# Best option for personal car finance?



## JBirchy (Oct 9, 2010)

Hi all,

I have done a quick search in this section and found some answers, but there are a few things im unsure about how to best finance a new/nearly new car.

Let me briefly explain my situation:

I have just been promoted to an external sales role for the company i have worked for 3 years, and along with that comes a car allowance. My company does not provide company cars, it provides a personal allowance which i prefer to be honest. The car has to do +45mpg but that is the only prerequisite. So i'll be buying a personal car which will be used for business use. I'll do about 20k miles per year, and would require an Automatic, built in Sat Nav, Bluetooth phone, iPod connectivity and preferably heated seats.

I will have around £1,200 deposit and will be looking at monthly payments of £300-£325 ish... :driver:

_*So how is best to finance it?*_

I've read lots about *PCP*, and it sounds like the best way to do it?

If PCP is the best way to do it, is it better to look over the internet at companies offering this, or is it best to visit dealers and haggle? 
Is there much negotiation to be done with dealers?
Can you have PCP on a used car? I would rather get something used which is better specced that something spanking new.

I've even thought about *personal contract hire*, we get spam emails all day at work and some of the deals on stock cars are unreal! I know this is only with new cars but has this become a slightly old fashioned way of doing it?

The other option is a *personal bank loan*. I will want to change the car every 3 years or so, so would you recommend a loan of 3 years or what are the thoughts on getting a loan for 5 years and then just swallowing the balance up into a new loan when i want to change? How does this work? Is this just a downward spiral to debt?

Being only 24, i've no real experience of this so i've no idea which is best. I've got 6-8 weeks to make my decision and im just going round in circles with it so any help would be appreciated!

Thanks,
JB


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## Nanoman (Jan 17, 2009)

www.broker4cars.co.uk is a good starting point. I got numbers off there and used them to haggle the dealer down. You can put in your budget for deposit and monthly payment along with your mileage and see what comes up.

I'd suggest getting a shortlist and then seeing which of your favourites have the best finance offers. Manufacturers tend to subsidise finance on new cars not used ones so it's sometimes better to go new. I was looking for a 2 year old diesel golf and got a new Audi A3 with a higher spec for less.

Check the excess mileage charge. And also bear in mind you'll be stuck with the car if you lose/change your job.


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## jimmy669966 (Sep 25, 2011)

Personal loan is the best IMO because you own the car and if you want to sell it in the future you don't have to worry about it having finance outstanding on it, etc.


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## McClane (Dec 9, 2010)

Broker4cars is a good start... do you have to have any maintenance packages on it to ensure you're "roadworthy" at all times?

For sure though... call around and go into dealerships and see whats on offer in there.

The sort of 3yr Finance seems to be better value on expensive cars from when I've looked.

For a cheaper car, you can often buy it in a forecourt for the monthly cost over the three years... but with finance there'll still be 4k to pay at the end of the time... if that makes sense. That's why I ended up saving up and buying a Fiesta, rather than own half something nicer for the same outlay.

I'd looked into all the PCP stuff though because so many colleagues (ex sales types) swore by it.


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## Nanoman (Jan 17, 2009)

jimmy669966 said:


> Personal loan is the best IMO because you own the car and if you want to sell it in the future you don't have to worry about it having finance outstanding on it, etc.


What about the fact it can't be handed back after half the purchase price has been paid? What about missing out on a GFMV and not having to pay it until the end of the policy? Also you miss out on the protection finance gives you. I've also never heard of a manufacturer subsidising a PL.

Financing a car with a personal loan has A LOT of drawbacks. Everyone is entitled to their opinion though.

Personally cash or HP/PCP are the best IMO.


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## jordanogrady (Sep 13, 2008)

Personally... I wouldn't touch a PCP or anything the garage offer, thats just me! I like to own the car I drive! I'm in the process of doing this my self, i'll probably get a loan out, and sell my current car to put towards something newer... (i'll never buy a spanking new car either as you loose 3k as soon as you drive it out the garage)
few years down the line and i'll sell the car, pay the remaining balance off the loan, and buy something with the equity that i've paid in.... at least i'll have something to show for at the end! 

A mate of mine has done the PCP thing, he's trying to get out of it, and is currently 1k in negative equity on it, plus the fact that he's gone over the milage allowance, so will start to get charged handsomely now! 
I just can't see the point in getting a car, paying £250 per month or what ever, then handing the car back? It doesn't make sense to me??

Just my opinion tho...
Jordan


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## jordanogrady (Sep 13, 2008)

What are the raw backs? Obviously the cost of the loan


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## Miglior (Feb 12, 2006)

jimmy669966 said:


> Personal loan is the best IMO because you own the car and if you want to sell it in the future you don't have to worry about it having finance outstanding on it, etc.


