could be, because they obviously have the trade value of the car, and it's going to be close to 7k!

    All about doing your homework and waiting for that one that's sensibly priced. Of course it goes without saying, you would be pretty nuts to pay as much as 2,700 in interest on that used Kadjar using PCP, when you can borrow 10k for as little as 500 at the moment!!

    That's my main problem with PCP in general. The actual interest you pay is closer to sub-prime loans...
    • Cornucopia
    • By Cornucopia 13th Jul 18, 9:00 PM
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    Cornucopia
    Yes, I think there are (at least) those two factors in the price of the Used car: dealer profiteering (there is only one dealer for Renault across most of Kent) and higher interest rates on finance for used cars vs. new.

    That caution that buyers need to employ is all part of the challenge of buying a car.

    I like the sound of that Zoe for 12k, though.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
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