AIBU to buy a car on PCP???

[MoonbeamSprinkles]

I have never bought a car before and I'm totally confused about what's for the best.

I have just passed my test and am looking for a Kia Picanto 3, I'm not the most confident driver so I like the fact it has reversing cameras etc.
I have about 8.5K saved and earmarked for the car.

My options are

1. Buy a 3 year old car outright for about 8.5k.

2. Buy a nearly new car for around 12k and dip into rainy day savings.

3. Buy a new car on PCP put down a 5k deposit and keep the 3.5k for the monthly payments and hand the car back at the end.

The dealership offer very low rates on PCP but it looks too good to be true, I've never had a credit card or loans and I hate the thought of being in debt.
It would be nice to have a brand new car that I could 100% trust though.

If I have a PCP contract and I want to trade my car in would I need to put another cash deposit down when I give it back?

Any advice would be helpful, I'm a long time lurker of mumsnet and you always know whats what when it comes to cars.

I would personally go for option 1. You should be able to get a decent, reliable car for that price. If you're worried about buying a car, you could get a mechanic to look at it beforehand. Not sure how you go about that though as we have a mechanic in the family so always just ask him.

I personally wouldn't go onto monthly payments if I could afford something decent outright

I'm in a similar situation wondering the same.
I'm leaning towards option 1.

Think very carefully before you buy a car on PCP. You’ll need to pay to have it serviced every year by the dealer, as well as an MOT before you hand it back (we weren’t made aware of that until the time). You’ll also have to pay for any damage incurred, even if it’s just cosmetic or they’ll deduct it off at the end (if there’s any equity left, if not you’ll have to pay). We thought we’d have enough ‘equity’ at the end for a deposit for the next car but it turned out we literally had none, despite the car being immaculate with only 12,000 miles on the clock! I’m also assuming that if your car is worth less than the remaining finance at the end of the term, you’ll have to pay the difference in that, too. Do your research, it sounds great but it isn’t necessarily the case!

I’d do option 1, especially as you’re a new driver and are quite likely to prang it. That would be expensive to fix on a PCP car. The older car would probably also have cheaper insurance.

Do option 1 and put the same money that you’d b spending on PCP into savings reassures for your next car.

I have done PCP for the last 8 years or so. BUT - I used to have a company car, and changed jobs to one with a car allowance. I earmarked that for payments (with some allocated for servicing etc), so it didn't feel like I was spending my own money (IYSWIM).

It worked for me, because I was commuting about 250 miles a week, plus doing one journey of about 200 miles a week, and it was our 'main' car for long journeys etc, so I wanted a decent spec car which I enjoyed driving. It wasn't a fancy car (a Golf), but it was a good car.

In lockdown, with us both working from home, we got rid of it, and DH got a different company car, so we now use his as the 'good' car, and I can use it for my long journeys which are now very much less frequent.

The thing to watch out for is the end of the term. I've done it 4 times now, and never had any equity in the car when I've returned it, so I need to put a new deposit down (I have some from my allowance put by to cover this). It means I'm not tied to one dealer/brand, so I shop around each time and probably get a better deal this way, but car salesmen go heavy on the 'at the end of the term your equity is the new deposit' line, but that's never been the reality for me, so I'd always assume that I'd be back to square 1.

If my circumstances went back to pre-pandemic, I'd do it again for sure as it works for me. In your circumstances, I'd be tempted to buy the 3.5 year old car, but so much depends on how you're planning to use the car etc.

@igotdemons - you don't have to pay anything if the car is in negative equity. The dealer takes the hit.

My last 2 cars both had tiny scrapes on them (which were picked up in the inspection) and I didn't have to pay anything for them. VW sent me a payment schedule detailing repair costs etc, and they were actually very reasonable, but minor dents etc were counted as wear and tear.

Option 1.

I think you should always own something out right.

I've just come to the end of my pcp contract on my seat ibiza and these were the options ; refinance the final balloon payment of 5k to eventually own the car outright, but can only do over 2 years so would increase my monthly payments to a 100 more than I currently pay. So that was a no. Second option was to upgrade to the latest model but again, monthly payments too high. Or hand car back and walk away which was obviously a no. Anyway so I have gone for an 18 plate with only 15 k on the clock, slightly newer model ibiza than my current and for only ten pounds more a month than I currently pay. I didn't have to put a deposit down because there was 2.5 k equity in my current car. Also 2 years service plan thrown in. Ideally I would have been able to pay off the balloon and then be free of monthly payments but I couldn't afford that option. I would say the pros of pcp are having a reliable car and having the option to upgrade/change after 3 or 4 years, so having the security of knowing you will always be in a decent car without the worry of things going wrong. Obviously if you can afford to pay outright for a decent used car, I'd go for that but if not, there's some decent deals about for under 200 a month and if the brand new models are too much a month then often the dealerships will have ex demos or used cars with very low mileage that will bring down your monthly payments.

Option 1.

Option 1. You’re a new driver and you don’t want to be stressed out with the thought of accidentally getting a scratch or scrape the alloys etc

I would buy the 3 year old car outright. The depreciation I'm the first 3 years is ridiculous.

