New car every 3 years?

masterboy123

So i bought my car which was 18 months old and paid all the amount at once. I was checking earlier today that similar models are about 4k cheaper. So i have lost 4k in depreciation in one year.

On other side, a colleague does PCP finance and gets a new car every 3rd year of similar model and make. He ofcourse pays higher interest rate every month. But every 3rd year he gets a new car and no repair costs are involved as the car is under warranty.

I am wondering is it cheaper overall to get car on PCP and change every 3rd year? Rather than paying all cash at once, as in my case?
My car would require paid service, repair costs, etc from next year.

Dravokivich

Can you afford to get a new car every 3 years?

Warranties aren't absolute either.

dense

Your acquaintance "benefits" from pretty constant payments. Problem with traditional loans in one way is that once it's clear having the spare cash is great but can be very painful to start saving for deposit and getting back into monthly payments again.

If a good car is an essential in your life it's worth spending on, but you can also get a lot of motor for a small enough money used.

I've spent just €1500 on cars in the last 7 years. It is essential but not my main transport.

grogi

masterboy123 wrote: »

I am wondering is it cheaper overall to get car on PCP and change every 3rd year? Rather than paying all cash at once, as in my case?
My car would require paid service, repair costs, etc from next year.

The car depreciate the same way, regardless if it is bought with cash, load or PCP.

Sleeper12

If you are talking about buying a brand new car then remember that it will depreciate as you drive it out of the showroom

Lantus

dense wrote:

I've spent just €1500 on cars in the last 7 years. It is essential but not my main transport.

When it's a critical and essential transport mode you will invariably need to spend more. I use PCP because I commute 100km a day and have a growing family. The cost of PCP is worth it for reliability and piece of mind and comfort. It was also cheaper over 3 years than second hand cars once the total cost of ownership was factored in. That will vary subject to needs.

As you say you don't rely on car like say I would do so you can match those needs and save money which is great.

Danjamin1

I'm on a PCP deal because it's affordable for me and I get the option of a new car every 3 years - but I'm under no allusion that it's a magical deal that just allows me to get a new car with no drawbacks.

Important things to consider when looking at PCP:
1. You do not own the car outright until the final payment has been made. This is a balloon payment worth approx. 1/3 of the car value.
2. In 3 years time you still may have to stump up more of a deposit to get the new car. The car is used to build equity, but in a worst case scenario it may only be valued at the value of your final payment, in which case you have nothing to trade in against the next car.
3. You are restricted to the terms of the finance arrangement. This can include capped mileage and you pay extra if you go over this. My agreement is for 15,000 km per annum. Not a problem for me but that's nothing for some people.
4. PCP deals are not regulated by the financial regulator. There is no external regulation on them. This is very topical at the moment, you should be able to find some info on it with a quick search.

In saying that there are positives:
1. You get to drive a new car and in 3 years time change it for another new one if you decide to continue with the arrangement.
2. Monthly repayments are manageable and affordable because you are deferring a large portion of the debt. You need to very aware that this is the case. You are liable for that remaining debt if you decide to keep the car after the 3 year period.

Each arrangement works for different people, but it's crucial to be aware of what you are entering in to.

grogi

Danjamin1 wrote: »

I'm on a PCP deal because it's affordable for me and I get the option of a new car every 3 years - but I'm under no allusion that it's a magical deal that just allows me to get a new car with no drawbacks.

Important things to consider when looking at PCP:
1. You do not own the car outright until the final payment has been made. This is a balloon payment worth approx. 1/3 of the car value.
2. In 3 years time you still may have to stump up more of a deposit to get the new car. The car is used to build equity, but in a worst case scenario it may only be valued at the value of your final payment, in which case you have nothing to trade in against the next car.
3. You are restricted to the terms of the finance arrangement. This can include capped mileage and you pay extra if you go over this. My agreement is for 15,000 km per annum. Not a problem for me but that's nothing for some people.
4. PCP deals are not regulated by the financial regulator. There is no external regulation on them. This is very topical at the moment, you should be able to find some info on it with a quick search.

