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  • FIRST POST
    • Qrbrrbl
    • By Qrbrrbl 2nd Aug 18, 10:08 PM
    • 18Posts
    • 11Thanks
    Qrbrrbl
    PCP, deposit and personal loans
    • #1
    • 2nd Aug 18, 10:08 PM
    PCP, deposit and personal loans 2nd Aug 18 at 10:08 PM
    Hypothetical question:

    Say I want to purchase a car (new or used, doesn't matter for the question) at a value of 25k, which has a GMFV of 10k after 3 years. A PCP deal would give me 9%APR over the term, whereas a personal loan can give me 2.5%APR over the same term. I have no cash funds of my own to serve as a deposit.

    Would it be possible, preferable, advantageous to take out a personal loan of 14k on 2.5%APR to use on a deposit, leaving just 1k on the PCP rate of 9%APR, rather than the full 15k on the PCP rate of 9%? Combined monthly payments of the two would potentially be lower than a pure PCP on 9% wouldn't they?

    Assuming excellent credit history, would you even be able to get a personal loan for this?

    Not asking about the relative (dis)advantages of PCP or anything like that, just interested in the hypothetical of trying to optimise a PCP deal.
Page 1
    • Car 54
    • By Car 54 2nd Aug 18, 10:17 PM
    • 3,189 Posts
    • 1,985 Thanks
    Car 54
    • #2
    • 2nd Aug 18, 10:17 PM
    • #2
    • 2nd Aug 18, 10:17 PM
    A loan of 14k would leave you paying 9% on 11k, not 1k. You are effectively borrowing 25k, not 15k.
    • bazzyb
    • By bazzyb 2nd Aug 18, 10:57 PM
    • 1,210 Posts
    • 3,283 Thanks
    bazzyb
    • #3
    • 2nd Aug 18, 10:57 PM
    • #3
    • 2nd Aug 18, 10:57 PM
    As above, you pay interest on the whole amount you're borrowing, including the balloon.

    The other issue is that you would struggle to find any lender that would let you put more than around 30% down as a deposit on a PCP.
    • Qrbrrbl
    • By Qrbrrbl 2nd Aug 18, 11:23 PM
    • 18 Posts
    • 11 Thanks
    Qrbrrbl
    • #4
    • 2nd Aug 18, 11:23 PM
    • #4
    • 2nd Aug 18, 11:23 PM
    OK, I did wonder if there were limits on how large a deposit you could put down on PCP.

    So using the above example then, if I were to take a loan to cover the maximum possible (in this case, say 8k), you would be looking for PCP to finance the 10k GMFV and the remaining 7k.

    Would this then give you 9% PCP interest on 17k and 2.5% personal loan interest on 8k, therefore saving 7.5% worth of interest compared to putting the full 25k on PCP?
    • DrEskimo
    • By DrEskimo 2nd Aug 18, 11:29 PM
    • 187 Posts
    • 122 Thanks
    DrEskimo
    • #5
    • 2nd Aug 18, 11:29 PM
    • #5
    • 2nd Aug 18, 11:29 PM
    I've seen some manufacturers stipulate that you have to borrow more than the final payment, so that limits your deposit. I image it might vary between manufacturers though.

    But in theory, yes, although as pointed out you pay 9% on the final payment as well, which obviously doesn't decrease over the term (hence why PCP loans cost more than standard loans in interest, despite having similar APR).

    If you can afford the higher monthly, you would be better off borrowing the whole lot (not that I would advocate borrowing >50%, particularly on a new car...) as the interest on your PCP example would be 4,872, whereas a personal loan of 25k over 3yrs also at 9% would be 3,472, a saving of 1,400.
    • Smellyonion
    • By Smellyonion 3rd Aug 18, 6:07 AM
    • 98 Posts
    • 59 Thanks
    Smellyonion
    • #6
    • 3rd Aug 18, 6:07 AM
    • #6
    • 3rd Aug 18, 6:07 AM
    The PCP can be overpaid at anytime. Using the loan as a larger deposit before the PCP is set up may leave you ineligible for the benefits of the PCP. Ie deposit contribution etc.

    Unless your income is high, you will struggle with getting a personal low at good rates with a 25k PCP in place. And with no funds in the bank, is it wise to make such a luxury purchase on a depreciating asset?
    • Tarambor
    • By Tarambor 3rd Aug 18, 2:49 PM
    • 3,385 Posts
    • 2,479 Thanks
    Tarambor
    • #7
    • 3rd Aug 18, 2:49 PM
    • #7
    • 3rd Aug 18, 2:49 PM
    The truth of the matter is that if you haven't even got enough for the deposit, either in cash or by selling/PXing your current car then you can't afford to get a 25k car because you'd not be able to afford the repayments, whether it was a loan or PCP. If you were able to afford the repayments you'd already have money for the deposit.
    • Qrbrrbl
    • By Qrbrrbl 6th Aug 18, 3:56 PM
    • 18 Posts
    • 11 Thanks
    Qrbrrbl
    • #8
    • 6th Aug 18, 3:56 PM
    • #8
    • 6th Aug 18, 3:56 PM
    I appreciate what you're saying, but saying it's unaffordable is fundamentally incorrect. I have a PCP currently - when this expires I would potentially hand the car back and start again from scratch (downsizing, changing manufacturer etc). This doesn't mean that I can't afford the monthly repayments - in fact, my monthly payments would be going down moving from my current PCP to a full personal loan 25k car. Given I can comfortably afford the payments now, I could then comfortably afford the 25k car without putting a deposit in.

