New Car

[Hobbit]

Brand snobbery extends well beyond cars. Who plays Mizzies? Who wouldn't consider Wilson irons? Why did Nike stop making clubs?

Mizzies have been top of my shopping list for years. Every time I go for a fitting the spin rate is too high but I still keep them at the top of the list, hoping that next time they'll fit. I haven't had a set of Wilson irons since I parted company with a lovely set of of Staffs in the early 90's.

I'd hazard a guess that the top of the range for every brand actually perform very similarly but people still go for x brand over y brand even though x might be twice the price.

 

[Smiffy]

Car dealerships like PCP's. There is a better chance of customer retention with a PCP. The only problem with a PCP is at the end of term, you have to do something. With a straightforward HP agreement you just keep the car.
But a PCP has it's uses. It allows you to buy a newer (or higher spec) car than you thought. And "most" of us want the newest (or highest specced) car we can get. I did say "most" not "all" by the way.
If you intend keeping the car for a decent length of time, then a PCP is not for you. But if you like to change every 3 or 4 years, then go ahead.
On new cars, you'll usually find the best interest rates, or deposit allowances, on PCP's. It's not the same on used cars.
If you buy the "right" car, the one with a massive finance deposit allowance, you'll often find that this will effectively wipe out the interest you're being charged.
The important word to remember in the guaranteed future value is "guaranteed". It's your protection against whatever the future holds.
Remember Rover?? If you'd just spent £30k cash or taken out traditional HP on a Rover 75 six months before Rover went down, your car was worthless, and you'd lost big time. There wasn't this guarantee.
If you'd bought it on a PCP you were safe in the knowledge that you could carry on driving it for the length of the PCP and just hand it back with no further loss.
I know what I'd rather have done.

 

[Dibby]

I suppose it depends on what you want from a car/bike really. I’ve got a 66 plate m4 comp and it already feels like interiors have moved on with the more modern cars. The way I see it, why does it make any difference how you pay for it, if it loses 20k it loses 20k no matter how you pay it. If it’s worth less that the balloon payment just hand it back and close the agreement off.

I agree with the statement about depreciation, with one caveat. If you have the capital, but just prefer to use it elsewhere, it makes perfect sense. If you don't actually have the capital and are using it to obtain something you actually couldn't really afford, you should perhaps think whether it really is the right thing to do, or if you are living beyond your means.

 

[robinthehood]

Keep an eye out for piss taking car dealers too.
https://www.bbc.co.uk/news/business-50052375

 

[BristolMike]

I agree with the statement about depreciation, with one caveat. If you have the capital, but just prefer to use it elsewhere, it makes perfect sense. If you don't actually have the capital and are using it to obtain something you actually couldn't really afford, you should perhaps think whether it really is the right thing to do, or if you are living beyond your means.

Completely agree, the money was there to pay it outright but putting it on a pcp allowed the money to be used much more efficiently elsewhere, actually providing a better return than the interest. PCPs are only useful if you intend on changing often

 

[PJ87]

Car dealerships like PCP's. There is a better chance of customer retention with a PCP. The only problem with a PCP is at the end of term, you have to do something. With a straightforward HP agreement you just keep the car.
But a PCP has it's uses. It allows you to buy a newer (or higher spec) car than you thought. And "most" of us want the newest (or highest specced) car we can get. I did say "most" not "all" by the way.
If you intend keeping the car for a decent length of time, then a PCP is not for you. But if you like to change every 3 or 4 years, then go ahead.
On new cars, you'll usually find the best interest rates, or deposit allowances, on PCP's. It's not the same on used cars.
If you buy the "right" car, the one with a massive finance deposit allowance, you'll often find that this will effectively wipe out the interest you're being charged.
The important word to remember in the guaranteed future value is "guaranteed". It's your protection against whatever the future holds.
Remember Rover?? If you'd just spent £30k cash or taken out traditional HP on a Rover 75 six months before Rover went down, your car was worthless, and you'd lost big time. There wasn't this guarantee.
If you'd bought it on a PCP you were safe in the knowledge that you could carry on driving it for the length of the PCP and just hand it back with no further loss.
I know what I'd rather have done.

Spot on

I PCP my car's not lease because I want to own them at the end

However I then buy them because I like I then PCP the second car.. so I keep a car about 8 years

Current cars are 1.5 and 10 years the other is only that old because I got it off my mum as a cheap run around

I might lease next because I want to try a leaf but don't want to own it incase of issues of charging but that's to be decided when the hrv is paid off in 1.5 years

 

[SwingsitlikeHogan]

We've just 'bought' a new VW Golf on PCP. Deposit and monthly payment fitted with our finances. Got a good lump knocked off the price and a pretty low APR. We got the car Mrs Hogie wanted - has always wanted. In a couple of years time when I hang up my boots I'll pull some cash and pay the balloon payment. We'll then keep the car for as long as - and that could be a good long time. So may or may not have been the best financing - but it works for us. For Mrs Hogie it's not really about the money. It's about living and enjoying today. What car costs us to buy outright in a couple of years time will be what it costs us - we know we'll be able to afford it if that's what we want to do.