Unless you buy the car cash you never own it until every penny is paid back mate. I don't get why these days everyone is so hung up on "owning" a depreciating asset.


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## jordanogrady (Sep 13, 2008)

Miglior said:


> Unless you buy the car cash you never own it until every penny is paid back mate. I don't get why these days everyone is so hung up on "owning" a depreciating asset.


I see your point.... but if you get a loan, and buy the car with the cash, you do own it..... you just owe the bank some cash!

If yo get a PCP or car finance.... then you never own it!

Ive also been lucky with cars, I've never really lost that much money on them!

Jordan


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## The Cueball (Feb 8, 2007)

jordanogrady said:


> I see your point.... but if you get a loan, and buy the car with the cash, you do own it..... you just owe the bank some cash!
> 
> If yo get a PCP or car finance.... then you never own it!
> 
> ...


just one small point.... no one ever owns a car, the DVLA actually owns all cars in the UK... 

Anyway, carry on...

:thumb:


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## jordanogrady (Sep 13, 2008)

The Cueball said:


> just one small point.... no one ever owns a car, the DVLA actually owns all cars in the UK...
> 
> Anyway, carry on...
> 
> :thumb:


Not technically correct.... Well, "registered user" maybe not the owner


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## justina3 (Jan 11, 2008)

best option for personal car = save up


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## McClane (Dec 9, 2010)

The Cueball said:


> just one small point.... no one ever owns a car, the DVLA actually owns all cars in the UK...
> 
> Anyway, carry on...
> 
> :thumb:


They own the registration plate. And own the V5C which states that I'm the registered keeper.

Ownership is whoever paid for it. Finance comp or personal individual. That's why you can be the registered keeper but not the owner of a car (if its on finance) ... but* not* because the DVLA owns it. Ownership and reg'd keeper are certainly separate. But the people who deal with registration do not deal with ownership.


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## The Cueball (Feb 8, 2007)

-PJB- said:


> They own the registration plate. And own the V5C which states that I'm the registered keeper.
> 
> Ownership is whoever paid for it. Finance comp or personal individual. That's why you can be the registered keeper but not the owner of a car (if its on finance) ... but* not* because the DVLA owns it. Ownership and reg'd keeper are certainly separate. But the people who deal with registration do not deal with ownership.


we can agree to disagree.... not wanting to take the thread o/t 

:thumb:


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## justina3 (Jan 11, 2008)

The Cueball said:


> we can agree to disagree.... not wanting to take the thread o/t
> 
> :thumb:


i would be interested to hear your take on it mr c


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## Nanoman (Jan 17, 2009)

jordanogrady said:


> I see your point.... but if you get a loan, and buy the car with the cash, you do own it..... you just owe the bank some cash!
> 
> If yo get a PCP or car finance.... then you never own it!
> 
> ...


It's a bit like your house though. You own it but if there is a mortgage on it then the bank has an interest in it. It's my name on the reg document.

It's like anything though. If your mate is trying to get out of it and has high mileage charges then it sounds as if either he didn't udnerstand what he was getting himself into or something unexpected happened and it hasn't worked in his favour.

Like I said taking HP/PCP has several advantages over PL and sometimes even cash. I can't actually think of any advantages of doing a PL other than you can sell it more easily (and be left with the debt rather than the finance company taking the hit).


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## jordanogrady (Sep 13, 2008)

-PJB- said:


> They own the registration plate. And own the V5C which states that I'm the registered keeper.
> 
> Ownership is whoever paid for it. Finance comp or personal individual. That's why you can be the registered keeper but not the owner of a car (if its on finance) ... but* not* because the DVLA owns it. Ownership and reg'd keeper are certainly separate. But the people who deal with registration do not deal with ownership.


Agreed... i just googled it too!

Jordan


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## jordanogrady (Sep 13, 2008)

Nanoman said:


> It's a bit like your house though. You own it but if there is a mortgage on it then the bank has an interest in it. It's my name on the reg document.
> 
> It's like anything though. If your mate is trying to get out of it and has high mileage charges then it sounds as if either he didn't udnerstand what he was getting himself into or something unexpected happened and it hasn't worked in his favour.
> 
> Like I said taking HP/PCP has several advantages over PL and sometimes even cash. I can't actually think of any advantages of doing a PL other than you can sell it more easily (and be left with the debt rather than the finance company taking the hit).


His misses was the car sales woman who sold him it, so i'm pretty sure he understood, its just that he got talked into it, as he thought it was a good deal, when clearly it wasn't! Its totally unto you, but i personally wouldn't go anywhere near a PCP...

