Finance on new car

Chelon

Looking at buying a brand new Skoda Octavia. Options are:-

1. Pay cash.

2. Pay around 25% deposit and take Skoda finance at 3.9% over 3 years for remainder

3. Get the loan elsewhere (Credit Union, etc).

Not bought a new car for a long time, so having a good think about what to do. The dealer is recommending option 2, citing overall savings if you're in their plan, and after 3 years they will give you beneficial trade in value on a new car.

Anyone got any advice which is best?

bazz26

The dealer also gets a commission from the financial institution if you take up finance too so you can kinda see why he recommends option 2. :pac:

d1234

Based on 1.6 ambition (25145) - here are some figures:

Cash - 25145 (Or less as you can push for discount)

Skoda - 26278.73

CU (Based on my locals) - overall loan value - 29010.99

AIB - 28324.44

I'd definately shop around with both garages and finance providers. If you choose cash, you can push for a discount which may be a few hundred depending on whether you have a trade in or not. VW bank which includes Skoda have some good deals such as 0% finance on SEATs at the minute. Good luck anyways and think it out before rushing in!

Chelon

He's offering me a really good trade in on my existing car, but the offer of course is only valid for a few days....pressure is on...:)

Your figures look ok however the Skoda finance option works out at 29k total, that's with a 7k deposit.

mickdw

Chelon wrote: »

He's offering me a really good trade in on my existing car, but the offer of course is only valid for a few days....pressure is on...:)

Don't get sucked in by that crap. He will be even more eager to sell towards month end or end of quarter towards end of March.

Odyssey 2005

I just bought a new skoda. Looked everywhere for finance but couldn't even come close to 3.9%. That's nearly as cheap as a morgage. You will have monthly payments,but if you are working this May not be a problem. Buying outright is always the best option IMO but you have to use your own cash and maybe borrow for something else,and the rate wont be 3.9%.
With regard to the dealer getting commission ,so what. He has to make a living too and if your happy with the deal that's all that matters to you. And no I'm not a car dealer...

noelf

U

Odyssey 2005 wrote: »

I just bought a new skoda. Looked everywhere for finance but couldn't even come close to 3.9%. That's nearly as cheap as a morgage. You will have monthly payments,but if you are working this May not be a problem. Buying outright is always the best option IMO but you have to use your own cash and maybe borrow for something else,and the rate wont be 3.9%.
With regard to the dealer getting commission ,so what. He has to make a living too and if your happy with the deal that's all that matters to you. And no I'm not a car dealer...

I was lucky to get a 1.9 interest loan on a highline golf just before xmas hopefully i will have it soon . They have stopped giving that deal.

Odyssey 2005

noelf wrote: »

U

I was lucky to get a 1.9 interest loan on a highline golf just before xmas hopefully i will have it soon . They have stopped giving that deal.

Fook 1.9. That's cheaper than free.....almost. Well Done.:)

Ded_Zebra

If you can afford to pay for it in cash you would be totally mad to do anything else. It's just throwing money away paying the interest.

Drummerboy08

Ded_Zebra wrote: »

If you can afford to pay for it in cash you would be totally mad to do anything else. It's just throwing money away paying the interest.

Its also tying up 25k of your own cash in a depreciating asset....

mickdw

Ded_Zebra wrote: »

If you can afford to pay for it in cash you would be totally mad to do anything else. It's just throwing money away paying the interest.

Don't agree. Very hard for anybody to build up 25k in cash savings nowadays. Also very hard to get 25k from a bank should you need it for something else therfore think that Borrowing a low rates for a sensibly priced car is best way.

Ded_Zebra

Drummerboy08 wrote: »

Its also tying up 25k of your own cash in a depreciating asset....

Personally I would rather tie it up over paying interest.

mickdw wrote: »

Don't agree. Very hard for anybody to build up 25k in cash savings nowadays. Also very hard to get 25k from a bank should you need it for something else therfore think that Borrowing a low rates for a sensibly priced car is best way.

The OP said they had the money though.

mickdw

Ded_Zebra wrote: »

Personally I would rather tie it up over paying interest.



