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Original poster

Buying a new car. Should I buy outright or Finance? What's the best option?

26 replies

winkybean · 03/05/2023 19:27

I know that a lot of people say that to buy a car outright is ludicrous given that depreciation It suffers when you drive off the forecourt, but my query is that if you have the money to do so then why not?

If people really do believe that HP or PCP is better in the long run, then can I ask why and which one you would recommend?

I tend to buy cars out right and keep them for years if that helps?

OP posts:
LittleFreakJezebel · 03/05/2023 19:30

Them losing value as soon as you drive off the forecourt is based on whether you buy new or used not how you pay for it.

Always best to buy outright in terms of how you pay for it as you aren't paying any interest, there's a few caveats e.g. there's a deal if you buy on finance which you can then pay off say 6 months later (so overall you pay less).

PurBal · 03/05/2023 19:33

With the recent COL issues I know people who’ve been unable to make their repayments. If you can afford to buy outright, do.

Changingplace · 03/05/2023 19:33

I always buy outright but a car a few years old, and then run them until they literally keel over.

I don’t really get the whole HP etc thing really, seems like a lot of money to pay out never to really own the car, if I didn’t have the money saved I’d probably look at a standard bank loan instead.

But then I’m not in any way a person who particularly cares about cars over and above, ‘does it work’.

LuckOfTheDrawer · 03/05/2023 19:35

We've always bought the cars that we can afford to buy outright. So, we've had two older cars and kept them until they were even older, and now we have one nearly new car. I love it, even if it a depreciating asset sitting on my driveway. It's also a really useful asset, and I really appreciate not having to pay a significant proportion of my salary towards a car every month.

SainsBrie · 03/05/2023 19:35

It is always going to be cheaper to buy outright, cash or a loan and run into the ground.

Anyone that argues that it isn’t is someone who likes having a new car but doesn’t like to admit that they’re showy!

PrinnyPree · 03/05/2023 19:50

We buy outright 2 or 3 year old cars (to avoid the biggest drop in depreciation yet still be in warranty) and run into the ground (or at least until we have a few expensive repairs). We had our last car 10 years (we only need one between us)

Although heard a great tip about getting a car on finance as they usually give good discounts if you use the dealers finance package and then just pay off the entire balance during the 14 day cool off period. ;)

LittleFreakJezebel · 03/05/2023 19:54

Changingplace · 03/05/2023 19:33

I always buy outright but a car a few years old, and then run them until they literally keel over.

I don’t really get the whole HP etc thing really, seems like a lot of money to pay out never to really own the car, if I didn’t have the money saved I’d probably look at a standard bank loan instead.

But then I’m not in any way a person who particularly cares about cars over and above, ‘does it work’.

HP is effectively the same as a bank loan, you own the car at the end, so you just go with whichever you can get the best interest on.

PCP is where you don't own the car unless you pay the balloon payment at the end.

Quitelikeit · 03/05/2023 19:56

Well if you can afford to buy brand new then what’s the point in posting

Cupcakequeen75 · 03/05/2023 20:01

We buy cash and then keep for several years.
The only time we had finance was when I bought my MGF, they offered me 0% so I kept the money in the bank.

Yes a new car depreciates but we like the choice of colour, options etc so it would be very unlikely we could find a recent model to the same spec. Also we just like having "new".

Original poster
winkybean · 03/05/2023 20:09

Quitelikeit · 03/05/2023 19:56

Well if you can afford to buy brand new then what’s the point in posting

For advice.

OP posts:
Original poster
winkybean · 03/05/2023 20:09

Thanks all for taking time to get back. This was pretty much what I was thinking!

OP posts:
Mephisneon · 03/05/2023 20:09

Changingplace · 03/05/2023 19:33

I always buy outright but a car a few years old, and then run them until they literally keel over.

I don’t really get the whole HP etc thing really, seems like a lot of money to pay out never to really own the car, if I didn’t have the money saved I’d probably look at a standard bank loan instead.

But then I’m not in any way a person who particularly cares about cars over and above, ‘does it work’.

I feel exactly like this and do this. However now I'm at the point where my car is costing lots to repair and inconvenient. So I'm actually wondering about what op is saying too. Should I just pay monthly to not have issues and think of it as renting?

It's so hard to know op but I think if you want a new car finance is better.

Original poster
winkybean · 03/05/2023 20:21

Now I'm confused all over again 😂

OP posts:
Lcb123 · 03/05/2023 20:21

HP and PCP are quite different. HP is borrowing the money and repaying with interest, if you want to do, best to look at a bank loan instead as the interest rates are usually lower. PCP is leasing and is a bit of a scam in my opinion… you have to pay extra at the end to own the car. We’ve recently taken a bank loan to buy a 2-year old car with low mileage. If we had a change of circumstances we could always sell the car, repay the loan and buy a cheaper car. It’s harder with PCP

GCWorkNightmare · 03/05/2023 20:22

About to buy another demonstrator: £8k off the list price and around 1000 miles on the clock.

we buy demonstrators outright and keep them forever.