Throw some figures in..... and we'll work it out... (if we can) Your never going to gain on a car, so its a matter of taking the best loss!

Jordan


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## The Cueball (Feb 8, 2007)

google... :lol:

everyone is right with google eh... :wall:


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## McClane (Dec 9, 2010)

The Cueball said:


> google... :lol:
> 
> everyone is right with google eh... :wall:


Indeed. I just trust the invoice I got from the Ford dealer for the full amount in sterling. If I de-register my car. I still own it! :thumb:


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## jordanogrady (Sep 13, 2008)

I think it's just the fact that the V5 says your the registered keeper, and not the owner that everyone has jumped on the band wagon..... Nowhere does it state that DVLA own your car... If so, please point this out to me! 


Jordan

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## MidlandsCarCare (Feb 18, 2006)

Do loans vs PCP have a different affect on your credit score?

At least with a PCP the value is held against the car so from a credit perspective is lower risk?


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## Nanoman (Jan 17, 2009)

MidlandsCarCare said:


> Do loans vs PCP have a different affect on your credit score?
> 
> At least with a PCP the value is held against the car so from a credit perspective is lower risk?


No-one can tell you an answer to that. It's entirely up to the finance company how they interpret your credit file. However if someone has a personal loan, then applies for another the finance company might question it. If someone has HP/PCP then applies for a PL they might think it's fine. Your credit file states facts, there are no rules about how a potential creditor will interpret those facts.

PCP/HP are secured. A PL is generally unsecured. The fact that on HP/PCP you can hand a car back after half the payments are made and walk away is generally worth a premium over paying cash. So many people don't understand the benefits/pitfalls of finance (I think you'd need to study the subject full-time in great detail to fully understand it). It's not bad or good. Depending on the person and the circumstance it can be either/or.

PCP/HP has benefits and built-in protections that you don't get with a PL or cash. I'm still waiting for someone to suggest what the actual/hard benefit of PL over PCP/HP is.


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## JBirchy (Oct 9, 2010)

justina3 said:


> best option for personal car = save up


Normally i would totally agree, however i will be getting paid a £250 per month allowance from the company i work for to use a car for business use. I want to provide a professional car that is reliable and a few nice gadgets for me too! :thumb: Therefore, i havent got circa £15k sat around and it would take a long time to save up, so why not get a PCP deal?

My thoughts on it are this...

If i did take out PCP, then at the end of the agreement i would most probably (things change over time!) part-exchange it for a new car. As it's a depreciating asset anyway, i might aswell rent one from the finance company, use the balloon payment to reduce the monthly payments and then swap it for a newer one in 3 years time. By choosing this option, excess mileage is irrelavent as the dealer tends settle the existing debt on it as you are giving them more business. (so i've heard from another source away from this forum)

It just seems the logical choice for someone in my position.


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## Nanoman (Jan 17, 2009)

JBirchy said:


> Normally i would totally agree, however i will be getting paid a £250 per month allowance from the company i work for to use a car for business use. I want to provide a professional car that is reliable and a few nice gadgets for me too! :thumb: Therefore, i havent got circa £15k sat around and it would take a long time to save up, so why not get a PCP deal?
> 
> My thoughts on it are this...
> 
> ...


I don't think you're right there. On a PCP be careful to get the mileage as accurate as you can to avoid being stung.


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## The Cueball (Feb 8, 2007)

is the £250 after tax OP?!? thought I would ask, just in case... 

:thumb:


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## JBirchy (Oct 9, 2010)

Nanoman said:


> I don't think you're right there. On a PCP be careful to get the mileage as accurate as you can to avoid being stung.


Yeah i didn't know if it was true, or maybe i have interpreted what was said incorrectly. The person i spoke with has had several PCP cars and said that some of his were dealt with this way.

I'll be sure to fully investigate with the dealer i buy from


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## JBirchy (Oct 9, 2010)

The Cueball said:


> is the £250 after tax OP?!? thought I would ask, just in case...
> 
> :thumb:


Yes it is. I will then be putting some towards it so will have approx £300-£325 for the car, then probably another £100 for insurance! :wall: the joys of being a 25 year old male...


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## The Cueball (Feb 8, 2007)

JBirchy said:


> Yes it is. I will then be putting some towards it so will have approx £300-£325 for the car, then probably another £100 for insurance! :wall: the joys of being a 25 year old male...


cool... I just know someone that got a car that they couldn't afford because they didn't realise they got taxed... :lol:

How much more is your insurance for using a private car for business!? I'm having a fight with my insurance (company one) at the moment... :wall:

Have you decided on a car yet?!? :driver:

:thumb:


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## Bero (Mar 9, 2008)

Miglior said:


> Unless you buy the car cash you never own it until every penny is paid back mate. I don't get why these days everyone is so hung up on "owning" a depreciating asset.


