Can anyone advise me about buying a car? Should we get a loan or do PCP?

[moneyworries8]

DH & I currently lease a car. We paid a deposit (around £1600) and pay £230 per month.

DH is in the Army and is due posting in a couple of years. We don't want to lease this time due to the fact that the charges are huge if you need to get out of the lease early. We could end up with an overseas posting so could have no choice but to cancel.

The car DH wants us to get is £14,000. It's a couple of years old with around 30,000 miles on the clock.

By the time we need to buy it, we'll have about £2,000 saved towards it. We can take a loan out for the remaining £12,000, pay off over 3.5 years at £300 per month. The only thing that worries me is that leaves us with £70 per month less than we currently have.

The other option is to pay a £1,400 deposit and have the car for £215 per month on PCP. I don't fully understand PCP but the lady I spoke to at the leasing company recommended it to me. She said that whenever we need to end the contract, people often come out of it with a little bit of money rather than having to pay a cancellation fee. Her company don't offer PCP so this wasn't a sales pitch from her.

I understand the PCP deal would work our way more expensive if we completed the contract because there's a final sum you pay at the end to own the car but it's highly unlikely we'd stick with that car until that point.

I'm massively attracted to paying less per month. That seems like it would be the best way for us to go but I just want to make sure I've got all the facts right 👍🏻

Can anyone help?

Thank you.

A good financial rule of thumb is: don't do things you don't understand.

A repayment loan which can be repaid in full at any point is really easy to understand. As you say if it is a 42 month loan then you have 42 payments, so in your case £300 x 42 = £12,600 for a £12,000 loan so you know there is £600 of interest/fees.

What other cars are there to look at? Can you find something at say £6000 (£8000 inc your deposit)? £8000 (£10,000 inc deposit)? You could then do a 36 month loan, which may be £175ish a month for £6000, £225-£250 a month for £8000.

Or... how about a £2000 car? Then save £200 per month yourself and after a year you could upgrade to perhaps a £3500 car (£2400 plus trade-in). Then after another year could upgrade to a £5000ish car, then a year later upgrade to a £7000ish car. It all depends on what you can sell the car for at the point of upgrading to something better.

As posted on other thread
I loathe PCP
I bought my most recent car with a Zopa Loan that I paid off early.

PCP worked for us, our term was 3 years and we bought it at the end of this period. Total costs paid equalled less than what it would have cost to buy it out right (£6000!!!)

£14k for a car that’s a few years old and has 30k miles on it seems very expensive to me! Surely you can find something cheaper with less miles...?! Then I would take out a loan at a low rate to purchase it. That’s what we did (we got a 3 year old Kia that was still in warranty for £7k).

Hi there @Fairylea
how are things going ?
Glad your car worked out OK

It's an Audi A4 and £14k is a lot less than we've spent on cars in the past as we've always had new it leased, which is probably silly. We need a very reliable car as we have to travel very long distances regularly with small kids and I think an Audi would be a good reliable family car for us.

I should be working within the year and money won't be such a concern then. It's just making sure we don't bite off more than the can chew in the mean time.

There's also a chance we may have another kid so we'd then need a bigger car so there's a chance we won't have that car all that long really. There are just so many unknowns for us just now with not knowing when I'll get a job, when we might move and where to, when/if we'll have another child 😩

*new or leased

TBH my car cost more than double yours so who am I to talk !

(a) Is it diesel ? Because the resale values of them will PLUMMET over the next year
(b) how long will you keep it for (please say more than 5 years)
(c) if you do a lot of miles, PCP will probably not cover you - we looked at it for DH and the costs rocketed because he travels a lot

Thanks Talk.

It's petrol. Mileage will be about 10k a year as there will be long journeys through the night to see family but day to day we won't use the car all that much.

We have no idea how long we'll keep it. If DH was to be posted to Canada for instance, we'd need to sell. That's not necessarily the most likely outcome but it could happen as he's due posting within the next 2 years.

I do also think that buying an older car can be a false economy! I've known loads of friends who've done so and been plagued with huge repair bills.

10k is low mileage in my book !!!
DH can do 1000 in a week .....

And yes, decent newer cars are a better bet

I don’t think you need to spend that much’
We got a brilliant 3 year old seat Leon which had done 40’000 for less than 8k. Never had an issue yet, you will be paying a fair chunk just for the Audi name.

