First time car finance/PCP

TylerRyan28 · 18-04-2021 12:58pm #1

Hi I'm looking into getting my next car on Finance im trying to get my head around if it's worth getting. A new car every 3 years is tempting.
I know the low payment draws you in but are hidden cost.

What are the good and bad points?
Would it be better to go for a used car or brand new ? I would be happy with around 2017 car.

iBaxter · 18-04-2021 1:33pm

TylerRyan28 wrote: »

Hi I'm looking into getting my next car on Finance im trying to get my head around if it's worth getting. A new car every 3 years is tempting.
I know the low payment draws you in but are hidden cost.

What are the good and bad points?
Would it be better to go for a used car or brand new ? I would be happy with around 2017 car.

True the monthly payments on PCP are quite low, but dont forget there is a substantial balloon payment after 3 years, which in my view make it expensive and also there are all types of rules regarding mileage and servicing etc...I think there are a few threads here outlining the good and the bad regarding PCPS. Perhaps you could go for a credit union loan, where you have cash in hand and get a good discount, I also seem to remember that some new car brands offer interest free HP on new cars, which may be worth pursuing as opposed to PCP.

On the year of the car, sure its nice to have a brand new car, but most cars depreciate very fast in the first two years, and there are good low mileage cars to be found out there that are 3 or 4 years old.

TylerRyan28 · 18-04-2021 2:35pm

iBaxter wrote: »

True the monthly payments on PCP are quite low, but dont forget there is a substantial balloon payment after 3 years, which in my view make it expensive and also there are all types of rules regarding mileage and servicing etc...I think there are a few threads here outlining the good and the bad regarding PCPS. Perhaps you could go for a credit union loan, where you have cash in hand and get a good discount, I also seem to remember that some new car brands offer interest free HP on new cars, which may be worth pursuing as opposed to PCP.

On the year of the car, sure its nice to have a brand new car, but most cars depreciate very fast in the first two years, and there are good low mileage cars to be found out there that are 3 or 4 years old.

Yeah I was thinking since I wont be getting a mortgage for another while at least if I get a decent car on finance now it will be paid off and wont have to pay a mortgage aswell as monthly payments for the car . If I wanted a new car after I could trade it in and put a money with it .

CIP4 · 18-04-2021 4:27pm

TylerRyan28 wrote: »

Yeah I was thinking since I wont be getting a mortgage for another while at least if I get a decent car on finance now it will be paid off and wont have to pay a mortgage aswell as monthly payments for the car . If I wanted a new car after I could trade it in and put a money with it .

If you want to get it paid off for a mortgage your aswell just to get a HP loan at the end of that the car will be fully paid off. Whereas PCP you’ll have a balloon payment. Just look at the Cost of credit for whatever you chose obviously you want to try get a loan with a low interest rate.

TylerRyan28 · 18-04-2021 9:33pm

CIP4 wrote: »

If you want to get it paid off for a mortgage your aswell just to get a HP loan at the end of that the car will be fully paid off. Whereas PCP you’ll have a balloon payment. Just look at the Cost of credit for whatever you chose obviously you want to try get a loan with a low interest rate.

Yeah I have been looking at HP Loan looks like a better way to do it especially with with pcp you have the balloon payment. Anyone have any experience with HP Loan ?

CIP4 · 18-04-2021 9:41pm

TylerRyan28 wrote: »

Yeah I have been looking at HP Loan looks like a better way to do it especially with with pcp you have the balloon payment. Anyone have any experience with HP Loan ?

I have had them in the past the biggest thing with them is just to be aware that if you stopped paying the loan they can take back the car technically you don’t own the car until the loan is fully paid. Otherwise they are straightforward enough try go for a low interest rate one over as short a period as you can to reduce the total amount you will pay in interest.

TylerRyan28 · 18-04-2021 11:20pm

CIP4 wrote: »

I have had them in the past the biggest thing with them is just to be aware that if you stopped paying the loan they can take back the car technically you don’t own the car until the loan is fully paid. Otherwise they are straightforward enough try go for a low interest rate one over as short a period as you can to reduce the total amount you will pay in interest.

I would say any loan it's the number 1 thing to do not miss a payment they are pretty low anyway . Would it not be the same under a pcp plan ?

What would be a low interest rate and who would be the best company to get finance off ?

Bandara · 18-04-2021 11:27pm

https://www.ccpc.ie/consumers/money/debt/problems-making-car-repayments/

Good article explaining the HALF RULE

Really import to know you have this in your armoury. The loan companies despise it and will do anything to lie, trick you out of going this option should you ever need to. If you do, make sure you fully arm yourself with information before doing so. They will try to trick you into making a Voluntary Surrender, which is absolutely NOT what you want to agree to.