    Not arguing that any of the above methods are a good way of funding a car, just thinking about hypothetical options at the moment. I will be putting a deposit together regardless.
    • Penelopa.Pitstop
    • By Penelopa.Pitstop 6th Aug 18, 4:01 PM
    • 331 Posts
    • 129 Thanks
    Penelopa.Pitstop
    • #9
    • 6th Aug 18, 4:01 PM
    • #9
    • 6th Aug 18, 4:01 PM
    As above, you pay interest on the whole amount you're borrowing, including the balloon.

    The other issue is that you would struggle to find any lender that would let you put more than around 30% down as a deposit on a PCP.
    Originally posted by bazzyb
    Mercedes allows or used to allow to put huge deposits. I know someone who paid 30K upfront and pays peanuts monthly.

    • bazzyb
    • By bazzyb 6th Aug 18, 6:45 PM
    • 1,210 Posts
    • 3,283 Thanks
    bazzyb
    Mercedes allows or used to allow to put huge deposits. I know someone who paid 30K upfront and pays peanuts monthly.
    Originally posted by Penelopa.Pitstop
    Mercedes Agility maximum deposit is 30%.
    • Jonesya
    • By Jonesya 6th Aug 18, 8:18 PM
    • 1,461 Posts
    • 899 Thanks
    Jonesya
    I appreciate what you're saying, but saying it's unaffordable is fundamentally incorrect. I have a PCP currently - when this expires I would potentially hand the car back and start again from scratch (downsizing, changing manufacturer etc). This doesn't mean that I can't afford the monthly repayments - in fact, my monthly payments would be going down moving from my current PCP to a full personal loan 25k car. Given I can comfortably afford the payments now, I could then comfortably afford the 25k car without putting a deposit in.
    Originally posted by Qrbrrbl
    The fact someone can afford the monthly payment for something doesn't mean its affordable, you've got to look at how much safety margin that person has in terms of extra disposable income over and above their outgoings and how much savings they have as a buffer.

    All of your posts suggest you need to raise virtually all of the money for this car through borrowing, which kind of suggests you have little or no savings available to fund a deposit.

    Everyone needs some savings for life unexpected events, big purchases etc, so if someone has little or no savings, it's probably reasonable to suggest that an expensive new car isn't affordable.
    • thescouselander
    • By thescouselander 7th Aug 18, 8:27 AM
    • 5,391 Posts
    • 5,002 Thanks
    thescouselander
    What car are you looking at? If you dont have much of a deposit a lease might be a better option.

    Personally I'd never go for finance as high as 9%. It doesn't sound like a good deal.
    • Qrbrrbl
    • By Qrbrrbl 7th Aug 18, 1:30 PM
    • 18 Posts
    • 11 Thanks
    Qrbrrbl
    Not going to be looking seriously for another 9 months or so, and I will have a sizeable deposit at that point - probably looking at at BMW m140i but the Merc A45 is another contender.

    On the affordability question, like I said I'm not seriously considering full finance - it was a hypothetical question. My monthly disposable income is in four figures (even taking my current higher monthly PCP cost into account) so like I said, regardless of whether it's sensible it would be affordable for me to purchase a 25k car fully on finance.
    • thescouselander
    • By thescouselander 7th Aug 18, 5:14 PM
    • 5,391 Posts
    • 5,002 Thanks
    thescouselander
    Not going to be looking seriously for another 9 months or so, and I will have a sizeable deposit at that point - probably looking at at BMW m140i but the Merc A45 is another contender.

    On the affordability question, like I said I'm not seriously considering full finance - it was a hypothetical question. My monthly disposable income is in four figures (even taking my current higher monthly PCP cost into account) so like I said, regardless of whether it's sensible it would be affordable for me to purchase a 25k car fully on finance.
    Originally posted by Qrbrrbl

    Have you looked into this properly? A BMW M140 starts at 35k before options and by the time you've ticked a few options boxes you'll be pushing 40k before any incentives you can get. Either way you'll need to raise a lot more than 25k. Luckily BMW PCP finance is more like 5% APR rather than 9% and sometimes they'll do the odd 0% special (on diesels mainly).
    Last edited by thescouselander; 07-08-2018 at 5:30 PM.
    • Cornucopia
    • By Cornucopia 7th Aug 18, 5:30 PM
    • 10,476 Posts
    • 10,631 Thanks
    Cornucopia
    I assume that 9% is a finger-in-the-air estimate? The only place you will see that being quoted these days is in the used market, and even then it is expensive, especially for a PCP.

