I am considering buying a new car. Various people have said that there is no value in buying a car outright or owning a car - that it is much more cost effective to use Personal Contract Payments (PCP) allowing you the option of changing cars every few years.
Does anyone have any experience of these contracts? I always just assumed that buying a car or paying instalments towards owning a car was the only way to go but I have been told that it is more cost effective to go the PCP route. Any advice, opinions or expertise would be greatly appreciated!
Quote from: qwerty123 on October 16, 2017, 11:47:24 AM
I am considering buying a new car. Various people have said that there is no value in buying a car outright or owning a car - that it is much more cost effective to use Personal Contract Payments (PCP) allowing you the option of changing cars every few years.
Does anyone have any experience of these contracts? I always just assumed that buying a car or paying instalments towards owning a car was the only way to go but I have been told that it is more cost effective to go the PCP route. Any advice, opinions or expertise would be greatly appreciated!
First question is how many miles will you do in a year? PCP usually has pretty low mileage allowances in their headline prices. (about 10-12k normally). If you are going to do more it could change the costs significantly.
I considered it. We have two cars at home though so we wouldn't be able to afford two PCP payments on the go at the one time. PCP sounded good as you can get some cracking cars for much cheaper, but we ended up going for the usual credit union loan. Once we get one car paid off we will then change the other car and keep the credit union payments going.
I've heard the payments are lower than Hire Purchase. Then you get the chance to get a new car again when the contract is up.
In the long run which would be cheaper? Owning a car means you won't be making repayments but you would think that owning a new car would mean that the associated service and maintenance costs would be much lower.
Thats my understanding of it anyhow!
Check out Personal Contract Hire....like PCP but cheaper depending on choice if vehicles
Be careful to compare like with like.
If you have a car to trade in then you can get a good PCP deal, but at the end of the PCP period you then do not have a car to trade in as such.
I have a car to trade in at the minute but my understanding was that at the end of the pcp you give back the car and can begin another contract with a new car.
PCH or lease. The payment at the end of the agreement will probably leave you with little equity or none. Have had two PCPs and had f**k all equity at end of the agreement. Leasing makes sense if you wish to change regularly. Unless you are hoping to run a car for years why go for an agreement to own the car? Ultimately you will never own the car anyway. Looking at a specific car work out your 3 year costs for PCP and PCH or leasing and I think you will be surprised.
Don't use PCP for secondhand cars, interest rates are far to high and will rip you off. New car PCPs usually have added manufacturer's deposit and/or subsidised interest rates
Best to put as little of your own money as possible into a heavily depreciating asset.
Low interest HP or bank loan will always be the cheapest way to buy but with the highest monthly payment. You also take the full risk on the cost of depreciation. e.g. diesel cars now depreciating faster than planned/expected. Overall, true cost can become high depending on what you have bought, i.e. the day you buy is the day you sell.
Use PCP but with little or no deposit, payments will be higher but you have little to lose when the contract ends.
PCH is good but again minimum deposit. However, you can be caught in the less than perfect condition of the car when you end the contract.
PCP is more flexible than PCH if you want to end the contract early.
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
We have two cars. We wouldn't be able to afford two PCP deals at the one time. It would be more than our mortgage. So PCP doesn't work for us. If one of us had a company car or something then I would definitely look at PCP.
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Service/maintennace is part of if but the main cost in your analogy above is that under PCP in year ten you are driving a "new" car, not a ten year old car so you are constantly paying for that privilege. As such cost effective is probably the wrong term as you are not comparing like with like.
get a loan and pay it off as quickly as possible
best way to finance a car
My policy is to buy something in good shape with less than 100k miles on it and take out a loan from my credit union or Prosper.com, whichever is cheaper. I buy something Japanese, change my oil regularly, drive it into the ground until it can go no further, then donate it to public radio when its time is up and get a tax write-off for it because it's a charitable donation. My current car is at about 255,000 miles and still going strong. The soft top roof leaks a week bit in the rain but for all the rain we get that's not a big deal.
I've never bought a new car and I doubt if I'll ever because of the depreciation.
Quote from: Eamonnca1 on October 16, 2017, 08:55:42 PM
My policy is to buy something in good shape with less than 100k miles on it and take out a loan from my credit union or Prosper.com, whichever is cheaper. I buy something Japanese, change my oil regularly, drive it into the ground until it can go no further, then donate it to public radio when its time is up and get a tax write-off for it because it's a charitable donation. My current car is at about 255,000 miles and still going strong. The soft top roof leaks a week bit in the rain but for all the rain we get that's not a big deal.
I've never bought a new car and I doubt if I'll ever because of the depreciation.
I'm the same - never bought new and unless something drastic changes, never will. Once you stick a set of plates on it you're down 20% immediately.
Mileage used to be a major issue with older cars. But with engine technology now, any modern car will comfortably reach the 200k miles mark. If it's a decent make and you don't live on the coast, rust shouldn't be a major factor either.