Enjoy your new car

WacoKid · 19-04-2021 7:53am

https://www.youtube.com/watch?v=xCNbjT6SHms

PCP works well for your 1st contract, and if you want to keep the car after that.

If you get fond of a new car and want to continue with PCP through years 4-6 and 7-9 then you will be paying more.

I would say get a personal loan, pay it off, and own the car. Also less likely to trade up straight away as there won't be a dealer waving new car keys at you in 3 years.

Lantus · 19-04-2021 8:02am

There's not much between hp over 5 years or pcp over 6?

Check the interest rates as pcp can be cheaper and you can save over first 3 years to cannabilise lump sum.

You can also opt to pay off lump sum in 1, 2 or 3 years and make an interest saving on shorter periods with pcp and vw group anyway.

Do your sums....

McCrack · 19-04-2021 6:43pm

Any finance on a depreciating asset and particularly pcp is a mugs game

Lantus · 19-04-2021 10:51pm

McCrack wrote: »

Any finance on a depreciating asset and particularly pcp is a mugs game

So any car then? Because they all depreciate. Or any possession at all, because they all depreciate....and money depreciates over time with inflation so owning any is also a mugs game.... Really?

McCrack · 19-04-2021 10:57pm

LillySV · 19-04-2021 11:01pm

TylerRyan28 wrote: »

Hi I'm looking into getting my next car on Finance im trying to get my head around if it's worth getting. A new car every 3 years is tempting.
I know the low payment draws you in but are hidden cost.

What are the good and bad points?
Would it be better to go for a used car or brand new ? I would be happy with around 2017 car.

Is there any particular cars you are looking at ? That could greatly affect the answer

Buddy Bubs · 19-04-2021 11:20pm

I got a pcp quote for an audi a6 before Christmas. Car was 60k euro. Pcp breaks into 3 parts, roughly equal in my case. Deposit could be smaller as mine was max allowed but if you do that the monthlies increase.

Offered 20k for my own 6 year old a6 which would be deposit.

550 euro a month or something like that for 36 months which is about 22000

20000 odd still owing at end of 3 years

So....I'd have to give my perfectly good fully paid for car as a deposit

Pay 550 a month

Still owe 20k

The headline grabber is the brand new a6 for 550 a month, a bargain some might think

But if you break it down, an a6 would cost 3 times that to pay back over 36 months in reality
If I went into that, there's very little chance of me stumping up 20k in 3 years time to buy out a car I had been driving for 3 years and probably a bit bored of at that stage. No, I'd be nearly certainly refinance and get a new one...the cycle continues indefinitely.

That's how pcp works, adjust your figures accordingly. I'm not saying anything for or against pcp, it does suit a lot of people.

But just be sure you understand exactly how it goes and make your decision. For some, 550 a month forever (or 200,300,400, whatever) on a new car replaced every 3 years is great, others not so much.

TylerRyan28 · 20-04-2021 8:34am

LillySV wrote: »

Is there any particular cars you are looking at ? That could greatly affect the answer

I have been looking at Audi A7 & Mercedes Cls but looking at other Audi models aswell as BMW.
So three brands.

Vinnymcdonnell · 20-04-2021 8:45am

Look at it this way, PCP from the likes of VW/Skoda/Audi will be significantly cheaper than any bank or credit union rates. I have seen comments on this thread saying you will get a better deal going in and buying straight with money from your credit union. Again this is totally wrong, it will generally work out more expensive as the dealership will do you a better deal by getting finance from them as they get a reward scheme of sorts.

If you want a new car, look at the 0% rate finance deals by the names listed in the 1st sentence, depending on the car you go for the balloon payment will be much less than the actual worth of the car if you were to sell it privately after. You can also pay off your loan early if you so wish which I have done previously.

Using the low interest rate would be a smarter idea than laying out all your fund buying the car outright, it makes more logical sense having slush fund in your account rather than offloading it all for buying outright when the cost of credit is so low on the cars

WacoKid · 20-04-2021 1:53pm

Dealers don't sell cars anymore. They sell finance. You will get a better deal if they are getting a cut of the APR you are paying on a loan.

You could get say 6% from the Bank but also 6% from the dealer. They may get 2% from the finance house (i.e. Volkswagen Bank) so will be looking to do a deal to get this locked in.

If you go in with cash then the only way they make money off you is the sticker price so will play hard ball...unless its a car that has been sitting for ages and they just want rid!

Not dissimilar to subscription models where re-occurring payments allows them to better plan future income, and not relying on someone walking onto the forecourt for a once off purchase. PCP was put in place for this reason, in my opinion.