In saying that there are positives:
1. You get to drive a new car and in 3 years time change it for another new one if you decide to continue with the arrangement.
2. Monthly repayments are manageable and affordable because you are deferring a large portion of the debt. You need to very aware that this is the case. You are liable for that remaining debt if you decide to keep the car after the 3 year period.

Each arrangement works for different people, but it's crucial to be aware of what you are entering in to.

The mileage penalties apply only if you handle the car back. As almost nobody would do that (it means loosing any equity), it really is irrelevant.

Danjamin1

grogi wrote: »

The mileage penalties apply only if you handle the car back. As almost nobody would do that (it means loosing any equity), it really is irrelevant.

Yep, but it's really really important to be aware of because I'm sure there's people out there who think their deposit + 3 years repayments are covering the total cost of the car.

Edit: Misread your post, you're absolutely right.

masterboy123

Thanks everyone.

I know a brand new car would depreciate but if my intentions are to trade in this new car with another brand new car at the end of 3rd year, would it be a good deal?

Are you supposed to give 30% deposit again on a new car while returning your 3 year old used car?

Sleeper12 wrote: »

If you are talking about buying a brand new car then remember that it will depreciate as you drive it out of the showroom

masterboy123

My main queston is:

would ye say overall it's more costly to get a car every 3rd year on PCP scheme? Keeping in mind i drive 20,000km a year and exchange for a new car at the end of 3rd year.

Danjamin1

masterboy123 wrote: »

Thanks everyone.

I know a brand new car would depreciate but if my intentions are to trade in this new car with another brand new car at the end of 3rd year, would it be a good deal?

Are you supposed to give 30% deposit again on a new car while returning your 3 year old used car?

It depends on the equity you have in the car.

If the car you hand back is worth €15k but the final payment is only €10k then you have €5k which goes against the new car deposit. You need to make up any shortfall to cover the rest.

bmwguy

Either way you are paying. Your actual cost is depreciation plus interest payments. Not repayments which people confuse. PCP is a lot about headline figures, low monthly repayments and cash flow to be honest. Very marketing driven. Nothing wrong with it really if I was buying a new car I would probably PCP it to be honest.

jca

Danjamin1 wrote: »

It depends on the equity you have in the car.

If the car you hand back is worth €15k but the final payment is only €10k then you have €5k which goes against the new car deposit. You need to make up any shortfall to cover the rest.

Or pay a higher monthly payment.

Danjamin1

jca wrote: »

Or pay a higher monthly payment.

of course, should've specified you don't have to stick to 30% deposit, you can drop to 10% & pay more monthly. I meant you just have to make up the balance of a minimum deposit if the value of the trade in car doesn't cover it.

bazz26

OP, it sounds like you really don't understand what PCP is or how it works.

PCP is just a different way of managing the payments but the car still suffers depreciation. PCP just incorporates the total cost of that depreciation into the monthly payments over 3 years less any deposit you put into it on day 1. Handing the car back and taking out another doesn't mean that your not taking a hit on depreciation. Of course you may get a higher trade-in value that the GFV, that is called equity and would be used towards the deposit for your next car if you want to keep monthly payments similar to the first PCP deal.

With the uncertainty over the next few years around the long term future of diesel and petrol cars, along with the forthcoming potential budget increases in motor tax and excise duty on fuel, I'd be very cautious around resale values of used petrol/diesel cars in 3 years time. You could end up with no equity by the time the next PCP deal comes round.

masterboy123

Ok, and the diesel/petrol issue is another topic.
Americans won't let it ban in any country. Time will only tell the change.

Ok so in short I should be happy with my car ownership

jimmycrackcorm

Danjamin1 wrote:

4. PCP deals are not regulated by the financial regulator. There is no external regulation on them. This is very topical at the moment, you should be able to find some info on it with a quick search.