I would never buy a new car either and my thoughts were to do something like Eamonnca1 but then I heard about these other schemes and wondered if it made more financial sense. In theory leasing a new car should greatly reduce the service bills, no MOT etc. Even less sure now!lol
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Bought a 2017 A5 a few months ago and went with PCP. Mine is a 3-year term. There are 3 options at the end of the term
1) Hand car back and walkway
2) Pay the remaining money owed in lump sum and own the car
3) Hand car back and start new term with another brand new car - the car dealership will have gave a minimum amount the car will be worth - if you are within the mile per year it will most likely be worth more than the amount you owe so you will use the difference as deposit for next new car.
A guy in work is on PCP as well - he just changed his a few weeks ago - he was nearly 30K miles over the amount allowed - as he was continuing on with a new car he wasn't actually charged for the extra miles done but he had no equity in the car to go towards a deposit for new car but he had 5k saved for that deposit
Quote from: Frank_The_Tank on October 17, 2017, 01:49:39 PM
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Bought a 2017 A5 a few months ago and went with PCP. Mine is a 3-year term. There are 3 options at the end of the term
1) Hand car back and walkway
2) Pay the remaining money owed in lump sum and own the car
3) Hand car back and start new term with another brand new car - the car dealership will have gave a minimum amount the car will be worth - if you are within the mile per year it will most likely be worth more than the amount you owe so you will use the difference as deposit for next new car.
A guy in work is on PCP as well - he just changed his a few weeks ago - he was nearly 30K miles over the amount allowed - as he was continuing on with a new car he wasn't actually charged for the extra miles done but he had no equity in the car to go towards a deposit for new car but he had 5k saved for that deposit
If you don't mind me asking Frank, what's the monthly payment on a deal like that and who's it with?
Quote from: Franko on October 17, 2017, 01:57:40 PM
Quote from: Frank_The_Tank on October 17, 2017, 01:49:39 PM
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Bought a 2017 A5 a few months ago and went with PCP. Mine is a 3-year term. There are 3 options at the end of the term
1) Hand car back and walkway
2) Pay the remaining money owed in lump sum and own the car
3) Hand car back and start new term with another brand new car - the car dealership will have gave a minimum amount the car will be worth - if you are within the mile per year it will most likely be worth more than the amount you owe so you will use the difference as deposit for next new car.
A guy in work is on PCP as well - he just changed his a few weeks ago - he was nearly 30K miles over the amount allowed - as he was continuing on with a new car he wasn't actually charged for the extra miles done but he had no equity in the car to go towards a deposit for new car but he had 5k saved for that deposit
If you don't mind me asking Frank, what's the monthly payment on a deal like that and who's it with?
Sent you a PM Franko
Its a bit of a generalisation you lose 20% by putting the plates on it. Depends very much on the car and what you payed for it vs thd list price.
Last car I bought I had 24% of the total list price and holding the value still a year later.
Quote from: thebigfella on October 17, 2017, 05:09:40 PM
Its a bit of a generalisation you lose 20% by putting the plates on it. Depends very much on the car and what you payed for it vs thd list price.
Last car I bought I had 24% of the total list price and holding the value still a year later.
Good man.
Quote from: Frank_The_Tank on October 17, 2017, 02:09:25 PM
Quote from: Franko on October 17, 2017, 01:57:40 PM
Quote from: Frank_The_Tank on October 17, 2017, 01:49:39 PM
Quote from: qwerty123 on October 16, 2017, 05:30:48 PM
I'm just wondering if it's more cost effective to buy a car outright/using a loan vs using something like pcp or pch so that you can keep getting a new car.
If i buy a car for 8k and i have it for 10 years that's £800 per year which is a hell of a lot less than any monthly payments with pcp/pch. Would the extra service and maintenance that go with an older car make up for the difference?
Various people have said that they would never own a car again as it's not worth it financially.
Bought a 2017 A5 a few months ago and went with PCP. Mine is a 3-year term. There are 3 options at the end of the term
1) Hand car back and walkway
2) Pay the remaining money owed in lump sum and own the car
3) Hand car back and start new term with another brand new car - the car dealership will have gave a minimum amount the car will be worth - if you are within the mile per year it will most likely be worth more than the amount you owe so you will use the difference as deposit for next new car.
A guy in work is on PCP as well - he just changed his a few weeks ago - he was nearly 30K miles over the amount allowed - as he was continuing on with a new car he wasn't actually charged for the extra miles done but he had no equity in the car to go towards a deposit for new car but he had 5k saved for that deposit
If you don't mind me asking Frank, what's the monthly payment on a deal like that and who's it with?
Sent you a PM Franko
Cheers Frank
Remember the days when you rented a TV because they were so unreliable that you needed to have someone on call to come out and fix it when it went on the blink? Doesn't make a whole lot of sense with the reliability of modern TVs so businesses like Radio Rentals are a distant memory. I feel like we've reached the same point with the reliability of cars now. The only reason I'd have to see a mechanic now would be to rotate the wheels, and that's only because I have no way of lifting the whole thing off the ground. Routine oil changes or replacing the headlight bulbs is something I can do myself. I feel like a warranty on a new car would just be a big waste of money.
