Next car finance options

[zooankski]

thinking about my next car. Possibly an S3. Question is how to finance it. At present I own my 2015 A3 1.4cod sline saloon out right. Don't own a penny having paid in cash.
Any suggestions on best possible options to change? I guess the options are-

Keep saving for the next one

PCP
Never had a PCP deal and the more I read, the less I understand!!! It seems I may have an issue due to value of current car as a deposit?

HP

 

[DrEskimo]

How come you are thinking about moving away from your current way of buying cars? What made you buy the A3 outright?

Not sure I understand why you think the value of your current car may be an issue as a deposit on a PCP? You can put down as little or as much (well...sort of...the minimum is usually £1000 and the max cant exceed the balloon payment) on a PCP.

Just think of a PCP as a personal loan, but you set aside a large portion of the loan to the end and only pay interest on it.

 

[jaypers777]

PCP is a great way to afford a car that might not be attainable via the old traditional methods.....loans etc. Important thing is to understand and pre-plan what you think you might want to do at the end of the deal. For me, I don't like the idea of not owning the car so have always paid cash/via cheap loans etc. Am very fortunate to have been able to buy my current car outright. My son has a PCP deal and it works for him.

 

[DeanoC]

Just think of a PCP as a personal loan, but you set aside a large portion of the loan to the end and only pay interest on it.

That pretty much nails it. PCP is great for anyone who lives on a month by month, pay cheque by pay cheque basis. It gives you access to cars you'd not be able to get in if you was looking at financing most of it normally. Like a interest only mortgage gets you in a house you can't afford to buy.

For those who think of the entire cost of ownership over the term the math is not going to stack up so well because you are paying interest on something you more than likely won't pay off the capital and own. You are basically paying for the depreciation and interest of the bit you are financing then renting the bit that isn't depreciating through the finance cost on it.

Make no mistake the rise of pcp's from not being known to being 8/10 new car sales is not because they are great value for the consumer. They are great for the automaker and dealer and convenient for the consumer. A consumer that tends to buy new more nowerdays, only cares about the monthly cost and will change after a max of 3 years.

They will tweak the guaranteed future values to suit them and your monthly budget. Example - my mate has a 90k rs6. It has a GFV of 40k after 36 months and 30k miles. Through the deposit and monthly payments he will hand over just shy of 50k in 3 years. When he gives it back they will then sell that car for 55k. So even though he felt good getting a 10k dealer contribution the dealer makes £105k on a car with a 90k list price and no doubt keeps hold of my mate as a customer to start the cycle all over again.

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[Jassyo06]

Buy Cash or rent doesn't matter they are all a waste of a lot of money in the end l don't live month to month either but have a pcp the only debt l have, don't even have credit card
Pcp gives me the option of doing other things with my money
It also gives me the option of changing my car quicker l get mightily bored with cars after 2 years and my God l am very bored right now lol

 

[DeanoC]

Buy Cash or rent doesn't matter they are all a waste of a lot of money in the end l don't live month to month either but have a pcp the only debt l have, don't even have credit card
Pcp gives me the option of doing other things with my money
It also gives me the option of changing my car quicker l get mightily bored with cars after 2 years and my God l am very bored right now lol

All reasons why pcp is such a good idea for lots of people and why they are the most popular way to buy a car. I did it for years. It is only now i am in a car i don't want to flip after a couple of years that i changed because the cost of owning was a bigger factor than holding onto cash or simplicity of exiting was. Everyone has different needs and wants



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[S32B]

Decide how much you want to lose on a car each month, then visit your dealer, tell him your figure and let him work out how much deposit you need to attain that figure. At the end of the deal if you have equity then fine, if you don't then fine.

 

[Jassyo06]

All reasons why pcp is such a good idea for lots of people and why they are the most popular way to buy a car. I did it for years. It is only now i am in a car i don't want to flip after a couple of years that i changed because the cost of owning was a bigger factor than holding onto cash or simplicity of exiting was. Everyone has different needs and wants



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A RS car is more of a viable proportion to buy new cash or hire purchase, as they normally don't depreciate as badly as other cars do

 

[DeanoC]

A RS car is more of a viable proportion to buy new cash or hire purchase, as they normally don't depreciate as badly as other cars do

Indeed. Especially if you go a year old. Based on conservative B7 values I work out i will drive around in a 13 month old RS4 for 400 quid a month over 5 years. If i sold after 3 and paid the remainder of the 50% i financed back early id be in it for about 425 a month.

My old diesel Leon FR cost me 500 a month over 3 years....