On the other hand finance/pcp companies take account of all the deprecation.....then add on their operating costs......then some more for profit. Why would people want to Involve another profit making company in a car buying transaction if they have the cash to exclude them?!


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## Bero (Mar 9, 2008)

The Cueball said:


> How much more is your insurance for using a private car for business!? I'm having a fight with my insurance (company one) at the moment...


I'm about £20 a year to go from SDP+commuting to buisness use 1 (travel to different locations of work)


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## JBirchy (Oct 9, 2010)

The Cueball said:


> cool... I just know someone that got a car that they couldn't afford because they didn't realise they got taxed... :lol:
> 
> How much more is your insurance for using a private car for business!? I'm having a fight with my insurance (company one) at the moment... :wall:
> 
> ...


Well i have, but im not sure if i can afford it. I'd love a Volvo V60 R-design;










So i've got a couple of dealers looking for used ones in the right spec.

My insurance company said they would charge me only £140 per year extra for 10k business mileage which i thought was very reasonable!

It will probably be around May time when i have my 'order to place' though, so i've got a good bit of time to weigh up the options.

I'd love a Passat CC, a BMW 325d M-Sport, or i'd love a 57-58' plate 525d M-Sport even more. Trying to strike a balance between age/spec!


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## The Cueball (Feb 8, 2007)

that does look quite nice for a volvo... 

:thumb:


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## Nanoman (Jan 17, 2009)

Bero said:


> On the other hand finance/pcp companies take account of all the deprecation.....then add on their operating costs......then some more for profit. Why would people want to Involve another profit making company in a car buying transaction if they have the cash to exclude them?!


Interesting post. The other way to look at it is this... they can't be sure of the depreciation and to make it attractive they can't overestimate it. Get them to take on some of the risk.

My whole point is you can play the game and use it to your advantage - lots of people do. It's usually easiest to do when buying new and using the manufacturers own finance. There are many reasons that buying a new car with saved cash would not be the best idea - even more occasions when buying with a PL is not the best idea.


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## Hercs74 (Dec 29, 2011)

I've taken out PCP on my last three cars.. I've changed them every 30 months.. The mileage limit on PCP only takes effect if you hand the car in and walk away.. Obviously normal rules apply to cars re sale value depending on whether your mileage is as a high or low user so as to speak.. It also depends on how good a deal you got on the car in the first place.. 

I've have just chopped my car in for new and I had £5 k equity to play with.. I put £3k down on new car on PCP and got £2k cheque from dealer... 

But then I spend 3 weeks haggling and playing dealers against each other.. They hate it but they have a monthly figure in relation of cars to sell so does work in my favour.. 

If I was going to take out a PL or save up my own cash then I'd never buy a new car... However dealers at the mo can do better deals on new cars than used.. My new car has cost me same as a year old with 6 k miles..

So it just all depends on the deal u get..

I once was totally against PCP but when you can leave your hard earnt cash in bank to pay for holidays decor of house family treats building works and still have a car it tends to suit me.. IMO every has there own views and opinions and it's down to individuals circumstances and experiences...




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## Hercs74 (Dec 29, 2011)

It also depends on the vehicle.. Cars like BMW Mercedes etc hold there value.. Citroen Fords Mazda and unlike depreciate very very quickly.. 




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## andy665 (Nov 1, 2005)

Simple - there is no best funding option- there can only be the best funding option for YOU - there are so many variables, car, mileage, usage, preferred length of ownership, credit rating, budget etc etc that what works really well for one person may be totally unsuited to the next


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## andy665 (Nov 1, 2005)

Hercs74 said:


> It also depends on the vehicle.. Cars like BMW Mercedes etc hold there value.. Citroen Fords Mazda and unlike depreciate very very quickly..


I do believe you're being serious, BMW and Mercedes are suffering massive depreciation at the moment and have been doing so for a few years


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## JBirchy (Oct 9, 2010)

Hercs74 said:


> I've taken out PCP on my last three cars.. I've changed them every 30 months.. The mileage limit on PCP only takes effect if you hand the car in and walk away.. Obviously normal rules apply to cars re sale value depending on whether your mileage is as a high or low user so as to speak.. It also depends on how good a deal you got on the car in the first place..
> 
> I've have just chopped my car in for new and I had £5 k equity to play with.. I put £3k down on new car on PCP and got £2k cheque from dealer...
> 
> ...


Very helpful mate, thanks for the post!