Quote from: Eamonnca1 on October 18, 2017, 09:00:25 PM
Remember the days when you rented a TV because they were so unreliable that you needed to have someone on call to come out and fix it when it went on the blink? Doesn't make a whole lot of sense with the reliability of modern TVs so businesses like Radio Rentals are a distant memory. I feel like we've reached the same point with the reliability of cars now. The only reason I'd have to see a mechanic now would be to rotate the wheels, and that's only because I have no way of lifting the whole thing off the ground. Routine oil changes or replacing the headlight bulbs is something I can do myself. I feel like a warranty on a new car would just be a big waste of money.
Can you change a timing belt? Can you service your brakes. Can you change a clutch/flywheel? Have you a diagnostic computer? Can you align your steering? Can you service your suspension?
I could go on...
An example of different ways to buy a car.
Focus ST-Line 1.0 EcoBoost 140PS on Ford website PCP 3 year deal:
0% APR, Customer Deposit £5,610, Monthly Payment £209, Optional Final Payment, £7,996.
You can get better deal than this I'm sure if you go for pre registered or a demonstrator.
Similar car to lease £152.72 per month, Processing Fee: £198.00, Initial Rental £916.32, 2 year deal. These deals usually includes road tax and sometimes break down cover.
10k loan for 2 year old car, 2.8% APR based on borrowing £10,000 and repaying over 60 months with 60 monthly repayments. Monthly repayments of £178.64 with total amount repayable of £10,718.40.
You need to decide what you want from a car. If you want a vehicle to get you from here to there, buy second hand and pay off a loan. Downside here is you may have little or no warranty, potentially more costly with repairs and MOT is a factor, may be less efficient.
A new car on PCP gives you warranty, reduces potential repair costs and you have a car that no one else has driven. Downside is you will end up paying more and may be stung with no equity at end of the deal.
Leasing is cheaper, get a new car and full warranty included. Downside is you will never own the car (not an issue if you want to change regularly), you have to find the initial lump sum payment each time you start a new deal, potential costs as car has to be in good condition at end of the deal. Mileage really shouldnt be an issue as you should be aware of what you need at beginning of deal. Also it is usually only 10p a mile give or take a couple of pence. Therefore, £1 for every extra ten miles. So if you did 2,000 extra miles that equates to £200.
I would probably go with a lease or PCH.
Quote from: GJL on October 18, 2017, 10:21:19 PM
Quote from: Eamonnca1 on October 18, 2017, 09:00:25 PM
Remember the days when you rented a TV because they were so unreliable that you needed to have someone on call to come out and fix it when it went on the blink? Doesn't make a whole lot of sense with the reliability of modern TVs so businesses like Radio Rentals are a distant memory. I feel like we've reached the same point with the reliability of cars now. The only reason I'd have to see a mechanic now would be to rotate the wheels, and that's only because I have no way of lifting the whole thing off the ground. Routine oil changes or replacing the headlight bulbs is something I can do myself. I feel like a warranty on a new car would just be a big waste of money.
Can you change a timing belt? Can you service your brakes. Can you change a clutch/timing belt? Have you a diagnostic computer? Can you align your steering? Can you service your suspension?
I could go on...
Ah don't start on him, he'll report you to the mods 😀
Also if your buying new or 2nd hand from a dealer, cash won't necessarily get you a better deal. The way the deals are structured, part of the discounts come from taking out the finance. For example there may be 5k of the new car but 50% of that is made up from the dealer and the other 50% from the finance company before you even negioate.
Also remember the sales person/dealer will get commission on signing you to a finance deal as well. So if you pay cash they lose that commission and will be less likely to negioate as they effectively lose that cash which would compensate any additional discount out of their margins.
You can take the PCP and effectively pay it off after you drive out of the dealership, effectively you only pay the pro rated interest. Remember though, the sales person may only get the commission after a few months; if you want to a maintain a good relationship with them then only pay it off once you know the commission terms has been met. That few quid may be worth it in the long run.
I was buying in the North so used CarWow as well to get some deals beforehand from Across the water and then got my local dealer to match that and throw in a few extras (3 Free Year GAP Insurance for example)
https://www.carwow.co.uk/
Quote from: Frank_The_Tank on October 19, 2017, 10:02:57 AM
I was buying in the North so used CarWow as well to get some deals beforehand from Across the water and then got my local dealer to match that and throw in a few extras (3 Free Year GAP Insurance for example)
https://www.carwow.co.uk/
In our house we bought the last four cars this way. Car Wow dealers can really undercut local dealers. Some will match and others will walk away when shown the deals. Make sure you get the dealer to send their finance deal to you on their own headed paper as this authenticates your deal when showing it to a local dealer.