PCP is still a HP contract and is covered already by protections such as the 'half' rule. Of course it's designed in such a way that by rolling over in the years then you likely get to that stage.

PCP works well if you can get to a point where you save enough money asking side your monthly payments to eventually pay off the balance and have a three year old car.

jimmycrackcorm

Danjamin1 wrote:

4. PCP deals are not regulated by the financial regulator. There is no external regulation on them. This is very topical at the moment, you should be able to find some info on it with a quick search.

PCP is still a HP contract and is covered already by protections such as the 'half' rule. Of course it's designed in such a way that by rolling over in the years then you likely get to that stage.

PCP works well if you can get to a point where you save enough money asking side your monthly payments to eventually pay off the balance and have a three year old car.

masterboy123

I bought a 1.5 year old car without any loan.
Is this a better deal in terms of value for money?

jimmycrackcorm wrote: »

PCP is still a HP contract and is covered already by protections such as the 'half' rule. Of course it's designed in such a way that by rolling over in the years then you likely get to that stage.

PCP works well if you can get to a point where you save enough money asking side your monthly payments to eventually pay off the balance and have a three year old car.

grogi

masterboy123 wrote: »

I bought a 1.5 year old car without any loan.
Is this a better deal in terms of value for money?

Are you looking for confirmation?

Yes, that was much better deal.

mickdw

Buying 1.5 years old and even if you swap it every 3 years should give you better value than buying new and swapping it every 3 years.
Pcp doesnt help in any way to avoid new car depreciation, in fact of you go for a new car at each end of term you are locking yourself into suffering thay heavy depreciation each term.
Having bought your used car, you should be better off, have more freedom with future car purchases just you wont drive a new car.

masterboy123

Happy to hear that.

I tried my best to do the maths but i guess i am bad in maths.

I plan to keep my car for atleast 5 years and then buy another 1-2 years old car in coming future.

Thanks everyone for shedding light on this topic.

mickdw wrote: »

Buying 1.5 years old and even if you swap it every 3 years should give you better value than buying new and swapping it every 3 years.
Pcp doesnt help in any way to avoid new car depreciation, in fact of you go for a new car at each end of term you are locking yourself into suffering thay heavy depreciation each term.
Having bought your used car, you should be better off, have more freedom with future car purchases just you wont drive a new car.

mickdw

What car did you get. I will try to put very rpugh figures on a comparison between new pcp and what you have done.

bazz26

I think from previous threads he bought a Merc GLA.

masterboy123

Benz C200D 151 model auto with 35000 kms

mickdw wrote: »

What car did you get. I will try to put very rpugh figures on a comparison between new pcp and what you have done.

masterboy123

GLA was too tight inside. So went for C200D

bazz26 wrote: »

I think from previous threads he bought a Merc GLA.

Lantus

masterboy123 wrote:

I bought a 1.5 year old car without any loan. Is this a better deal in terms of value for money?

Was buying an almost new Merc with cash a good deal? Of course it was. Don't we all want to be able to buy new cars with cash? I'd buy two if I could.

bazz26

To be honest I'd be very surprised if you only lost 4k in depreciation over 18 months. With Mercedes offering 10% new ones at the beginning of this year and the lower cost of importing due to Brexit I'd say your car probably lost twice that in it's trade-in value now.

masterboy123

Well, i bought it second hand from Benz dealer.
I noticed 3-4k depreciation in last 6 months. It was 18 months old when i bought it

bazz26 wrote: »

To be honest I'd be very surprised if you only lost 4k in depreciation over 18 months. With Mercedes offering 10% new ones at the beginning of this year and the lower cost of importing due to Brexit I'd say your car probably lost twice that in it's trade-in value now.

SBPhoto

Sleeper12 wrote: »

If you are talking about buying a brand new car then remember that it will depreciate as you drive it out of the showroom

I think this depreciation is common knowledge on a new car, doesn't stop people from buying them though