    There are plenty of 0% and low rate PCPs out there. Some of them even have low deposits. Someone has already mentioned leasing, and quite a few leases are a fair bit cheaper than the PCPs on the same models at the moment.

    For example, BMW is quoting 499 deposit + 499pm over 48 months for the 140i Shadow. A similar lease is 2825 + 282pm. (which works out 7800 cheaper).
    Last edited by Cornucopia; 07-08-2018 at 5:34 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.

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    • neilmcl
    • By neilmcl 7th Aug 18, 7:59 PM
    • 11,451 Posts
    • 8,236 Thanks
    neilmcl
    Have you looked into this properly? A BMW M140 starts at 35k before options and by the time you've ticked a few options boxes you'll be pushing 40k before any incentives you can get. Either way you'll need to raise a lot more than 25k. Luckily BMW PCP finance is more like 5% APR rather than 9% and sometimes they'll do the odd 0% special (on diesels mainly).
    Originally posted by thescouselander
    However you're likely to get very good deals on a new M140i on PCP, at least 20% or more.
    • thescouselander
    • By thescouselander 7th Aug 18, 9:59 PM
    • 5,391 Posts
    • 5,002 Thanks
    thescouselander
    However you're likely to get very good deals on a new M140i on PCP, at least 20% or more.
    Originally posted by neilmcl

    20% would be the maximum I'd say - that's also what Broadspeed seem to be indicating (about 18%). I can tell you from experience BMW dealers are offering naff all discount on petrol models at the moment; all the best deals seem to be on diesel variants.

    I ordered a new BMW recently and luckily I got a good discount through a work scheme which ended up at about 20%. The dealers couldn't event get close to that.

    The other thing with the 1 Series is that its not a well speccced model. For example even on the M140 variant you only get the basic idrive system as standard - upgrading to the Professional system would be a must on that car but its an extra 800. Theres arguably a few other options boxes that need ticking too and discounts are rarely available on options.
    • Qrbrrbl
    • By Qrbrrbl 8th Aug 18, 6:37 PM
    • 18 Posts
    • 11 Thanks
    Qrbrrbl
    Been looking already at new or used and whilst a new would be nice I wouldn't be able to make the figures work. I could bring them down lower than my current cars PCP but not to a level I would be happy with. Generally with a couple of options (pro media, sports auto and heated seats) I was being given costs of around 33k including deposit contribution (which was 2.3k iirc). I know the base spec isn't great for these, but we already have another car for carting the kid around which is a lot more comfortable so this would purely be a fun machine for me.

    Looked at used models which is where the 25k came from. On new m140s you would be looking at 4.9% but on used models they only go to 9.1% with BMW finance.

    Where are people getting lease estimates from? I have considered this as an option as well but couldn't find anything close to the 282 monthly figure noted above...
    • Cornucopia
    • By Cornucopia 8th Aug 18, 6:58 PM
    • 10,476 Posts
    • 10,631 Thanks
    Cornucopia
    Where are people getting lease estimates from? I have considered this as an option as well but couldn't find anything close to the 282 monthly figure noted above...
    Originally posted by Qrbrrbl
    I think the 282 is this one:

    https://carlease4u.com/car-listing/lease-bmw-1-series-m140i-shadow-edition-5dr-auto/?gclid=CjwKCAjwqarbBRBtEiwArlfEIHsi4hs3E73q7fa7sed g3-Phs3i46CWMbq8XfM1_ofbfUxhPp06ObxoCZPQQAvD_BwE

    Unfortunately I misread the downpayment, and it is actually 3385, although that's still a saving of 7250 against the BMW PCP.

    Quite a few options here around 305pm plus 2800 down...

    https://www.cars2buy.co.uk/personal-car-leasing/BMW/1+Series/?fFuel=0&fEngine=0&fTransmission=0&fTrim=M140i+Sha dow+Edition&fBodytype=0&fDoors=0&fCarID=0&fTerm=48 &fDeposit=9&fMileage=10000&maxbudget=0
    Last edited by Cornucopia; 08-08-2018 at 7:02 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
    • Qrbrrbl
    • By Qrbrrbl 8th Aug 18, 7:25 PM
    • 18 Posts
    • 11 Thanks
    Qrbrrbl
    Decent mileage allowance as well. I won't be doing a great deal of miles (current has 10k on the clock and I've had it for 2 years) so should be able to get something even better.

    Other than not having the option to buy are there any other disadvantages of lease over PCP?
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