TBH cost wise, yup brands are more
BUT
when I was looking at cars, the difference in finish and spec between the Skoda, the Seat, the Ford, the French cars
and the German beast we did buy
was really clear

Op look on the moneysavingexpert website as there are clear explanations plus pros and cons of each finance type.

PCP means you pay a deposit, smaller monthly payments and then a final payment which is the guaranteed minimum future value of the car. So at the end of the term you can pay off the lump sum and keep the car, walk away and hand the car back or start again with a new car (if your car is worth more than the minimum future value then you won't get that as cash, you have to use it against a new car or buy the car and sell privately).

In terms of getting out early, you would need to pay off the finance using the equity of the car plus likely a shortfall - say at that point the car was worth 10k but your finance outstanding was 12k, you'd need to front that 2k at the same time.

Is it diesel ? Because the resale values of
them will PLUMMET over the next year

Nonsense.

I think I must live on a different planet sometimes. Where I live 10k mileage is tiny. I do about 20-30 a year, we live rurally. Even a trip into the nearest town (Norwich) is a 50 mile round trip. Yes an Audi is nice and all that and if you have money to burn and just fancy one, go ahead but you are paying a lot more than you need to just for the brand. You really don’t need an Audi for reliability - tons of other cars are equally reliable and 10k isn’t high mileage to many people. And diesels around where we live are the cars people want - I guess it depends where you live but we have a lot of rubbish roads and bad weather in the winter, diesels resell and hold their value.

I don’t think it’s true that a slightly older car is doomed to a life of repairs and difficulties either. You can get many good, reliable brands with warranties left on them for half of what you’re planning to spend.

But if you just love Audi’s and want to spend £14k then go for it, but you don’t need to.

Can I just add.. just for fun really .. one of the best cars I ever had was a £450 Fiat seicento that had a low mileage but had an engine of only 0.9... it was the first car I ever had and I had it for years and and years and used to go down to London and back in it regularly (250 mile trips). It used to take an age to get up to 80mph but I loved the thing, and because it was cheap to run and cheap to service it went on and on!

I’m not saying you should get a Fiat seicento, I’m just saying everyone has this thing about Audi being the best blah blah and it really isn’t necessarily true.

Borrowing £12-14k on a car that you may have to sell in 2 years time sounds like a recipe for losing a lot of money.

I would honestly use about £1500 to buy the best car you can get, which could still be a decent reliable car, and keep a bit back in case of repairs, along with saving the loan payments that you aren't making in case the car needs replacing, which it probably won't.

I am interested in this from a different point of view.
We don't need a loan to buy a car and always pay cash.
Last time we bought a car it was apparent that the car sales people were more interested in selling us credit in one form or another than selling cars! They wouldn't budge on price for cash but there was lots of room to negotiate if we took PCP. We didn't.

Now looking to get another car and I wondered whether you could get a good deal on PCP and then just pay it off?

The issue we found with PCP is the additional fees, there was an arrangement fee, another one when you end the deal, add ons for admin fees - in total added about another £1000 to the price of the car.

the fixed term loan was the loan price, no charges or fees to pay off early.

We can take a loan out for the remaining £12,000, pay off over 3.5 years at £300 per month.
Could you take the loan out over 5 years but pay more than the repayment figure? that way it's cleared in 3.5 but if needed you can reduce the payments if you are short.

started
PCP you never actually own the car ....

You can choose to pay the final balance and own the car.

You could technically pay it off in one go but you would need to be secure in the additional admin costs of doing that before agreeing it. Dealers get extra commission for getting you to sign up to their finance hence why they can negotiate on the price using their preferred credit company.

I agree 14k is too much too spend, you could get a brand new Fiesta Zetec for that I think. I recently bought a 3 year old Fiesta for just over 6k, 16,000 on the clock. I paid cash and I also noticed most garages are only interested in selling finance and not cash buyers.

Last 4 - 5 cars I've owned had approx 60k miles and cost about 1k. Drove loads of miles. However, no worries about paying off an expensive loan each month. Suggest buy something like Ford that is cheap to repair. Buy AA or RAC breakdown cover.

Breakdown cover - I use Autoaid - a fraction of the price of the big names and absolutely FAB when I've needed them.