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## Hercs74 (Dec 29, 2011)

andy665 said:


> I do believe you're being serious, BMW and Mercedes are suffering massive depreciation at the moment and have been doing so for a few years


Seriously.. Had no problems in this neck of the woods.. My wife's Ford and Megane did suffer.. She just about broke even... But like I said its definitely got to do with the deal you get...

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## SteveTDCi (Feb 8, 2006)

I'm against PCP, unless you can get a low deposit, I can see why people think they are good, there are some very good deals on mercs at the minute, I've seen a slk for £260 a month, the same site also had a v60 for £220 per month, the Volvo was an 18 month lease too. Even at £300 per month with a £2500 deposit that's £13300 and you own nothing, at least a 10k car with a personal loan is still going to be worth £5000 in 3 years, and that makes you £8300 better off 

PCP works if you want something expensive but cannot afford it.


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## jordanogrady (Sep 13, 2008)

Just out of curiosity, what sort of deal do you get with these PCP's? 

I'm currently advertising my car to sell.... It's a mk4 golf, prob worth about 3k... I want a car that's probably worth about 10-13k so was going to get a loan out.... The loan would be over a longer period of time, like 6 years... Just to keep the monthly payments to £170 per month... Ish. I wouldn't ever keep the car this long, and would probably sell the car to re pay the loan off in 2-3 years time, in the hope that I'd have some equity left.... 

So basically, the car would come down in value, and the loan would cost me about 1-1.5k so I'd lose quite a lot over the 2-3 year period. As long as I'm in positive equity then I'm happy.

Where would I benefit from a PCP in all this? 


Jordan

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## SteveTDCi (Feb 8, 2006)

jordanogrady said:


> Just out of curiosity, what sort of deal do you get with these PCP's?
> 
> I'm currently advertising my car to sell.... It's a mk4 golf, prob worth about 3k... I want a car that's probably worth about 10-13k so was going to get a loan out.... The loan would be over a longer period of time, like 6 years... Just to keep the monthly payments to £170 per month... Ish. I wouldn't ever keep the car this long, and would probably sell the car to re pay the loan off in 2-3 years time, in the hope that I'd have some equity left....
> 
> ...


I wouldn't bother, in this case you would be better off with a PCP if you have no intention of keeping the car past 3 years, use the golf towards the deposit, then in three years review wat you want. A lot more manufactures a pushing this option, have a look at pugs just add fuel, or google contract hire


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## jordanogrady (Sep 13, 2008)

SteveTDCi said:


> I wouldn't bother, in this case you would be better off with a PCP if you have no intention of keeping the car past 3 years, use the golf towards the deposit, then in three years review wat you want. A lot more manufactures a pushing this option, have a look at pugs just add fuel, or google contract hire


But you can't get a PCP on a private 2nd hand car? I dont want a new new car as you loose too much on them!

Jordan


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## SteveTDCi (Feb 8, 2006)

no, but you can get them on used cars from most dealers, with PCP you really are paying the depreciation and interest, so if you only intend to keep the car for 3 years then the difference between what you would lose in deprecation would be similar. PCP is for if (imo) want something that you cannot afford, so if you wanted something like a new Audi A1 you would pay a deposit and then payments of around £200 per month.


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## JBirchy (Oct 9, 2010)

jordanogrady said:


> But you can't get a PCP on a private 2nd hand car? I dont want a new new car as you loose too much on them!
> 
> Jordan


I dont think you can get PCP on private finance, so your best option then is a loan. However its worth considering what kind of car you can get for your monthly payment.

I will be looking at it as if i will be leasing the car and simply handing it back for a new one after 3 years. With my work and requirement for the car, it works out best this way.

If you prefer to keep the car for a longer period of time and own it, the PCP isn't the best way to do it. Same as if you would prefer a car thats over 2-3 years old, i dont think PCP is the best way.

From the research i've done, it seems like it only really works for people like me who need a new, reliable car for work and will be changing it every 3 years or so.


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## JBirchy (Oct 9, 2010)

SteveTDCi said:


> no, but you can get them on used cars from most dealers, with PCP you really are paying the depreciation and interest, so if you only intend to keep the car for 3 years then the difference between what you would lose in deprecation would be similar. PCP is for if (imo) want something that you cannot afford, so if you wanted something like a new Audi A1 you would pay a deposit and then payments of around £200 per month.


Having something you cannot afford is a broad way of putting it...

For example, i could if i wanted to own, spend £500 per month on a personal loan from my bank - using the online calculator i would be looking at a £15k car over 3 years at around 9% APR. i Can afford it if i wanted to do it this way. However all cars bar the exception of vintage classics are depreciating assets so it would be worth a lot less come sale time.

