15k: Go new or 2nd hand?

Bacchus

I've 15k to spend and I've been looking around 2011/12 Mondeos. Some good spec cars out there with good mileage. This will be our primary car for the next 5+ years (already have a 2008 Golf).

It occurred to me (the power of advertising at work right here) that some of these 0% finance or PCP deals might be worth a closer look. I've had a quick look at some (not all) dealers sites and the only manufacturers I see who do 0% finance seem to be Skoda & Opel (was keen on Ford but they don't offer it). I did a quick "build your own" of an Octavia and an Insignia and they come out around €27-€29k. Depending on who you go with you either pay more up front, have a final lump sum or pay more in the month installments but ultimately you pay the cost price.

So, I'm just wondering in the wisdom of you boardsies... is the 15k better spent on a deposit on a new car (and all the benefits you have of a new car) vs being spent on a 4/5 year old 2nd hand car (obviously won't have have further repayments to make but will require more servicing).

In terms of mileage I'll be doing, I've worked it out at about 30,000km a year.

Cheers

bazz26

You would want to check with dealers around PCP when your doing 30k km per year as this could affect the GFV of the car or they might incur an excessive mileage charge at the end of the term. Also make sure you understand PCP extensively, it's a more manageable way of paying monthly for a car but the car still has to be paid for or handed back.

Bacchus

Yeah, I'm not overly familiar with the ins and outs of PCP (but I know the basics) so I'm not so sure about that route but the 0% finance is a separate thing, yes?

grogi

bazz26 wrote: »

You would want to check with dealers around PCP when your doing 30k km per year as this could affect the GFV of the car or they might incur an excessive mileage charge at the end of the term. Also make sure you understand PCP extensively, it's a more manageable way of paying monthly for a car but the car still has to be paid for or handed back.

There should be none if you decide to keep the car and pay the balance. Or am I wrong again...

bmwguy

Without doing specific maths on this I would expect this is what you are up against, based on figures I have come across, changes for different cars but this is all ballpark work. I am sure some will critique my figures, I am welcome to that.


30% deposit for PCP on a 30k car would be a 9 grand outlay, whichever way you choose to come up with this 9k
36 payments of approx €320
Total paid €20,520

GFV of 12k are usually what they come in at
Market value of 16-18 if low mileage and good condition

So, after paying 20.5k you have 4-6k equity for a new car

Cost of car to you is 14.5-16.5k for 3 years

Then you have the choice to buy the car outright or hand it back or buy again using the equity

Buy a second hand car 30k car (using 2013 Mondeo as an example) 3 years old going by Carzone for approx 16-18k for a good one, same figure as used above

Keep it for 3 years (same as PCP timeframe) you are talking about getting 8 back on it (2010 prices today) so will have 8k equity if you have cleared the finance

Cost of car to you is 8-10k for 3 years

Disclaimers:
You will almost certainly get a better finance rate on the PCP than traditional lenders or dealerships will offer you
New car will be in warranty
New car may be cheaper to tax (unlikely)
New car may be more fuel efficient (unlikely)
You have to worry about mileage and condition with PCP deals
If not service inclusive you have to use main dealers for servicing

But difference in buying new and buying 3 years old, taking variables out of it, if keeping for 3 years will be in the region of 6-7 grand.

Up to you to decide if this is worth it, maybe it is, maybe it isn't.
But no way can a new car ever be cheaper than a similar 3 year old car.
Depeciation in years 1-3 are much steeper than years 4-6
You can step down in size and class and buy new for less than a second hand but this is not like for like. No tax savings in the years you are describing either.

Monthly payments are tempting but not the whole story

grogi

bmwguy wrote: »

Monthly payments are tempting but not the whole story

Buying new becomes even more attractive if you'd like to keep it for longer, but don't want a car older than 6 years for instance...

The second hand would be due to replacement, while one can keep driving the new one and know exactly what they have.

Bacchus

Thanks for the detailed response bmwguy. Seems like the sensible approach is to go 2nd hand. The only thing is (as grogi points out), I'd be keeping this car for at least 5 years if not longer. So it's more likely that I'd hold on to a new car longer than a 2nd hand one. Not sure does that really bridge any sort of financial gap though. On the one hand, say I going for a 2012 model, I'll end up replacing it by about 2021. If I go new, I'd be inclined to think I'd stick with it until around 2025/6. Hard to say exactly though when talking so far into future.