 

[Grant85]

I just realised the next wave of customer lock-ins. The PCP balloon payment these days now seem to be much higher than residual value. At the point of sale, the sales talk is all about how you will get a high residual value, but the reality is that a new car depreciates very quickly. So my old BMW run around had about 9.5k balloon after 4 years. Took it around to the dealers and online valuation and it all comes between 8-9k (It has all the normal wear and tear).
Non BMW dealerships wont use it as part exchange as it is negative equity. So ended up taking it to BMW which did a good deal on the new 1-series. Now really looking forward to seeing a new wheels when they get delivered next month (I hope there are no queues at the border).

Looked thru the paper work of the other car and looks very similar balloon-residual argument can be made there.


PS: The new 1-series now comes with indicators as standard

The PCP deals are only worthwhile to people who want / need a new vehicle every 3 years or so... and are basically going to have a £200 to £400 monthly payment ongoing forever.

Ultimately people who might otherwise have bought outright a second hand car with a bank loan or HP agreement might look at the deals and see that the monthly payment is much the same 'for a new car'.

They then do the deal for a new car, but as the OP has said, the balloon payment means that after 3 years they need to then borrow a fair chunk again to buy the car (and continue with a similar monthly payment) or return the car and do another similar deal on a new car.

My strategy has always to buy a second hand car maybe between 2 or 3 years old, with sensible mileage. If you buy at £13,000 to £15,000 - this is a car that would have been £30,000+ brand new.
Put a trade in and a bit of savings down and take a bank loan for the balance.
Borrow at 3% or so over 5 years. (will be much cheaper pm than someone buying a similar car on PCP, only difference is their car is new).
Aim to keep the car for 5 years and probably pay the loan off early at some point.
You then have a car that is still maybe worth £3,000 to £5,000 as a 7 or 8 year old car to trade in or sell to repeat the process.

Compromise is I don't have a brand new car and I try and keep a car for 5 years. Obviously when a car gets to 6 or 7 years old, it can start costing money in terms of brakes and other things - but cars these days are fairly robust and as long as you aren't doing crazy mileage, this will still be MUCH better than a PCP every 36 months.

 

[drdel]

Peeing with rain so I did a few sums...

Buying a car on finance is often the subject of ‘creative’ accounting by ignoring in the total cost the cash flow of the monthly payments.

Let’s assume a potential buyer has a net worth of £30k saved that is earning net 3.5% pa after 4 years there would be £34,760 sitting in the account.

If a £30k car was bought via a PCP loan at 4% pa for 4 years and with a GFV of about 28% e.g. £8,400 that would be a loan of £21,600. Requiring 48 payments of £531 a total of £25,488: leaving £8,934 in the account (assuming the payment came out of the account and end of year balancing doesn’t reduce the equiv. 3.5%pa) and No car.

Should the buyer pay the cash up front he’d own the car worth £8,400 after 4 years BUT he’d have had £531 per month potential ‘savings’ which at 3%pa (IF compounded monthly) would reach about £22k. The result is a net worth of £30k.

The issue that is often forgotten is the opportunity cost (e.g. savings) that the payments represent and which are necessary to put you back where you were with your original net worth!

 

[drdel]

Something the more mature members might want to note. Some months ago an old guy died. They had a PCP car but it was in his name, the financiers wouldn't talk sensibly to his widow and so the widow was left a with big bill to keep it (but couldn't pay because of probate). She was then left with no car at just the wrong time; adding to her woes.

 

[Mudball]

Peeing with rain so I did a few sums...

Buying a car on finance is often the subject of ‘creative’ accounting by ignoring in the total cost the cash flow of the monthly payments.

Let’s assume a potential buyer has a net worth of £30k saved that is earning net 3.5% pa after 4 years there would be £34,760 sitting in the account.

If a £30k car was bought via a PCP loan at 4% pa for 4 years and with a GFV of about 28% e.g. £8,400 that would be a loan of £21,600. Requiring 48 payments of £531 a total of £25,488: leaving £8,934 in the account (assuming the payment came out of the account and end of year balancing doesn’t reduce the equiv. 3.5%pa) and No car.

Should the buyer pay the cash up front he’d own the car worth £8,400 after 4 years BUT he’d have had £531 per month potential ‘savings’ which at 3%pa (IF compounded monthly) would reach about £22k. The result is a net worth of £30k.

The issue that is often forgotten is the opportunity cost (e.g. savings) that the payments represent and which are necessary to put you back where you were with your original net worth!

agree with most of it and is probably how you would do a business case.. also something else that can be added from real world .. when doing a PCP and assume you get a ‘good deal’ . If it is a new car then you will get manufacturer and dealer contributions. So my 29K magically turned to 24k and my finance was for done for a lower amount. All I see is that I paid £350 for a new motor and then pay 300 odd every month. Low tax and no MOT for 3 years and better efficiency and ability to drive into London. Yes it does deprecate every time I look at it.

Spot on about the opportunity Cost.. If I had 30k (I wish) then I would be putting that into stocks within ISA with the aim to yeild 8-10% annualised returns. So at the end of a 3-4 year period I would have my balloon payment + the 30k capital

 

[PJ87]

Peeing with rain so I did a few sums...