The OP said they had the money though.

Yes but very hard to recover that 25k again

Ded_Zebra

mickdw wrote: »

Yes but very hard to recover that 25k again

It's impossible to recover any money that you spend on a depreciating asset whether the money is borrowed or not. If the car is bought with cash there is only 25k to recover (as you put it but I don't really know what you mean by that) and if you get a loan you have to recover the interest and the 25k.

mickdw

Ded_Zebra wrote: »

It's impossible to recover any money that you spend on a depreciating asset whether the money is borrowed or not. If the car is bought with cash there is only 25k to recover (as you put it but I don't really know what you mean by that) and if you get a loan you have to recover the interest and the 25k.

I mean for you're average working person who for whatever reason had 25k sitting in the bank, you can bet your last pound that if they were to pay out the cash, in 3 years time they will not have replaced those savings.
My point is that people are forced to make regular payments when they finance the car. The average person is not so likely to religiously save the same amount each month in order to replace their savings.

d1234

That's where I got it from OP http://www.skoda.ie/finance/finance-calculator but thought that it was a little too low. Best of luck.

Chelon

Thanks for all the help on this. I did see the calculator above which gives me a "cost of credit" of 1.1k

The paperwork from the dealer says this:-

Car price 26.8k (it's the Combi model)

Deposit 7k

Interest charge 2.5k

Total HP price payable is therefore 29.5k

Both the above scenarios are over 36 months, so I'm not sure why the 2 interest figures are different. Guess I'll be calling the dealer....

Chelon

mickdw wrote: »

Yes but very hard to recover that 25k again

I can see both sides of the argument, but I am a fairly good saver - the dealer said no discount for cash, possibly because he's giving me a good trade-in deal.

Would anyone know if discount-for-cash is offered normally on a new car?

Odyssey 2005

Chelon wrote: »

I can see both sides of the argument, but I am a fairly good saver - the dealer said no discount for cash, possibly because he's giving me a good trade-in deal.

Would anyone know if discount-for-cash is offered normally on a new car?

I certainly never heard of discount for cash. Got just over 3k off for no trade in though

noelf

Odyssey 2005 wrote: »

Fook 1.9. That's cheaper than free.....almost. Well Done.:)

Even at 3.9 op your doing well on the English Volkswagen web site its 6.9 although cars have a much better spec as standard . Did you get free servicing included in your deal ?

Drummerboy08

noelf wrote: »

Even at 3.9 op your doing well on the English Volkswagen web site its 6.9 although cars have a much better spec as standard . Did you get free servicing included in your deal ?

There's not really much spec difference at all any more, especially on the VW Range.

noelf

Drummerboy08 wrote: »

There's not really much spec difference at all any more, especially on the VW Range.

In england you get sat nav parking sensors adaptive cruise control and a alarm as standard all are extra here...oh the more I look the more I see

Odyssey 2005

noelf wrote: »

Even at 3.9 op your doing well on the English Volkswagen web site its 6.9 although cars have a much better spec as standard . Did you get free servicing included in your deal ?

Yep 3years or 45k Kim's and 12months road tax:cool:

Odyssey 2005

noelf wrote: »

In england you get sat nav parking sensors adaptive cruise control and a alarm as standard all are extra here...oh the more I look the more I see

Buy a Skoda. Every conceivable extra there as standard (almost),sat nav,auto dimming mirrors,keyless entry,heated electric seats(4)etc etc. Lot cheaper than a similar specked Pissat.

Chelon

Bit clearer on what's being proposed by the dealer - called a "Skoda PCP" - personal contract plan. It involves in my case only paying €340 per month as opposed to €557 with the full HP deal. The PCP works like this:-

Step 1 - Agree a repayment period and estimate your annual mileage
Step 2 - Set a deferred amount to the end of the agreement (the optional final payment) to make your repayments lower
Step 3 - Pay a deposit made up of part exchange or cash – as little as one repayment (in advance)
Step 4 - At the end of your repayment term you have three choices*:

•Pay off the optional final payment so you own the car
•Return the car to us and pay nothing more (subject to terms and conditions)
•Part-exchange the car for a brand new ŠKODA on a new solutions contract

It really sounds geared to someone who wants to refresh their car every 2-3 years - cost of credit is 1.5k more than the HP deal, but you do get the above options at the end.

