Author Topic: Buying a new car - finance plans  (Read 563 times)

qwerty123

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Buying a new car - finance plans
« 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!

TabClear

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Re: Buying a new car - finance plans
« Reply #1 on: October 16, 2017, 11:57:18 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.

JimStynes

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Re: Buying a new car - finance plans
« Reply #2 on: October 16, 2017, 12:08:53 PM »
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.

qwerty123

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Re: Buying a new car - finance plans
« Reply #3 on: October 16, 2017, 12:16:29 PM »
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!

delgany

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Re: Buying a new car - finance plans
« Reply #4 on: October 16, 2017, 12:34:08 PM »
Check out Personal Contract Hire....like PCP but cheaper depending on choice if vehicles

armaghniac

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Re: Buying a new car - finance plans
« Reply #5 on: October 16, 2017, 12:52:51 PM »
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.
if at first you don't succeed, then goto Plan B

qwerty123

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Re: Buying a new car - finance plans
« Reply #6 on: October 16, 2017, 01:38:42 PM »
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.

ned

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Re: Buying a new car - finance plans
« Reply #7 on: October 16, 2017, 01:46:31 PM »
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.

Owen Brannigan

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Re: Buying a new car - finance plans
« Reply #8 on: October 16, 2017, 04:54:00 PM »
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.

qwerty123

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Re: Buying a new car - finance plans
« Reply #9 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.

JimStynes

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Re: Buying a new car - finance plans
« Reply #10 on: October 16, 2017, 05:49:52 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. 

TabClear

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Re: Buying a new car - finance plans
« Reply #11 on: October 16, 2017, 06:12:10 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.

manfromdelmonte

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Re: Buying a new car - finance plans
« Reply #12 on: October 16, 2017, 08:06:54 PM »
get a loan and pay it off as quickly as possible
best way to finance a car

Eamonnca1

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Re: Buying a new car - finance plans
« Reply #13 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.