Jolenetookmyman · 03/05/2023 20:42

I've had HP, Loan, Lease and bought old cars outright.

The HP car was expensive and APR was also expensive, I paid a lot for not a great car.

The nearly new car I bought with a bank loan was better value as I could choose the terms of the finance.

The leased cars were on really cheap deals but I was terrified of driving them lest they get a paint chip on them and we get screwed on charges when we handed them back. We also got our last lease car in Feb 2020. 🙄paid every month for a nice car we could barely drive due to lockdown.

We're currently back to buying cars for less than £5k (ensuring we pay for decent breakdown cover) and driving them till they collapse. This works for us due as neither of us need a car to work or for school run.

Cars are really expensive now, second hand and new.

Lincslady53 · 06/05/2023 21:13

If you are buying on hp or pcp, just add the numbers up. Deposit plus total cost of monthly payments plus any final lump sum. Then compare with the cash price and that is what the credit costs you. We usually buy a year or two old car outright, but last time there was a good discount on list (via Carwow) and interest free credit, so we bought on pcp and the total price paid was less than the cash price. Interest rates have gone up since then though, so i wouldn't expect such a good deal now. The other thing to take into account is how much interest would the money earn in a savings account if you paid in monthly payments and kept the bulk of the money saved.

Pemba · 08/05/2023 11:58

LittleFreakJezebel · 03/05/2023 19:54

HP is effectively the same as a bank loan, you own the car at the end, so you just go with whichever you can get the best interest on.

PCP is where you don't own the car unless you pay the balloon payment at the end.

Show quote history

I don't think HP is the same as a bank loan, the HP company owns your car really, not you, until it is paid off. Hence 'hire purchase'. But with a bank loan they don't, the money is not secured on the car. But if you are very confident you'll be able to make the payments whatever happens, I'd just go for the one with the best interest I suppose. Bearing in mind it's not really yours with HP until it's paid off.

I'd be scared of PCP, it might seem affordable but there is always the huge 'balloon' payment to make at the end if you want to own the car outright, so people are tempted to get another brand new car instead and continue paying. That's how how they get you. I suppose if its important to you to have new or nearly new cars all the time, it's a way to do that.

I agree with the strategy of trying to get cars around 3 years old, so a lot of the depreciation has already happened, yet the car should still be reliable.

Lisbeth50 · 08/05/2023 12:09

I bought my car on PCP & I don't think I'd do it again. I worried a lot about the end payment. However, I've had it 7 years now and, fingers crossed, no problems zo far.

Previously, we've bought outright or had a loan. We've bought older cars that we've kept until they start to cost a fortune.

It depends what you want your car for too. I bought mine because I needed a reliable car for work as I was doing a lot of driving.

CuriousGeorge80 · 08/05/2023 12:19

We got a car on PCP but I hated having the monthly payments so have just paid it off two years early to get it done. For me, I wouldn’t get PCP again unless I really couldn’t afford the car outright.

IsThisNameTaken · 08/05/2023 12:26

It's worth seeing what offers you can get for taking out finance even if you can afford to buy outright. I was going to buy outright but got a much better deal (£2k deposit contribution plus negotiated an extra £1k discount) by taking out finance. Once I collected the car I had 14 days to withdraw from the finance agreement and pay off the car in full, having benefitted from the discounts I woudn't have got by paying cash in the first place.

DogInATent · 08/05/2023 12:31

If you're buying new, it really depends what the current deals are. My parents always buy new, and they have found that on occasion there's a discount for taking out finance, then they pay it off in full as soon as the minimum finance period for the deal ends (often just 3-6 months). They saved a few grand on a new Toyota doing this on a Toyota finance deal and owed the vehicle outright inside of 6 months.

Personally, I think new car depreciation is a mugs game. We'll get a vehicle around 3 years old, take care of it, and run it pretty much into the ground.

Leftoverssandwich · 08/05/2023 12:32

We got a car on PCP as it was the only way we could afford the specific car we needed at the time. However we’re coming up to the balloon payment and are going to pay it and sell, as the rising price of second hand cars since we bought it means we’ll recoup some of our PCP payments by doing that. (Just in case any fellow PCPers are reading!).

But buying outright is the easiest and usually cheapest thing to do.

lost20000 · 08/05/2023 12:37

Second hand cars are going up in value with the direction of car market and Covid effect on 2nd hand market right now - as in fewer vehicles coming out of deal

User1685409 · 08/05/2023 12:40

Always buy outright as easier and generally cheaper, especially with interest rates going up