If doing low enough mileage the PCP is the way to go, Pay the depreciation and interest rather than the whole amount.

Why spend savings that could be needed ? No point tying savings into a depreciating asset.

mickdw

What you need to look at though is how much value will you have in the car at the year 3 over and above the final payment value as this will be your deposit on the next car. If this figure is similar to the deposit you are paying now, it should be a sustainable deal going forward. If on the other hand you are paying a large deposit now to achieve a very low payment monthly, you would find that at year 3, your deposit on new car will be small and your repayment much bigger unless you throw an additional lump sum of cash into the deal.

lomb

Its all financial engineering though. Ie it doesn't really matter what you do youll be pissing your money up a wall. Budget 20% loss per annum . Ie a 25k car will loose 5k in year one, 4 k in year two , 3,2k i6n year 3. Add to that around 3% interest say around 600 a year. The interest really is nothing next to the loss.
Some people like to think they are modern men for signing up to something like PCP but they aren't its just a version of pissing your cash away. A new car is the sort of luxury that if you cant afford it in cash you are happy to loose you probably shouldn't buy it.

Drummerboy08

lomb wrote: »

Its all financial engineering though. Ie it doesn't really matter what you do youll be pissing your money up a wall. Budget 20% loss per annum . Ie a 25k car will loose 5k in year one, 4 k in year two , 3,2k i6n year 3. Add to that around 3% interest say around 600 a year. The interest really is nothing next to the loss.
Some people like to think they are modern men for signing up to something like PCP but they aren't its just a version of pissing your cash away. A new car is the sort of luxury that if you cant afford it in cash you are happy to loose you probably shouldn't buy it.

I just do not understand this attitude at all.

Lets apply it to houses. Does this mean that if you cant afford it in cash you should live on the street?

lomb

Drummerboy08 wrote: »

I just do not understand this attitude at all.

Lets apply it to houses. Does this mean that if you cant afford it in cash you should live on the street?

Of course not . A house is generally not considered depreciating as its components labour and land generally increase with inflation. Everyone needs a roof over their head so a need an a value can be put on it. A house costs the mortgage interest rate per annum+ an amount towards savings. Ie 100000 house with interest rates at 5% costs 5000 a year. The rest is a saving ie repaying the loan so either you can afford it or you cant.

A new car is a luxury and as soon as its made the labour is depreciated. Sure it has a useful value as transport but that's only a fraction of new.
What I was trying to say is you should only buy it if you have the cash to throw away, and if you do then you could pcp it, lease it or buy it in cash it doesn't really matter.

lomb

lomb wrote: »

Some people like to think they are modern men for signing up to something like PCP but they aren't its just a version of pissing your cash away.

Buying a new car is not going to save anyone money so how does that make pcp worse ?

If someone wants a new car every 3 years then why pay high monthly sums when you can pay half ? why not pay the depreciation and interest rather than pay for the full amount of the car ?

lomb

Deleted User wrote: »

Buying a new car is not going to save anyone money so how does that make pcp worse ?

If someone wants a new car every 3 years then why pay high monthly sums when you can pay half ? why not pay the depreciation and interest rather than pay for the full amount of the car ?

It doesn't make it worse. Its the same difference.
Warren Buffet didn't make 45 billion dollars buying new cars he drove used cars for many years and recommended people do the same. Something to think about.

lomb

lomb wrote: »

It doesn't make it worse. Its the same difference.
Warren Buffet didn't make 45 billion dollars buying new cars he drove used cars for many years and recommended people do the same. Something to think about.

Yeah but the majority of us won't be millionaires so no point worrying about spending some money.

Life's too short for worrying about depreciation and interest. You can't take it with you.