Buying a car on finance is often the subject of ‘creative’ accounting by ignoring in the total cost the cash flow of the monthly payments.

Let’s assume a potential buyer has a net worth of £30k saved that is earning net 3.5% pa after 4 years there would be £34,760 sitting in the account.

If a £30k car was bought via a PCP loan at 4% pa for 4 years and with a GFV of about 28% e.g. £8,400 that would be a loan of £21,600. Requiring 48 payments of £531 a total of £25,488: leaving £8,934 in the account (assuming the payment came out of the account and end of year balancing doesn’t reduce the equiv. 3.5%pa) and No car.

Should the buyer pay the cash up front he’d own the car worth £8,400 after 4 years BUT he’d have had £531 per month potential ‘savings’ which at 3%pa (IF compounded monthly) would reach about £22k. The result is a net worth of £30k.

The issue that is often forgotten is the opportunity cost (e.g. savings) that the payments represent and which are necessary to put you back where you were with your original net worth!

Would love to see where anyone is earning 3.4% on 30k in savings lol more like 0.25

 

[Mudball]

Would love to see where anyone is earning 3.4% on 30k in savings lol more like 0.25

use a Stocks and Shares ISA.. choose your stocks & funds carefully .. hedge them with cyclics and countecyclics.. dont chase trends or 'time the market', invest for longer term.. expect to make some loses but you should get decent return. You can do 8-10% on it. Using an ISA will save tax on it.

At the moment, markets are down tnx to Brexit uncertainities, so great time to pick bargains. IMO, don’t invest in anything that drives most revenues from Britain eg BT at the moment if you are looking to pay your balloon payment on current car (while it is heavily discounted share, its market is shrinking and sentiments are against it)
PS: I am neither anti-British nor a financial advisor so please do your own assessment.

 

[YamiKuriboh]

Just wanted to add that a hidden cost of PCP/HP/leasing is that the contract will often say that you need to have a genuine approved or main dealer service at specific intervals. I know mine did when I was on a PCP deal a couple of years ago.

When you own your own car you can take it wherever you want to get serviced – or even do it yourself if you are so inclined. Saves a lot of money.

 

[Mudball]

Just wanted to add that a hidden cost of PCP/HP/leasing is that the contract will often say that you need to have a genuine approved or main dealer service at specific intervals. I know mine did when I was on a PCP deal a couple of years ago.

When you own your own car you can take it wherever you want to get serviced – or even do it yourself if you are so inclined. Saves a lot of money.

Agree.. however now manufacturers are falling over each other for warranties and free servicing. Generally speaking you should be alright for the first 3 years..

 

[PJ87]

Just wanted to add that a hidden cost of PCP/HP/leasing is that the contract will often say that you need to have a genuine approved or main dealer service at specific intervals. I know mine did when I was on a PCP deal a couple of years ago.

When you own your own car you can take it wherever you want to get serviced – or even do it yourself if you are so inclined. Saves a lot of money.

Most If not all manufacturers warranties require dealer services

My hrv had offer 5 year servicing £600 so wasn't fussed

 

[Blue in Munich]

No come on, say what you’re thinking

I did.

What other people spend their money on doesn't rile most people; it's the incessant bragging or rubbing other people's noses in it that causes the issues.

No more, no less. I'd be very surprised if you have never met that sort of person, which is why I said

Very much so. I see it daily in the office.

and

I'm sure you know very well.

If you've never met this sort of person you've either led a very sheltered life, which I doubt, or been very lucky.

 

[Bunkermagnet]

Agree.. however now manufacturers are falling over each other for warranties and free servicing. Generally speaking you should be alright for the first 3 years..

That is true, but with the amount of cars now having extended service intervals you will see a greater number of cars between 3 and 8 years old breaking down or needing expensive repairs to keep them on the road.
The stress on an engine oil is too much for the up to 20k service intervals some manufacturers are going to now, and it's only for "enviromental and cost" reasons, not for the good of the car or the used car buyer.

 

[GreiginFife]

Most If not all manufacturers warranties require dealer services

My hrv had offer 5 year servicing £600 so wasn't fussed

Not true. The European Block Exemption (sometimes called the OEM Act) states that as long as the servicing agent uses appropriate parts and in line with intervals, warranties remain intact. Too many dealers are spouting this crap and getting away with it.

 

[Bunkermagnet]

Not true. The European Block Exemption (sometimes called the OEM Act) states that as long as the servicing agent uses appropriate parts and in line with intervals, warranties remain intact. Too many dealers are spouting this crap and getting away with it.

However EU rules now mean a dealer has to replace everything they remove from a vehicle under warranty, and if they don't the consequences can be massive.
We had pads replaced on a VW van not that long ago, and they replaced the calliper bolts as well (they now come with the pads). Subsequently one sides bolts came free, and the calliper flopped loose. This was put down to a bolt issue, BUT....when asked why they changed the perfectly good bolts they said its because of EU rules now under warranty terms. Apparently there has been a couple of garages on the continent taken to court and fined heavily having not changed all the bits as they should and something unpleasant happened after.