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.

It's not as simple as returning it at the end of the term and driving away in a new one! That's only if you have enough equity in the car for a deposit on the new one. I never have, and neither have others who have commented.

I'm impressed that @Blossomtoes has managed several 0% PCP deals and built up equity every time (I'll use your dealer next time!) but that scenario is rare.

Don't get me wrong - I see the benefits of PCP and would do it again myself, but you asked about YOUR circumstances, and I'd still agree with all the others that for you, for your first car, I'd buy outright. Put aside the monthly amount you've been saving to get to 8.5K to cover maintenance etc, and when you decide to trade your car in, you can part-ex it and put your new savings to a deposit.

You also don't know how many miles you'll end up doing, which is something else to factor in with PCP. Put too many on the contract and you're straight away paying over the odds, put too little and you'll end up not using it so you don't go over the mileage!

I think I would rather not have to worry about stratches and dents tbh.

My DH scratched a hire car on holiday once and it ruined the holiday worrying about having to pay for it at the end. (We actually didn't have to pay but it was pretty stressful)

Option 1, but do you even need to spend that much on a car?
My first car cost me £1000, passed the next 3 MOT's without issues. if it got scratched or banged it was no big deal. Plus i remember my dad saying to me when i mentioned buying a new one 'you don't have a driveway, do you want that much cash sat out in the street?' he was right!

I’d never, ever own a depreciating asset.
Utterly irrelevant - the only considerations are the overall costs comparing like with like.
There is no point paying more than it would cost to buy outright just to parrot some bit of managementspeak "wisdom".

How about bank loan specifically for car purchase repaid over 3 years. Buy 2 year old car with the loan plus some of your own money. Repay loan each month for three years but keep the car for five years. For the final two years , save the monthly amount you were paying towards the loan in a separate account to build up an deposit for your next car. Then repeat with another car.

I bought my first car 15 years ago for £6k. It was a year old. I’ve still got it!

DH leases his car. It costs us a fortune every month and he won’t ever own it.

@MaskingForIt

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.

This! You WILL prang your car at some point and it can prove very expensive on PCP.

PCP is just long term rental - you are not buying a car at all. Fine if you are the kind of person who needs a shiny new toy every few years, and can reconcile the damage to the environment of such a throwaway culture. But if you want to buy a car that you will keep for more than a minute, it isn’t the most cost effective option.

Option 1, but do you even need to spend that much on a car?

Probably not but I think I'm being a bit stuffy.

I quite want a nice car.

I haven't got kids, have managed to get to the point in my business where I have a decent income and fancy treating myself.

On the other hand I don't want to just throw money away so if I'm just being snobby I don't mind being told.

Also I'm getting an upper range kia picanto not a lexus

I have a car on finance and have done for the last 10 or so years. I like having a new car as they're comfortable, more economical to drive and are under warranty so if anything breaks I don't get hit by an unexpected bill. I like the peace of mind that gives me as they're very unlikely to break down and so to me that is worth the money.

I've got mine on PCP as there's no way I'd be able to afford it otherwise. I've almost broke even with the payments already so I'm hopeful there will be some equity in the car, if not I'll look into refinancing the balloon payment. I'm hoping to trade it in for another one after 3 years though.

@thatonehasalittlecar it's not as though the car will be scrapped, someone else will buy it so it will go on! I don't want to have to MOT it or deal with the rust (it's known for that) so it suits me to hand it back.

Buy outright, and spend less than the £8.5k. Chances are you'll have a few scrapes in it here and there if you've just passed your test.

I haven't got kids, have managed to get to the point in my business where I have a decent income and fancy treating myself.
Do you run your own business?
If so you should definitely talk to your accountant about whether it would be more cost effective for the business to finance your car and for you to run it as a company car - this works especially well for electric and hybrid cars.

I recently bought a 2nd hand car and paid half from my savings and the other half on an interest free credit card. So I now dip into my savings monthly to pay the monthly minimum (or more). This keeps some savings in tact but also available if I need it for anything else.

On the other hand I don't want to just throw money away so if I'm just being snobby I don't mind being told.
Everything to do with cars (except for tiny number of very expensive and rare ones) is throwing money away - the only question is how much.

I'm impressed that @Blossomtoes has managed several 0% PCP deals and built up equity every time (I'll use your dealer next time!) but that scenario is rare

Toyota Peterborough! We always overestimate our mileage - we’re waaaaay under with our current cars. It also helps that we both drive Toyotas and they know they’ve got us for life now, they treat us very well.

They're a lot more forgiving of scratches than people fear, the last one I sent back was quite tatty and I got a bill for about £60, most of the damage was deemed fair wear and tear.

The downside I see with PCP is that if you hand the car back and don't get another one, you've basically given your deposit away. I had PCP on a Skoda Citigo and the deposit was only one month payment. I'd expect to pay only a very small deposit on such a small car as a Kia Picanto.

On the matter of the Kia Picanto, we had one as a holiday hire car. The boot is very very small. It was also completely gutless. I thought my Skoda Citigo was much more practical, decent sized boot for a small car, and copes fine with longer journeys. I got mine for £130 deposit and £130 pm but that was a few years ago. But the money you're talking about spending OP will get a nearly new one, or a decent PCP deal.

I’d go for option one, but buy from a reputable garage with a warranty. The first car I bought was a secondhand Ford Fiesta, which cost just under £7000 - I bought it from a Ford dealer as an ‘approved used car’ with a year’s warranty, for peace of mind - it was maybe a bit more expensive than buying privately but definitively less risky. It was a fantastic car that I had for 11 years and had no issues with. Maybe look to see if Kia do a similar approved used car warranty scheme?

Everything to do with cars (except for tiny number of very expensive and rare ones) is throwing money away

Not relevant to the OP but there are plenty of cars you can buy for under 10k that will appreciate in value.

Option 1. A 3 year old car will be great.

I got a PCP and wouldn't again. Now instead of the monthly payment I save the money each month and roll it into payment towards my next car. I've ended up much better off.

If you do go for PCP at the end consider selling the car instead if in good condition. I sold mine to webuyanycar, and got 2k more than the balloon payment. Obviously it won't always work out like that but it's worth checking out.

We will buy cars outright every time now. If there's a cashflow issue id rather get a cheap loan or 0% credit card for the difference.

I really think it's best to buy with your first car - speaking from experience I had two minor prangs from reversing in to a tree and a small wall in my first few years of driving - and this was after passing with flying colours!

When you pass your test, it isn't the end of learning. The first few years of being out in your own are when you are most likely to cause some dents and scrapes, especially when moving from the car you learned on to one that's a different size and shape. After more experience, you will be able to get in any car and have the spacial awareness not to prang it, but it's a learning curve

@Shade17

Everything to do with cars (except for tiny number of very expensive and rare ones) is throwing money away

Not relevant to the OP but there are plenty of cars you can buy for under 10k that will appreciate in value.

Okay fair enough but I was talking about cars that people can use - not put in a garage/storage and only use when it's not raining ;)

PCP threads are like bog brush and shoes off threads :)