Also, to clarify. When a manufacturer is offering 0% finance... is that a separate thing to PCP or is it PCP in disguise?

bmwguy

grogi wrote: »

Buying new becomes even more attractive if you'd like to keep it for longer, but don't want a car older than 6 years for instance...

The second hand would be due to replacement, while one can keep driving the new one and know exactly what they have.

This is true.

grogi

Bacchus wrote: »

Thanks for the detailed response bmwguy. Seems like the sensible approach is to go 2nd hand. The only thing is (as grogi points out), I'd be keeping this car for at least 5 years if not longer. So it's more likely that I'd hold on to a new car longer than a 2nd hand one. Not sure does that really bridge any sort of financial gap though. On the one hand, say I going for a 2012 model, I'll end up replacing it by about 2021. If I go new, I'd be inclined to think I'd stick with it until around 2025/6. Hard to say exactly though when talking so far into future.

If I was to keep a car that long, I would buy new.

Bacchus wrote: »

Also, to clarify. When a manufacturer is offering 0% finance... is that a separate thing to PCP or is it PCP in disguise?

0% is offered on PCP finance. So the latter I guess.

Bacchus

grogi wrote: »

0% is offered on PCP finance. So the latter I guess.

PCP isn't really an issue either when intending to keep the car beyond the 3 years... that's my understanding anyway.

bmwguy

Bacchus wrote: »

Thanks for the detailed response bmwguy. Seems like the sensible approach is to go 2nd hand. The only thing is (as grogi points out), I'd be keeping this car for at least 5 years if not longer. So it's more likely that I'd hold on to a new car longer than a 2nd hand one. Not sure does that really bridge any sort of financial gap though. On the one hand, say I going for a 2012 model, I'll end up replacing it by about 2021. If I go new, I'd be inclined to think I'd stick with it until around 2025/6. Hard to say exactly though when talking so far into future.

Also, to clarify. When a manufacturer is offering 0% finance... is that a separate thing to PCP or is it PCP in disguise?

Don't get hung up on the interest rate, just calculate total cost to you. Low interest rates. example 2 cars you like equally, say a Mondeo and a Mazda 6. 32 grand at 0% for the Mondeo and 29 grand for the Mazda charging some interest could work out the same, figures are example only. Charging interest allows manufacturers and dealers to offer a lower purchase price because you also pay them interest, no interest means they have to make it all on the sale. Of course if you like one more than the other its down to you to decide to put a monetary value on how much more you like it!

If you want to keep the new car for 9/10 years as you say, here is my take. The average 10 year old car will sell for approx 3-5k depending on what it is, some rare or desirable machines a bit more.

This is what you will be left with if you buy a new car and keep it. Your 30k 2016 car will have cost you 25-27k for 10 years if you sell in 2026 if it is in good nick. It could also be worthless at your mileage and could be worth zero. So your entire 30k could be gone in depreciation. But it could be working fine and you are happy to drive it, but thats doubtful.

An 9 year old car in 2021 (the 2012/2013 you plan of buying now) will be pretty much worth the same as the new one in 2025/2026 and your inital 15/16k could be gone in the black hole of depreciation or it could be worth the 3-5k estimate. Meaning your cost range will be 12-16k

The big variable here is the reliabilty of cars as they get older which I cant quantify.

But like for like, keeping a new car for 9 years will be more expensive than keeping a used car for 6 (25-30k v 12-16k). Again, all ballpark but think I am at least in the ball park.

I am in the lucky situation I like buying older, expensive (when new) cars and don't worry too much about depreciation its just the running costs that get me.

bazz26

grogi wrote: »

There should be none if you decide to keep the car and pay the balance. Or am I wrong again...

Problem is that PCP is setup so that it makes it harder or expensive to get out of it and keep the car. It's designed to keep/trap you into staying with PCP, ie handing back the car for a new one and taking out another PCP term.

So if you want to hand the car back and get a new one via another PCP deal, you need the car to be worth more than the agreed GFV. The difference between the GFV and the market value of the car is your equity. Above average mileage affects the market value of the car which in turn reduces your equity in the car. This equity is your deposit for the next car and PCP agreement in order to retain similar monthly payments on the new car. It means you need to top up the deposit.

But if you decide you want to keep the car after the PCP agreement finishes and pay it off, then again you need the market value of the car to higher than the GFV, otherwise you will end up paying more for the car than it's worth just to keep it. Again above average mileage impacts the car's market value.

