Hire Purchase - Is it Value?

paulmcgrath

Good morning gents,

I finally have a little security now in a job and I am now looking to upgrade on my car.

The last few cars I have bought have been used, usually about 7-10 year old, cost 8000E and at approx 90,000 miles. And while I thought good value the cost of repairs has been atrocious. As they constantly pop up with new problems.

With this in mind I would prefer to buy a “newer” car and distance myself from older cars which are prone to expensive repairs.

I have heard great things from family about hire purchase schemes. That you can get a reliable car on a cheap monthly rate with a smallish one off payment. Then after 2/3 years or so, trade in that car which will pay off your contract? Then pay another one off payment and drive away in another new car which will be reliable.

Does anyone have any experience of this worth telling. Any opinions on the matter?

For example. Are you better buying HP on a new car or a used car? Value wise.
Does age matter? I’m 23 years old. Do I need collateral. I live with parents.
What is the rough cost of HP, per month and one off payment?
Is there anything I need to be aware of beforehand?

I thought this be the best place to ask without trying to search though the fine print looking for things garages are trying to hide from me.

Thanks for reading all.

Paul

ironclaw

It depends really. I'd be of the opinion that given the crash in the market globally, you can pick up some serious motors for less than €8k on the likes DoneDeal. Age to me is meaningless in some respects as any well looked after, well serviced, sub 10 year motor will be as good as a brand new 132 in terms of driving experience and maintenance upkeep.

Speaking in a really general way and these figures are just a rough guide,

With hire purchase you are tied into an agreement for a car. So say your new car was €20k, the second you drive that off the forecourt, its worth about €16k (20%). It then depreciates on average by 15% per year. So end of year two its worth €13.6k, and at the end of year three about €11.5k.

So in three years you'll have lost €8.5k PLUS whatever the premium you pay for the hire purchase.

Contrast that to a 5 year old model you pick up for say €8k. After one year that's worth about €6.8k and the year after perhaps it will bottom out at €5k or so. You've lost €3k in depreciation. And probably less than that because the car will have had a steep initial depreciation curve and may actually hold its value closer to the €8k you paid for it. It certainly won't depreciate much further in 3 years of ownership. Bu tmost importantly you haven't lost anything on the price of the hire purchase credit and you have an asset worth at least €5k which is yours to 'cash out' at any time.

Personally I never saw the 'value' in hire purchase unless you really, really want a very new and can't outright afford it / get a low interest loan for it.

paulmcgrath

But are you not getting security when you purchase a HP, in the sense that they normally come with 1 year guarantee (Used) or 3-5 year guarantee (new).

colm_mcm

Bear in mind though that an older car doesn't require additional repairs to the tune of an extra €200 a month out of your pocket.

ironclaw

colm_mcm wrote: »

Bear in mind though that an older car doesn't require additional repairs to the tune of an extra €200 a month out of your pocket.

This. Plus fuel. You'd be paying an awfully high 'premium' for the rare case something major goes wrong with the car.

galwaytt

ironclaw wrote: »

This. Plus fuel. You'd be paying an awfully high 'premium' for the rare case something major goes wrong with the car.

Colm is bang on. My 01 Audi cost €1k in the last year, and is in the workshop again for the week. And every now & then I do wish I did have a shiney new econobox with cheap tax and mega mpg.

Colm you'd want to add another €10 for 'mental trauma' as well !!

Anan1

galwaytt wrote: »

Colm is bang on. My 01 Audi cost €1k in the last year, and is in the workshop again for the week. And every now & then I do wish I did have a shiney new econobox with cheap tax and mega mpg.

That kind of does depend on the car, though. Elderly Audi and Mercedes have always bled me dry, but the Japanese cars that I put my friends into seem to plod on with nothing more than routine maintenance.

paulmcgrath

My 05 Audi has put me out E2k this year. And needs to head back to the garage again.

The guarantee of a few years must add a lot of value to the worth of the car.

mickdw

colm_mcm wrote: »

Bear in mind though that an older car doesn't require additional repairs to the tune of an extra €200 a month out of your pocket.

My alfa 166 did.... and it wasnt even old