However with PCP, i can pay around £300-£350 per month and get a brand new/less than 2 year old car worth about £17-18k, run it for 2-3 years and then simply swap it for something newer, using the mindset that im paying to lease a car and that i'll never own it.

Its not a case of having something you can't afford, its about keeping my money for holidays, engagement ring :wall: , decorating the house etc... whilst still having the ability to run a car which is reliable enough for business use.

Seems like a good idea to me...


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## Rob_Quads (Jul 17, 2006)

JBirchy said:


> For example, i could if i wanted to own, spend £500 per month on a personal loan from my bank - using the online calculator i would be looking at a £15k car over 3 years at around 9% APR. i Can afford it if i wanted to do it this way. However all cars bar the exception of vintage classics are depreciating assets so it would be worth a lot less come sale time.
> 
> However with PCP, i can pay around £300-£350 per month and get a brand new/less than 2 year old car worth about £17-18k, run it for 2-3 years and then simply swap it for something newer, using the mindset that im paying to lease a car and that i'll never own it. .


Your not comparing like with like - you would want to look at taking the loan over a longer period probably i.e.

17K over 5 years @ 6.1% = £320 PM.
After 3 years you would owe ~ 7.5K

So it all comes down to would the car you are buying going to be worth more. if its going to be worth ~10K then your better off going the loan route.

Once you know the PCP per month amount work out what you would get spending it on the loan.


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## JBirchy (Oct 9, 2010)

Rob_Quads said:


> Your not comparing like with like - you would want to look at taking the loan over a longer period probably i.e.
> 
> 17K over 5 years @ 6.1% = £320 PM.
> After 3 years you would owe ~ 7.5K
> ...


Thanks for that. This is where my naivety shows. Im unaware of the options with regard to getting the loan over a longer period of time and the pro's and con's about it.

So if thats the case, if i were to get a loan of £17k over 5 years but wanted to change the car after 3, what would happen to the balance of the finance? Would this just be swallowed up into the new loan amount?


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## SteveyG (Apr 1, 2007)

You can repay a personal loan in full at any time. Some lenders may charge a fee of one or two months interest.


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## Nanoman (Jan 17, 2009)

I was in a similar position to the OP in late 2008 i.e. new job needed a decent motor and had a car allowance. When I was looking here were my choices (figures from memory but fairly accurate with a £1500 deposit)...

2 year old golf GT diesel 140bhp. Screen price £15999. Financed on a PL £350 for 5 years. If the car depreciates more than expected I'm going to be in negative equity with no way out.

Brand new Audi A3 diesel 140bhp. Screen Price £23k Financed with manufacturer subsidised finance £350 for 4 years with an optional balloon payment (offset by a Guaranteed minimum future value) - if the car is worth less after £11.5k has been paid I can hand it back and walk away. 

If I pay the ballon payment it's cost me £4k more than buying the golf yet the screen prices were £7k apart. That's not to mention the 2 year younger Audi is likely to be worth at least £4k more than the golf. If I buy the golf I take on all the risk of depreciation. 

I can't work out why anyone would buy the Golf. Technically I'm better off buying the audi no matter which way you look at it. I can still sell the audi at any time - I just have to settle the finance first.

Even if I had £23k cash I would still be tempted to finance the car. I have financed a car before when I have had cash to pay for it because it made sense to do so.


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## SteveTDCi (Feb 8, 2006)

JBirchy said:


> I dont think you can get PCP on private finance, so your best option then is a loan. However its worth considering what kind of car you can get for your monthly payment.
> 
> I will be looking at it as if i will be leasing the car and simply handing it back for a new one after 3 years. With my work and requirement for the car, it works out best this way.
> 
> ...


yes for you it works, but if you want to spend money on holidays etc then once you are hooked on the PCP then its difficult to get out, you never actually own anything so at the end of 3 years you have paid all that money and own nothing. In order to keep the car you either need to refinance the balloon payment or start again. With a loan providing the loan is clear then you actually own something, you can either have a break and actually have something you can keep or take another loan if thats what you want.

Its the difference between spending 8k on a used car or being able to buy a brand new car, the only difference is that one you will own, the other other you would have paid the same amount of money for but not actually own it. YOu are not limited to a contracted mileage and you can change the car at any time as the fincance is not secured against the car.

Getting stuck in a PCP isn't for me, but as an example I've just received some rates for a Merc C250CDi, its £295+VAT per month on a 3+35 lease, so £500 depsosit with 35 payments of £360 (inc VAT) if you went down the route of a loan for the full amount of the car you wouldn't get anywhere near those payments hence my comment about getting something that you would not normally be able to afford


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## JBirchy (Oct 9, 2010)

Nanoman said:


> I was in a similar position to the OP in late 2008 i.e. new job needed a decent motor and had a car allowance. When I was looking here were my choices (figures from memory but fairly accurate with a £1500 deposit)...
> 
> 2 year old golf GT diesel 140bhp. Screen price £15999. Financed on a PL £350 for 5 years. If the car depreciates more than expected I'm going to be in negative equity with no way out.
> 
> ...


