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New car - haggling, PCP & HP

  • 16-02-2022 3:56pm
    Registered Users Posts: 969 ✭✭✭ PGE1970

    Hi all,

    My wife is looking at buying a new Seat Arona. It's the first time that we've bought a new car in the family for 20 years so looking for some tips!!

    She likes the look of it and needs a slightly higher car but not one that it too big. It's a petrol 110hp SE+.

    First of all, is there haggling between dealers on a new car or is it just list price - take it or leave it? Should I try a few around Louth, Meath, Cavan & Dublin?

    Seat have low finance offers - much better than the banks. Both options require 10% deposit up-front that is not an issue.

    Option 1: PCP at 1.9% for for 3 years and then a final balloon payment of €10k that we could borrow from the bank.

    Option 2: HP over 4 years at 5.9% to buy outright.

    What do people think? All comments welcome including "Are you nuts?"!!



  • What's the total cost of both?

    Based on your OP I'd go PCP. Lower payments (it would seem) and in 3 years the balloon payment could look smaller again with inflation.

    Haggling etc. is hard at the minute with shortages.

  • Registered Users Posts: 969 ✭✭✭ PGE1970

    Cheers Button,

    Both just over €2,500 up-front

    Option 1: €364 x 36 months and final payment of €10,600

    Option 2: €532 x 48 months and no final payment

  • Registered Users Posts: 50,430 ✭✭✭✭ bazz26

    I'm not sure there is much scope for discounts in the current market as brand new cars are in short supply and have very long delivery times due to the chip shortage and Covid. If you are lucky to find on in stock then the way demand is, dealers probably don't need to offer much in the way of discount because they know it will sell either way. In saying that if you don't ask then you will never get so shop around as many dealers as you can for the best price. If you are flexible enough to take a car in stock then that might help. If you want to order something with options from the factory then you could be waiting 6 or 9 months for it depending on the model which means prices could be increasing again over what they cost today.

    Regarding finance, if PCP rate is @ 1.9% v HP @ 5.9% then it's a no brainer to go with PCP. Better to get a lower rate for 3 years and then a higher HP rate for the balloon payment rather than 5.9% over 4 years. You could always stick a few quid away in a deposit account to help pay off some of the balloon payment in 3 years time also to reduce the amount you need to HP again. Do some maths on both methods is the best advise.

  • HP would be €25,536 in payments over 4 years

    PCP would be €13,104 over 3 year plus €10,600.

    About 1800 difference. Looks like a fairly clear shout for once. 😅

  • Registered Users Posts: 969 ✭✭✭ PGE1970

    Cheers folks,

    Do you know if you can hand the car back on PCP after 3 years or are you obliged to keep it?

    Saying that, we've had my wife's current car for 14 years so it's unlikely that she will change again after there unless something is dramatically wrong with it.

    Any feelings on the Seat Arona? It seems a well built and nicely designed car priced better than the Skoda equivalent?

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  • Registered Users Posts: 50,430 ✭✭✭✭ bazz26

    You have 3 options with PCP at the end of the term:

    1. You pay off the balloon payment and the car is yours.
    2. You go PCP again by trading in against a new car. The equity in your trade-in is then used as your deposit for the new car.
    3. You hand the car back and walk away with nothing.

    You really only take option 3 if you cannot afford option 1 or 2.

  • Registered Users Posts: 937 ✭✭✭ MIKEKC

    That's if the e10,600 doesn't have to be borrowed

  • Registered Users Posts: 969 ✭✭✭ PGE1970

    It would Mike; but by ordinary bank loan on a then 3 year car so I would hope that that wouldn't be an issue.

    We've already got overnight approval on a €20k loan when we thought we might go second-hand. But the difference between a 3 year old car and a new one isn't that much hence the consideration of a new one.

  • The money will be worth less in 3 years so even if you ended up paying 1800 interest on it (don't think it'd be that much) plus you get to keep the money for now.

  • Registered Users Posts: 4,068 ✭✭✭ shanec1928

    Have you driven one? I had a loner one for several days when my Leon was in the garage. I Found it very noisy as in the cabin let in a awful amount of noise/ lack sound deadening wasn’t as refined as the Leon, the whistling from I assume the mirrors cutting through the air when the car was in motion drove me nuts.

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  • Registered Users Posts: 969 ✭✭✭ PGE1970

    My wife is test driving one at the weekend Shane.

    Thanks, I'll keep an eye out for those issues.

  • Registered Users Posts: 50,430 ✭✭✭✭ bazz26

    It's basically a tall Ibiza.

  • Registered Users Posts: 11,966 ✭✭✭✭ Gael23

    Not much room for haggling on new cars. The only negotiation would be in your trade in

  • Registered Users Posts: 4,426 ✭✭✭ maestroamado

    The Ibiza was a donkey... had 2 Arona on hire at different times they are sheep... suppose called progress....