BTW OP there is a detailed thread on here or in the main motors forum around PCP and well worth a read. 0% interest PCP deals look very attractive but you need to educate yourself on the ins and outs of how they work.

Black_Knight

@bmwguy:
While buying 2nd hand does work out cheaper, if you buy a 2011/2012 car now, and sell it in 2021, you'll have to buy another car for 15k. Whereas if buying a new car now, you wont be selling until 2026. This is all assuming the OP want to get rid of any car thats 10 years old.

Assuming all 10 year old cars are worth 3-5k, a new car is 30k, and a 4-5 year old 2nd hand car is 15k then the second hand route is cheaper by 3-5k (since you sell 2 15k cars for 3-5k, rather than 1 30k car for 3-5k.)

2nd hand car:
15k spent in 2016
Sold for 4k in 2021
15k spent in 2021
Sold for 4k in 2026
Total cost is 22k

New car:
30k spent in 2016
Sold for 4k in 2026
Total cost is 26k.

Soarer

If you're spending €15k, head to the UK for something.

Bacchus

Closure on this. I went to the UK for something Well, a car came up with a nice spec that was from the UK. Collecting next weekend.

Thanks for the advice everyone. In the end, going new was probably too much money down the drain to justify it and buying 2nd hand Irish isn't much value for money compared to the spec you can get on imports.

Bacchus

Closure on this. I went to the UK for something Well, a car came up with a nice spec that was from the UK. Collecting next weekend.

Thanks for the advice everyone. In the end, going new was probably too much money down the drain to justify it and buying 2nd hand Irish isn't much value for money compared to the spec you can get on imports.

bmwguy

Black_Knight wrote: »

@bmwguy:
While buying 2nd hand does work out cheaper, if you buy a 2011/2012 car now, and sell it in 2021, you'll have to buy another car for 15k. Whereas if buying a new car now, you wont be selling until 2026. This is all assuming the OP want to get rid of any car thats 10 years old.

Assuming all 10 year old cars are worth 3-5k, a new car is 30k, and a 4-5 year old 2nd hand car is 15k then the second hand route is cheaper by 3-5k (since you sell 2 15k cars for 3-5k, rather than 1 30k car for 3-5k.)

2nd hand car:
15k spent in 2016
Sold for 4k in 2021
15k spent in 2021
Sold for 4k in 2026
Total cost is 22k

New car:
30k spent in 2016
Sold for 4k in 2026
Total cost is 26k.

I agree with that it brings numbers closer. So many variables on this though. OP what did you buy?

Bacchus

bmwguy wrote: »

I agree with that it brings numbers closer. So many variables on this though. OP what did you buy?

Went totally left field (thanks to a suggestion from my brother) on a 2012 Seat Exeo. We test drove a (rather boring but in perfect condition & low mileage) 2011 Mondeo earlier in the day, felt a bit sad, drove the Exeo and pretty much can't wait to have it now. It's a UK import, very nice spec and tic'd the boxes for what we wanted plus a few extra.

grogi

Bacchus wrote: »

Went totally left field (thanks to a suggestion from my brother) on a 2012 Seat Exeo. We test drove a (rather boring but in perfect condition & low mileage) 2011 Mondeo earlier in the day, felt a bit sad, drove the Exeo and pretty much can't wait to have it now. It's a UK import, very nice spec and tic'd the boxes for what we wanted plus a few extra.

You've bought an Audi A4 then :-) No wonder you liked it more than Mondeo, it is just "a bit" smaller

Black_Knight

grogi wrote: »

You've bought an Audi A4 then :-) No wonder you liked it more than Mondeo, it is just "a bit" smaller

Easier on the wallet

MIKEKC

Bacchus wrote: »

Thanks for the detailed response bmwguy. Seems like the sensible approach is to go 2nd hand. The only thing is (as grogi points out), I'd be keeping this car for at least 5 years if not longer. So it's more likely that I'd hold on to a new car longer than a 2nd hand one. Not sure does that really bridge any sort of financial gap though. On the one hand, say I going for a 2012 model, I'll end up replacing it by about 2021. If I go new, I'd be inclined to think I'd stick with it until around 2025/6. Hard to say exactly though when talking so far into future.

Also, to clarify. When a manufacturer is offering 0% finance... is that a separate thing to PCP or is it PCP in disguise?

There is no such thing as 0% finance everything has to be paid for one way or another