Thats exactly the kind of example i was looking for. Very interesting and yeah, right decision to buy the Audi.

Out of interest, have/did you have someone from the dealership asking you if you wanted to upgrade before the end of the term?


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## Nanoman (Jan 17, 2009)

SteveTDCi said:


> yes for you it works, but if you want to spend money on holidays etc then once you are hooked on the PCP then its difficult to get out, *you never actually own anything so at the end of 3 years you have paid all that money and own nothing. In order to keep the car you either need to refinance the balloon payment or start again. With a loan providing the loan is clear then you actually own something, you can either have a break and actually have something you can keep or take another loan if thats what you want.*
> Its the difference between spending 8k on a used car or being able to buy a brand new car, the only difference is that one you will own, the other other you would have paid the same amount of money for but not actually own it. YOu are not limited to a contracted mileage and you can change the car at any time as the fincance is not secured against the car.
> 
> Getting stuck in a PCP isn't for me, but as an example I've just received some rates for a Merc C250CDi, its £295+VAT per month on a 3+35 lease, so £500 depsosit with 35 payments of £360 (inc VAT) if you went down the route of a loan for the full amount of the car you wouldn't get anywhere near those payments hence my comment about getting something that you would not normally be able to afford


With a PCP you still own the car but as with any form of Hire Purchase there is a legal third party interest. On a PCP/HP at the end of the term (or before once half the value has been paid) you have the choice to own something if it's worth owning or to let the third party take the hit on the negative equity. With a PL/cash you have no choice - you own it whether it's worth owning or not. On a PCP if there is negative equity you can use this to get the finance company to reduce the balloon payment as the last thing they want is a car back if it's going to cost them - another advantage over PL/cash.

There's nothing to stop you saving the balloon payment (as I do) so you can pay the balloon payment if you want to keep it and it makes financial sense.



JBirchy said:


> Thats exactly the kind of example i was looking for. Very interesting and yeah, right decision to buy the Audi.
> 
> Out of interest, have/did you have someone from the dealership asking you if you wanted to upgrade before the end of the term?


Yes of course, you get this with any purchase whether it's HP/PCP/Cash/PL! I've had a few tempting offers though. People don't understand that sometimes manufacturers put up crazy offers that are just stupidly cheap to get their sales up.


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## JBirchy (Oct 9, 2010)

SteveTDCi said:


> yes for you it works, *but if you want to spend money on holidays etc then once you are hooked on the PCP then its difficult to get out, you never actually own anything so at the end of 3 years you have paid all that money and own nothing.* In order to keep the car you either need to refinance the balloon payment or start again. With a loan providing the loan is clear then you actually own something, you can either have a break and actually have something you can keep or take another loan if thats what you want.
> 
> Its the difference between spending 8k on a used car or being able to buy a brand new car, the only difference is that one you will own, the other other you would have paid the same amount of money for but not actually own it. YOu are not limited to a contracted mileage and you can change the car at any time as the fincance is not secured against the car.
> 
> Getting stuck in a PCP isn't for me, but as an example I've just received some rates for a Merc C250CDi, its £295+VAT per month on a 3+35 lease, so £500 depsosit with 35 payments of £360 (inc VAT) if you went down the route of a loan for the full amount of the car you wouldn't get anywhere near those payments hence my comment about getting something that you would not normally be able to afford


With regard to the above in bold, i would say that if i were to get a personal loan of £15k over 3 years (purely example purposes) and at the end of the 3 years the car was worth only £7k, i've effectively spent £15k on the loan to get something that's worth £7k, so its striking a balance of accepting it will cost 'some' money to own and run a car, and how much it will cost to lease the car per month and then give it back.

I hope that makes sense, i know what i want to say but i cant find the right words!

Being stuck in a PCP doesn't bother me too much, my job is very secure (family business which is growing very nicely!) and i get a lot of enjoyment from driving a nice car, so the value i get from paying £300-£325 per month is well worth what i get back.


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## Rob_Quads (Jul 17, 2006)

Nanoman said:


> If I buy the golf I take on all the risk of depreciation.


Correct but you could argue you take on the risk of not making more out of it too.

Obviously if the Manufacturer puts in money to the deal that can also change things but you can normally get most of these even if you don't go for finance.