Lantus · 20-04-2021 4:37pm

Buddy Bubs wrote: »

I got a pcp quote for an audi a6 before Christmas. Car was 60k euro. Pcp breaks into 3 parts, roughly equal in my case. Deposit could be smaller as mine was max allowed but if you do that the monthlies increase.

Offered 20k for my own 6 year old a6 which would be deposit.

550 euro a month or something like that for 36 months which is about 22000

20000 odd still owing at end of 3 years

So....I'd have to give my perfectly good fully paid for car as a deposit

Pay 550 a month

Still owe 20k

The headline grabber is the brand new a6 for 550 a month, a bargain some might think

But if you break it down, an a6 would cost 3 times that to pay back over 36 months in reality
If I went into that, there's very little chance of me stumping up 20k in 3 years time to buy out a car I had been driving for 3 years and probably a bit bored of at that stage. No, I'd be nearly certainly refinance and get a new one...the cycle continues indefinitely.

That's how pcp works, adjust your figures accordingly. I'm not saying anything for or against pcp, it does suit a lot of people.

But just be sure you understand exactly how it goes and make your decision. For some, 550 a month forever (or 200,300,400, whatever) on a new car replaced every 3 years is great, others not so much.

You could just refinance the 20k left and pay over 1, 2 or 3 years as suits you. I've done it twice. Easy enough.

Also carrying over at 30pc deposit will see a good increase in monthlies unless an equivalent cash injection is made.

You seem to understand the structure but it's always down to affordability. You either can or cannot afford a 60k car.

LillySV · 20-04-2021 5:00pm

TylerRyan28 wrote: »

I have been looking at Audi A7 & Mercedes Cls but looking at other Audi models aswell as BMW.
So three brands.

As said above , vw bank and I’m sure many other car banks are now much cheaper than the likes of credit union ... I recently bought an Audi and their rate was much better than my credit Union or bank. In regard to whether u buy pcp new or buy something afew years old that’s up to you, your salary and your preference ..

For me, I’d see no point in buying new ... u could buy an a7 for around 90-100k and lose 50-60k value in around 4 years... no point ... buy one after 4 years when the biggest amount of depreciation has happened ... but that’s me , I was more about the power and spec of the machine I bought ... for you , you might appreciate the joy and pride of owning something new over anything else ... many people here in Ireland are more concerned about the number plate than anything else... if that’s their thing then fair enough

If it was a base model Kia or Dacia or something like that that doesn’t cost a whole pile new, then new probably wouldn’t be worst idea as you don’t stand to lose as much

Irishcrx · 20-04-2021 5:16pm

I just did a PCP for the first time on a new Cupra and financed with VW Bank who had a better rate than anything else available (In banks etc) - was all very straightforward and once you do your reading and research on what you are getting into it's all upfront , it's not the sneak attack some people would make you believe it is - basically your spreading your payments out over 36 month's at a lower rate and then in 3 years you have a decision on buying the car outright , re-finance remainder , new car - hand car back.

It made sense for me as I previously had a couple of older cars and always something over 10 years and I really wanted to have some reliability and warranty for a change , with this new car I can either change it in 3 years and stay always in warranty or buy it and keep it for 6 then get a new one etc depending on how she's been over the 3 years.

PCP gives finance access and affordability to more people hence sells more cars for dealers but it works for both really, Hire Purchase works out well to if you want to pay the extra monthly etc

Water2626262 · 20-04-2021 6:53pm

TylerRyan28 wrote: »

I have been looking at Audi A7 & Mercedes Cls but looking at other Audi models aswell as BMW.
So three brands.

Defo go for a 3 to 4 year old in these ranges. Buying these new is the equivalent of just burning piles of cash in a fire. 3 to 4 years will ensure the most severe depreciation has been dealt with. BMW dealers offer a bumper to bumper 2 year warranty on used anyway. If you are looking for a house in the next while, PCP is defo not the way to go because you will either be in another one or refinancing the balloon.

TylerRyan28 · 20-04-2021 7:10pm

LillySV wrote: »

For me, I’d see no point in buying new ... u could buy an a7 for around 90-100k and lose 50-60k value in around 4 years... no point ... buy one after 4 years when the biggest amount of depreciation has happened ... but that’s me , I was more about the power and spec of the machine I bought ... for you , you might appreciate the joy and pride of owning something new over anything else ... many people here in Ireland are more concerned about the number plate than anything else... if that’s their thing then fair enough.

