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PCP or Used Car Loan

  • 18-08-2021 6:58am
    #1
    Registered Users Posts: 1,137 ✭✭✭ Glen_Quagmire


    I need to upgrade my car and trying to decide what is the smarter option between:


    1. Trading my car in with with 10k car loan of around 7% APR and buying a used car for around 25k

    2. Trading my car in against a new car on PCP for a car worth around 40k on 0% APR.

    Car loan at approx 7% APR over 3 years works out at 300 per month

    PCP at 0% APR also works out at approx 300 a month

    PCP looks the smarter move on paper as I will be getting a new car but I realise there are T&Cs with PCP that need to be considered.

    I live close to work so don't do big miles so I'm not concerned with going over the allowable mileage.

    Also understand that I need some equity built up on the car for 3 years time to do an upgrade but not sure how much equity I can expect.

    With the used car, after 3 years its mine no T&Cs but the car would be worth maybe 10-15k less depending on the market.

    What would he the best option here or what other things should I consider?

    Cheers



Comments

  • Registered Users Posts: 3,028 ✭✭✭ Lantus


    Obviously you are borrowing a lot more with the new car but deferring some until later. So 300 for another 3 years to own outright.

    You save a little on costs for a new car as it's basically maintenance free bar servicing. It's also shiny and new and presumably to meet your specific needs.


    Just be wary of the trading up after 3 years. You will likely need some additional cash to keep those monthlies low. You can only really afford it if you are prepared and able to buy it outright. Even if you don't intend to.


    If the new car is a good mainstream make with high residual then no worries as selling or trading in will be easier.



  • Registered Users Posts: 1,137 ✭✭✭ Glen_Quagmire


    Yeah the main thing I'm concerned about is having enough equity at the end of the 3 years to use as a deposit for the next car, I'm not sure what equity to expect but if I keep the car clean and stay below the allowable mileage would the expected equity be enough for the full deposit off the next car of is it always expected that a few grand extra will be needed on top?

    Haven't decided on a car yet but SEAT are doing 0% finance at the moment



  • Registered Users Posts: 22,925 ✭✭✭✭ ShadowHearth


    My main advice would be to look at whole price, not monthly payments. And get in to mindset that equity will be lowest possible. There is almost no scenario possible, where you be able to sit in to new car with same payments, without putting extra deposit in 3 years.

    Your first mistake is already looking at second hand car for 24k and new for 40k. Just because its 300 a month now, does not mean that you won't need to fork out 40k for it. You might be in good position now, but who knows what will happen in 3 years, you might not be in position to upgrade for new car or buy it out.

    I personally bought a car on pcp, but from a get go, I opened savings account and started putting money every week in to it, so in 3 years I would have enough to cover balloon payment. In fact, it actually saved my arse, because my 3 years ended in 2020 June. No need to explain what happened back then. Thanks to little bit of planning I was able just to pay off balloon and keep my car until things blew over. Saved me a lot of stress.



  • Registered Users Posts: 12,966 ✭✭✭✭ wotzgoingon


    How much was your car all in after paying off balloon and monthly payments? I know you bought a new car recently did you get a good price for your old.

    Also did you have to break in your car when it was new?



  • Registered Users Posts: 3,028 ✭✭✭ Lantus


    The total cost is the price you agree plus any credit costs on the first or last 3 year period plus servicing and repairs, tyres etc.


    In relation to equity vw group is usually pretty good. Seat having improving equity but still lower than vw or skoda generally but it can vary a lot re model. If you allow for ten to fifteen PC equity you are probably about there based on 3 pcp deals I have run and multiple quotes. A massive deposit on day 1 doesn't equate to a bigger equity after 3 years.


    In terms of mileage and condition it will slightly improve the outcome but please never buy a car only to not drive or use it so you can recoup a few hundred extra at trade in because your mileage is ten k less.



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  • Registered Users Posts: 22,925 ✭✭✭✭ ShadowHearth


    24.5k on 0% pcp. 6k deposit and Ballon 8.5k. So in the end, it did costed me 24.5k as I payed nothing to bank.

    I sold my car to a friend who is a trader. We both won out of the deal. I was able to drive my car until I got new one, got good price for it in cash and was able to buy my new car as straight sale and get better price. He in return got a car that was very well looked after and knew history of it, that needed zero investment and he made a few quid on it. So win win. All I can say, I got lucky and was at right time and right position to buy my new car, because the prices of cars like mine got out of control in less then 2 weeks since I got mine.

    As for break in. Its a mixed bag of information. Some say you don't need to do it on new modern cars, other say you need to. I just took it easy for first 8k kms on it just to be on the safe side.



  • Registered Users Posts: 75 ✭✭ JCN12


    Do you need to or want to?

    That's a lot of debt to carry around for the sake of a car 🙄



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