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## Grommit (May 3, 2011)

JBirchy said:


> Yes it is. I will then be putting some towards it so will have approx £300-£325 for the car, then probably another £100 for insurance! :wall: the joys of being a 25 year old male...


This is just being me and appologise if this doesn't come across to well but, £250 a month for a "decent" car seems low. Aswell as adding fuel, insurance, running costs, tyres when required and you are getting the car for the purpose of bringing in business, you should not have to dip into your own pocket to finance that Birchy.

They may also have a stipulation in their rulebook if you want to call it that, that the car must only be xx years old and be this and that.

The reality will be from my knowledge of having a company car since 19, and am now 31, is that I dont see how you can run a car, for generally under 400 quid a month. That includes your monthly fee to bank, dealer whatever, fuel, tax, wear and tear of the car etc. 20k miles a year is a lot so your looking at a 2litre at least to have a good motorway engine.....

If you get business miles back from your company at say xxpence per mile then fair enough, but it seems that you will be doing all the forking out for the running cost of the car yourself.

Unless you tell me differently I am just giving my thoughts on the reality of how it will work.


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## JBirchy (Oct 9, 2010)

Grommit said:


> This is just being me and appologise if this doesn't come across to well but, £250 a month for a "decent" car seems low. Aswell as adding fuel, insurance, running costs, tyres when required and you are getting the car for the purpose of bringing in business, you should not have to dip into your own pocket to finance that Birchy.
> 
> They may also have a stipulation in their rulebook if you want to call it that, that the car must only be xx years old and be this and that.
> 
> ...


Yeah you are partly right. £250 is not a lot at all to get a decent car. However on top of the £250 per month (partially covering a car payment/insurance) we will get paid the 40p per mile fuel expenses.

The reason why it is £250 per month is because i will be doing around 8k business miles per year, and around 12k private miles. So i can understand the boss man not wanting to shell out much more to cover the cost of my private use of the car.

Looking at some of the 2.0 diesels these days, What-car calculate them as costing between 11p-15p per mile to run, so the fuel expenses at 40p per mile should be enough to cover the tax and general wear and tear. As it will be my car, I will also be responsible to cover the majority of wear and tear/tax on the car, as i would if it wear wholly my car, but with a small contribution from the business.

Fair point though, something in the German league for less than £400 is hard to come by! £300 per month is currently looking at an 18month-2 year old Golf GTD which is still a nice bit of kit for what i want!


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## Nanoman (Jan 17, 2009)

Rob_Quads said:


> Correct but you could argue you take on the risk of not making more out of it too.
> 
> Obviously if the Manufacturer puts in money to the deal that can also change things but you can normally get most of these even if you don't go for finance.


I'm not sure I get you. If it's worth more I keep/sell it.

My whole point is if you need finance PCP/HP almost always makes far more sense than a PL and occasionally cash. New PCP can often make more sense than HP/PL on a used car with a far lower sticker price.


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## Rob_Quads (Jul 17, 2006)

Nanoman said:


> I'm not sure I get you. If it's worth more I keep/sell it. .


Without exact numbers hard to explain. You can keep it but then you need to pay the final agreed price which may well end up meaning your not quite quids

Sometimes it does work, sometimes it doesn't, all comes down to the exact numbers each person is able to do a deal with i.e. APR on a loan / PCP deal with the dealer


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## Nanoman (Jan 17, 2009)

Rob_Quads said:


> Without exact numbers hard to explain. You can keep it but then you need to pay the final agreed price which may well end up meaning your not quite quids
> 
> Sometimes it does work, sometimes it doesn't, all comes down to the exact numbers each person is able to do a deal with i.e. APR on a loan / PCP deal with the dealer


Yes, I had to look around for a deal which is why I recommended the OP come up with a shortlist and see what the best deal is.

Bear in mind that the finance company don't want the car back - especially if it's worth less than the GMFV. e.g:

You want to keep the car but it's only worth £6k and the GMFV (balloon payment) is £8k. You call the finance company up and say 'come collect your car because it's not worth me keeping it'. If they collect it they have a long list of costs (collection fees, storage fees, auction fees, admin fees) along with a car that's only worth £6k. So they say... how about we reduce your balloon payment to £5k and you keep the car. We'll even offer you 0%APR on the £5k.

You can't do that with a PL/Cash.


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## JBirchy (Oct 9, 2010)

Nanoman said:


> Yes, I had to look around for a deal which is why I recommended the OP come up with a shortlist and see what the best deal is.
> 
> Bear in mind that the finance company don't want the car back - especially if it's worth less than the GMFV. e.g:
> 
> ...


Dead right, this is why I think it makes the most sense, especially if they are willing to make a finance contribution!

Sent from my GT-I9100 using Tapatalk


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