Sounds exactly like myself I wouldn't get a brand new car would be 4 - 6 years old as you said the biggest depreciation has happened I'm more about the power and spec of the car aswell.
Very through about how people are concerned about a number plate then anything else. I have a friend who thinks there 2015 Volkswagen polo is better then say a 2012 A5 or Bmw 320 because it's a newer car haha

TylerRyan28 · 20-04-2021 7:14pm

Water2626262 wrote: »

Defo go for a 3 to 4 year old in these ranges. Buying these new is the equivalent of just burning piles of cash in a fire. 3 to 4 years will ensure the most severe depreciation has been dealt with. BMW dealers offer a bumper to bumper 2 year warranty on used anyway. If you are looking for a house in the next while, PCP is defo not the way to go because you will either be in another one or refinancing the balloon.

Definitely wouldn't be buying brand new , wont be going for a mortgage for about 2 - 3 years would that still not be worth it ?

Buddy Bubs · 20-04-2021 7:31pm

TylerRyan28 wrote: »

Definitely wouldn't be buying brand new , wont be going for a mortgage for about 2 - 3 years would that still not be worth it ?

You said you've a budget of 15 to 20k in your other thread. A 3 to 4 year car the likes of which you're suggesting will be somewhere from 40 to 50k. Your budget is for 8 or 9 year old examples.

Are you looking to spend that much and apply for mortgage in 2 to 3 years?

LillySV · 20-04-2021 7:46pm

Buddy Bubs wrote: »

You said you've a budget of 15 to 20k in your other thread. A 3 to 4 year car the likes of which you're suggesting will be somewhere from 40 to 50k. Your budget is for 8 or 9 year old examples.

Are you looking to spend that much and apply for mortgage in 2 to 3 years?

Well if he’s getting loan he could expand I assume. The cls would probably be the cheaper option, the a7 abit more ... he would be late 20s upwards depending on spec and mileage . If you’re going for higher performing 3 litres, then be thinkin mid 30k

Whatever u do op, make sure to get one with full service history and reasonable mileage... worth more than anything

colm_mcm · 20-04-2021 7:52pm

A €50k car will cost you upwards of €50k if you want to own it.

That’s basically it.

Buddy Bubs · 20-04-2021 8:00pm

LillySV wrote: »

Well if he’s getting loan he could expand I assume. The cls would probably be the cheaper option, the a7 abit more ... he would be late 20s upwards depending on spec and mileage . If you’re going for higher performing 3 litres, then be thinkin mid 30k

Whatever u do op, make sure to get one with full service history and reasonable mileage... worth more than anything

Won't get a 4 year old a7 for anything like high 20s. Lowest is advertised for 36k. And they were all 3 litres up until 2019 I think when a 2 litre came out. They're going to be 50k plus.

Just think there's a disconnect here between budget available and car wanted.

Plus expanding on budget by getting loan is poor advice to be fair. The man is talking about mortgages and expensive premium cars. Have to be realistic and sometimes the advice is don't do it. But I appreciate his taste in cars, very much like my own

LillySV · 20-04-2021 9:48pm

Buddy Bubs wrote: »

Won't get a 4 year old a7 for anything like high 20s. Lowest is advertised for 36k. And they were all 3 litres up until 2019 I think when a 2 litre came out. They're going to be 50k plus.

Just think there's a disconnect here between budget available and car wanted.

Plus expanding on budget by getting loan is poor advice to be fair. The man is talking about mortgages and expensive premium cars. Have to be realistic and sometimes the advice is don't do it. But I appreciate his taste in cars, very much like my own

https://www.donedeal.ie/cars-for-sale/2016-mercedes-benz-cls/27717709

https://www.donedeal.ie/cars-for-sale/audi-a7-3-0-tdi-s-line-ultra-218ps-5-5dr-auto/26608227

He said cls or a7, and theres two he can get for under 30k.
in regard to loans to get the car he wants, thats down to him, im sure he will know to budget to ensure he can afford any repayments....and in regard to mortgages..it would be worse advice to tell him to look at buying a house in the next year or three.. the property speculators are back in force looking for 400k+ for little cottages/terraced houses...better to wait another 5 + years when reality hits again....if it doesnt sooner...anyways that conversation is for another thread

fungie · 21-04-2021 11:25am

TylerRyan28 wrote: »

Definitely wouldn't be buying brand new , wont be going for a mortgage for about 2 - 3 years would that still not be worth it ?

Taking a loan out to buy a car is mad in the best of times but even more so if you want to buy house in a few years. Buy the cheapest car possible that suits your needs, I mean actual needs rather than vanity needs and do it with cash. 5-8k should do, add the savings from cheap car to your house deposit to reduce mortgage amount. Try keep said car until around say 60% LTV of house.

Louis Friend · 22-04-2021 12:11am

It depends on your circumstances.

I’m considering a PCP at the moment because I’d like to buy a new car once and because I have some money coming to me.

First time car finance/PCP

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