Look at how much 6 year old cars are going for, that will be your equity left if you want to change it in 3.years plus money you saved over the 3 years - on autoloader they are between 4 and 7k depending on mileage so your depreciation might only be £500 to 1k per year.

Another vote for option 1 (well, I personally would go for an older, cheaper car but that's up to you).

So I'll be using the car as a runaround.

I'll probably do the 3 mile drive into work which is city driving, visit family which will be short suburban driving and longer weekend drives into the country.
Maybe a longer holiday drive about once a year.

Pcp for me

You dont have to keep the car for the length of the PCP... your not by any stretch tied into that deal... so for example you buy a pcp car on a 4 year deal.
3 years in you decide actually you want a bigger car. You go to a dealer tell them you have a pcp car they will value your car find out your loan settlement amount and take this into account on your new car.

Or you keep the car till the point in your contract that you can voluntarily surrender it (usually after 50% paid but also paying any damages or mileage excess)

Or you keep it to the end of the term and either pay off the balloon payment or you buy a new car and the new dealer pays the settlement figure.

I will always buy pcp now. I dont care that i dont own my car why would i want to own a depreciating asset?

Yes you do have to pay servicing
, MOT (if required) and tyres etc but everything else is taken care under the warranty and in some manufacturers cases they also throw in their own breakdown care for the x years.

There is a option of hire purchase. You pay monthly for the car till you own it. Sometimes is more worth it on cheaper cars.

There is also lease hire where servicing tyres etc is taken care of but can be more expensive than pcp. I dont know much about the lease option having never had lease.

In fact the 2020 model is £6 -8k

You have £8.5k saved up for a car, which is also your first car after passing your test. I can't work out why on earth you think you'd need more. My Corsa was under a year old when I got it and cost about £8k, no owners other than the show room. It's been a dream. Look for an ex-display/ show car.

Also, go for a decent car which is a bit newer but isn't the single very specific expensive model that you've decide it has to be. You don't need a reversing camera.

I am going for a test drive to a kia garage tomorrow with my very impulsive mother who loves her PCP car so I need the iron will of mumsnet to keep me on the straight and narrow.

In fact the 2020 model is £6 -8k

Is that the 3 model?

You can definitely get much cheaper picantos than 8.5k if you go for the standard models but I like the idea of apple car (or whatever it's called), the reversing camera and they have forward automatic braking on the 3.

I probably don't neeeeed all these things but as someone whos taken a long time to get over a phobia of driving, I would like them.

Keep on the straight and narrow - and buy a decent 2nd hand car! Honestly, it's really stressful worrying about scratching or pranging a car that's not yours outright, let alone if it's your first one.
Good luck!

I’d never, ever own a depreciating asset.

We’ve had pcp cars at 0% for years now. It makes life so easy. We’ve never paid a deposit since the first ones; the returned car provides the deposit for the next.

You know exactly what the car’s going to cost, no MOTs and no garage bills. Every three years back it goes and you drive away with a new one. If you’re trading the old car in they don’t even inspect it when it’s returned - or at least our dealer doesn’t.

You know exactly what the car’s going to cost, no MOTs and no garage bills. Every three years back it goes and you drive away with a new one. If you’re trading the old car in they don’t even inspect it when it’s returned - or at least our dealer doesn’t.

That's what my step dad says, he loves his.

The minute I've made my mind up one way I get persuaded the other way.

So pleased you started this thread!
We're in similar situation. We don't have have the cash to buy one and are torn between lease and PCP.
It confuses me, are they the same thing?

@MoonbeamSprinkles

In fact the 2020 model is £6 -8k

Is that the 3 model?

You can definitely get much cheaper picantos than 8.5k if you go for the standard models but I like the idea of apple car (or whatever it's called), the reversing camera and they have forward automatic braking on the 3.

I probably don't neeeeed all these things but as someone whos taken a long time to get over a phobia of driving, I would like them.

I get that as another driver who had to overcome phobia to learn. I wouldn't do PCP, I'd be too worried about scraping it. I hate driving rentals, I get hypervigilant. I expect a new car on PCP would be the same. 2-3 year old car, as long as mileage isn't high, is usually a good purchase point due to rates of depreciation on new cars, but should be reliable and not faulty.

@Purple21

So pleased you started this thread! We're in similar situation. We don't have have the cash to buy one and are torn between lease and PCP. It confuses me, are they the same thing?

No they are not - lease - a fixed term - think of it more like hiring a car but for a longer term. At the end you give the car back.

PCP - you have the option to buy at the end of the term.

Similarities - both will usually have rules about mileage and may make you pay extra if over. Both will expect the car back in good order (if you're handing back the PCP of course) and will usually charge you for dents left by kind people with the doors and supermarket trollies, scruffed alloy wheels etc.

If I have a PCP contract and I want to trade my car in would I need to put another cash deposit down when I give it back?
Depends on how much the car is worth at the end and the terms of the deal - varies a lot (see responses above).