I still think PCP makes sense as your monthly payments are much less over the 3 years V bank loan because you're not paying the full amount for the car so you don't pay back so much.

If you want out then you just pay off the balance after 3 years or finance it.

But if someone might struggle to pay the min deposit then they shouldn't be thinking of new cars.

I'd go on PCP but the max mileage on a Leaf is 30 K kms per year and I need 40 K to be safe.

So the only way for me would be to pay a much higher deposit dipping into savings which is not a good idea. I'd rather low monthly payments.

Savings belong in the bank gaining interest, so this is another reason the low deposit and low monthly payments make more sense on pcp.

mickdw

Ya the low payment is great if it can be continued from car to car. Based on alot of the deals on offer, I think a great number of people are in for a shock when they try to change cars at year 3. Having originally had a car fully owned to trade in, they will now at 3 years only have the value over and above the gfv as a deposit and in many many cases, this will result in increased monthly payments on the next car taking it to a level where it will become unaffordable.

Chelon

mickdw wrote: »

Ya the low payment is great if it can be continued from car to car. Based on alot of the deals on offer, I think a great number of people are in for a shock when they try to change cars at year 3. Having originally had a car fully owned to trade in, they will now at 3 years only have the value over and above the gfv as a deposit and in many many cases, this will result in increased monthly payments on the next car taking it to a level where it will become unaffordable.

Been thinking about this also - what happens 2 or 3 cars down the line? In my example the gfv is 10k but if the car is in good nick with reasonable mileage would be higher than that.

I think this is called "confusion marketing"....

noelf

mickdw wrote: »

Ya the low payment is great if it can be continued from car to car. Based on alot of the deals on offer, I think a great number of people are in for a shock when they try to change cars at year 3. Having originally had a car fully owned to trade in, they will now at 3 years only have the value over and above the gfv as a deposit and in many many cases, this will result in increased monthly payments on the next car taking it to a level where it will become unaffordable.

My dealer has told me my new golf should (when ever it arrives) be worth around E 17000 in 3 years time the gfv is around E10500 and my repayments per month should be around the same IF Apr stays at 2days levels...

noelf

[Deleted User] wrote: »

Yeah but the majority of us won't be millionaires so no point worrying about spending some money.

Life's too short for worrying about depreciation and interest. You can't take it with you.

I still think PCP makes sense as your monthly payments are much less over the 3 years V bank loan because you're not paying the full amount for the car so you don't pay back so much.

If you want out then you just pay off the balance after 3 years or finance it.

But if someone might struggle to pay the min deposit then they shouldn't be thinking of new cars.

I'd go on PCP but the max mileage on a Leaf is 30 K kms per year and I need 40 K to be safe.

So the only way for me would be to pay a much higher hdeposit dipping into savings which is not a good idea. I'd rather low monthly payments.

Savings belong in the bank gaining interest, so this is another reason the low deposit and low monthly payments make more sense on pcp.

40000 km a year Madlad you should be driving a diesel !!! Forget about Nissan leafs and start making your own biodiesel their is a guy on boards making his own very interesting thread ...

lomb

noelf wrote: »

My dealer has told me my new golf should (when ever it arrives) be worth around E 17000 in 3 years time the gfv is around E10500 and my repayments per month should be around the same IF Apr stays at 2days levels...

Probably worth closer to the gvf than 17 I would say. A new base Golf is around 20 discounted.

noelf

lomb wrote: »

Probably worth closer to the gvf than 17 I would say. A new base Golf is around 20 discounted.

I got E18800 on a trade in 2012 golf bluemotion 63000 km

mickdw

noelf wrote: »

I got E18800 on a trade in 2012 golf bluemotion 63000 km

Don't tell me you traded in a 2012 off a traditional payment scheme for a new one on a pcp?
I know of a case where a vw dealer tried to get an elderly couple out of a 12 passat with very affordable traditional finance into a new one on a pcp with terrible figures re trade in value etc. Sharp practice imo.