  • Registered Users Posts: 3,027 ✭✭✭ Lantus

    If you can afford the higher payment take the pcp and save the difference each month to get 6k over 3 years. This leaves 4k to pay after 3 years which you can finance from VW and pay at most a few hundred euro interest over 1 year to pay off at roughly 364 a month. Saving 1500 euro overall.

    Try to squeeze a service out of them. VW group used to do buy 3 get 4th free. Better than than the service plan they foist on you.

  • Registered Users Posts: 24,618 ✭✭✭✭ AndrewJRenko

    Would you get a better price if you borrowed the money from your bank and became a cash buyer at the garage? Definitely worth comparing. Is the balloon payment amount fixed, or will it depend on mileage or other factors?

  • Registered Users Posts: 3,027 ✭✭✭ Lantus

    It's unlikely you would take that much off the top price plus the cost of interest on the loan you would have to repay on the full amount.

    Garage gets a commission for selling a pcp deal. Plus the car market is really under pressure and they don't need to discount. Multiple buyers for fewer and fewer cars. The Ukraine won't make better any time soon.

  • Registered Users Posts: 3,381 ✭✭✭ Masala

    getting the PCP direct in the garage is a whole lot easier than asking Bank for the money. No asking for bank statements, your first born and 3 quarts of blood!! I missed a monthlby DD one time ... quick phone call sorted out. No threatening letters and no damage to credit

  • Registered Users Posts: 24,618 ✭✭✭✭ AndrewJRenko

    So they will have priced in a much higher level of defaults than the banks, and customers are paying for that in the overall rates charged.

  • Registered Users Posts: 1,018 ✭✭✭ db

    There shouldn't be a higher rate of defaults with PCP than a regular loan. For one thing the monthly payment is less and the finance company can repossess the car at any time as it is a secured loan.

    The balloon payment at the end is the same - it is the amount left to pay after the deposit and monthly payments. The disadvantage is that you are paying interest on the total remaining balance throughout the the years but the lower interest rate balances it out.

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  • Registered Users Posts: 24,618 ✭✭✭✭ AndrewJRenko

    If they're not doing the same level of affordability checks, of course they are going to end up with higher default levels.

    With a bank loan there is no balloon payment. You pay for the car, no messing about.

  • Registered Users Posts: 81 ✭✭ CuriosityKilledtheCat

    Similar situation to OP. Considering new as there is little value in 2/3 years old cars.

    I would prefer to go HP but I'm amazed at the difference in rates between PCP & HP - 4 or 5% with mant brands. Overall budget 45k...ish - trade-in 15k, 10k cash and finance up to 20k

  • Registered Users Posts: 22,109 ✭✭✭✭ mickdw

    Yes but alot of banks are giving out unsecured loans for cars. PCP with deposit up front has the finance companies ass covered big-time and they likely have preferential arrangement with supplying dealers also for any repossessed cars so they can easily deal with a percentage of non performing without it having to hit the interest rate.

    The deals on offer beat the banks whichever way you look at it.

    You would imagine zero percent finance is just adding thousands onto the sale price day one to cover it but I've seen a good haggler go into vw with option to pay cash via his a personal loan or PCP and after trying different dealers with each option, PCP was cheaper after a counting for discounts, interest etc.

  • Registered Users Posts: 24,618 ✭✭✭✭ AndrewJRenko

    That’s true about the security.

    The true test is, as you suggest, going in with the option of being a cash buyer and seeing what is the deal available.

  • Registered Users Posts: 50,430 ✭✭✭✭ bazz26

    In the current climate, cash buyer doesn't have the same power as it used to. A shortage of used cars due to Brexit and shortage of new cars duel to part shortages has changed the landscape and made it a seller's market. I've actually read that some dealers prefer customers with a trade in now over a customer buying with no trade in as dealers have a shortage of used cars on their forecourt and can get top dollar for them. Dealers are giving very little discount off new cars either as they don't have to try selling them. Any new car in stock now has plenty of suiters willing to buy it. It's gone like the housing market during the Celtic Tiger.

    And the same banks giving out regular finance are giving out PCP finance through dealerships too. Some of the big car manufacturers even have their own banks to deal with financing. For example all the Volkswagen/Audi group dealers use VW Bank. Access to money is cheaper for them keeping it in house and gives them more flexibility around lending rates too. The like of Toyota, Ford, etc use BOI, AIB, etc.

    PCP finance is not governed under the same regulations as other lending products here yet so that's why the lending criteria is not as strict. However I think there is currently plans by the Central Bank to change it but have no clue when that will happen.