JAMM222

Around march last year Skoda ran a 0℅ finance offer for a couple of weeks, I'd hold out for that if you could

noelf

mickdw wrote: »

Don't tell me you traded in a 2012 off a traditional payment scheme for a new one on a pcp?
I know of a case where a vw dealer tried to get an elderly couple out of a 12 passat with very affordable traditional finance into a new one on a pcp with terrible figures re trade in value etc. Sharp practice imo.

1.9 Apr on new car and that rate is no longer available

L-M

The way I see best.

Invest your cash.

Get the Skoda on the PCP.

May your low monthly payments.

At the end of the cycle, if your Skoda is worth more than the agreed value, buy it back with said cash. If it's not, take the agreeed value and go again. It's a win win in my eyes.

If you go the other route, pay 25k cash, you're left with nothing, should an emergency come out/job loss etc. You have no comfort zone.

mickdw

noelf wrote: »

1.9 Apr on new car and that rate is no longer available

If a 3 year old standard golf is worth 17k, I will eat my hat

L-M

mickdw wrote: »

If a 3 year old standard golf is worth 17k, I will eat my hat

Boiled or fried?

Probably wouldn't sell for a whole pile off that.

noelf

mickdw wrote: »

If a 3 year old standard golf is worth 17k, I will eat my hat

On a trade in perhaps but not selling privitely i assume

Zubeneschamali

mickdw wrote: »

My point is that people are forced to make regular payments when they finance the car. The average person is not so likely to religiously save the same amount each month in order to replace their savings.

Where do you think the OP got the €25K in the first place? Saved it up, maybe?

The idea that we are all so dumb that we can pay a loan every month but can't save the same amount every month if we have no loans is ridiculous.

Zubeneschamali

Zubeneschamali wrote: »

Where do you think the OP got the €25K in the first place? Saved it up, maybe?

The idea that we are all so dumb that we can pay a loan every month but can't save the same amount every month if we have no loans is ridiculous.

What if you need 10k for something 6 months after buying the car for cash? All the saving in the world won't do you any good.

I'm not a good saver from my normal month to month stuff but I always put away money I got from presents etc. When I was buying a car I knew there was no way I would re-save the money so I borrowed against my saving in the CU and got a very low interest rate. That way I keep my savings and as I have no choice but to pay the loan I do.

noelf

noelf wrote: »

On a trade in perhaps but not sielling privitely i assume

Just had a look on carzone seems possible...I think I remember reading here that the price of second hand cars had strengthened in the last few years

Zubeneschamali

Kash Important Forehead wrote: »

What if you need 10k for something 6 months after buying the car for cash? All the saving in the world won't do you any good.

Ah, but by your logic, you shouldn't spend the 10K then either, you should get another loan, and keep the cash for when you really, really need it another 6 months later.

Or is it just cars that you shouldn't spend cash on, and kitchens and holidays are entirely different?

I have no problem with people doing their sums and deciding a loan is the way to buy a car - but this mental block some people have where a loan is the only way anyone should buy a car is mental - loans cost money.

And spending your savings on a car is a great way to make sure you only buy what you can actually afford, instead of the short sighted "I can afford the monthly" outlook.

Zubeneschamali

Zubeneschamali wrote: »

Ah, but by your logic, you shouldn't spend the 10K then either, you should get another loan, and keep the cash for when you really, really need it another 6 months later.

There are certain things that fit the bill for spending cash reserves on. Deposit for a house is one for sure but even then I wouldn't use up all my money. I'd rather borrow a bit extra for the mortgage than use up all saving on a deposit.

Then there are emergency or things that pop up and you are short for from your monthly wages etc, ok unlikely to cost anywhere near 10k but still better to be covered.

If I was the op I'd probably spend 10k of the cash and get a loan for the rest, that would my way of doing it anyway.

Zubeneschamali wrote: »

And spending your savings on a car is a great way to make sure you only buy what you can actually afford, instead of the short sighted "I can afford the monthly" outlook.

Live is too short to save for ages to buy something if you can comfortably afford to make the loan repayments. And again I don't agree with losing all your saving in one go when you can get relatively cheap money to buy the car and pay it back over time.