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[Ictus]

There was a maximum deposit of 50% when I pcp'd my S3. Long term pcp will be slightly more expensive but it works.

I took out a PCP to get the best deal then cleared it after a month.

You are in a good position as your car costs you nothing other than running costs at present. Don't underestimate the value of that. Having chopped cars in early before and taken a big hit on depreciation you may want to keep it a bit longer as the amount you loose wont be that much more. The value falls off a cliff in the first year so you have taken the major hit. Keep saving.

The above is sensible, depending on your circumstances if a deal too good to miss comes along you could trade it in and put the extra on your credit card if they let you use it. Get a 0% balance transfer card and pay a 3.9% fee over 36 months. Pay the minimum payment and save the real monthly cost in a savings account to pay off at the end.

Finally, cars are a waste of money!

 

[zooankski]

Thanks for the info chaps, lots to consider

 

[DrEskimo]

What Ictus said...! Depreciation is the same no matter how you buy it!

Cash will mean you pay no extra in interest, personal loan means you pay a bit, and PCP will mean you pay a fair whack.

To illustrate, imagine you buy a £30k car and trade it in 3yrs later for £15k.

Cash = £15k in depreciation.
Loan = £5k cash + £25k loan at 3.9% over 36months = £15K depreciation + £1.5k in interest.
PCP = £5k deposit with 35 monthly payments of £385.4 at 6.3% and final payment of £15k (i.e. the trade in value) = £15k depreciation +£3.5 in interest.

You often get a bit extra off as a finance contribution by doing it on PCP compared to cash, but Ictus method is a good way around this. Maximum discount, minimum interest costs.

 

[DeanoC]

What Ictus said...! Depreciation is the same no matter how you buy it!

Cash will mean you pay no extra in interest, personal loan means you pay a bit, and PCP will mean you pay a fair whack.

To illustrate, imagine you buy a £30k car and trade it in 3yrs later for £15k.

Cash = £15k in depreciation.
Loan = £5k cash + £25k loan at 3.9% over 36months = £15K depreciation + £1.5k in interest.
PCP = £5k deposit with 35 monthly payments of £385.4 at 6.3% and final payment of £15k (i.e. the trade in value) = £15k depreciation +£3.5 in interest.

You often get a bit extra off as a finance contribution by doing it on PCP compared to cash, but Ictus method is a good way around this. Maximum discount, minimum interest costs.

The thing is say the car was, in reality, worth 15k after 3 years trade in there is no doubt your GFV on a PCP would be like 12k or something. This means you paid the 15k real depreciation, 3k made up depreciation to help fund the amazing attention grabbing headline discount offer and the 3.5k interest.

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[GSB]

The thing is say the car was, in reality, worth 15k after 3 years trade in there is no doubt your GFV on a PCP would be like 12k or something. This means you paid the 15k real depreciation, 3k made up depreciation to help fund the amazing attention grabbing headline discount offer and the 3.5k interest.

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You do realise you don't have to give it back for £12k, right? You have other options. The GVF on my last car was £7k, so I sold it privately for £13k, took the extra £5k and used it for the S3. The car is worth whatever the car is worth. The GVF is just the amount you need to pay VW finance if you want to keep it.

 

[DeanoC]

You do realise you don't have to give it back for £12k, right? You have other options. The GVF on my last car was £7k, so I sold it privately for £13k, took the extra £5k and used it for the S3. The car is worth whatever the car is worth. The GVF is just the amount you need to pay VW finance if you want to keep it.

Yes totally. That's what i always did. They bank on the majority not doing that though.

They hope people want the simplicity of signing a few forms to get a new car rather than going to arrange their own finance or bunging down a chunk of cash many people don't have

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[GSB]

Yes totally. That's what i always did. They bank on the majority not doing that though.

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I don't think VW Finance get that many cars coming back to them. Nearly all are traded in, which is the long term strategy behind pcp, customer retention. But even those that don't trade in or sell and hand back will still get any additional value achieved over the GVF once VW Finance dispose of the car. No, they're probably not going to hold out for the best price on your behalf, but if there's additional value there, you will get it.

The GVF is just a number on a sliding scale that's adjusted along with deposit amount to achieve the buyers preferred monthly payment. What's important is the total amount it costs you to own the car. HP deals, the traditional way of financing cars, are just a PCP with a GVF of £0.

GVF does have one key advantage to it. If the used car market for your vehicle drops like a rock (say for example, you bought a diesel and the govt decided to ban them from city centres - something that is becoming increasingly likely and will hammer diesel values), and your car ends up being worth tuppence at the end of your contract, then you get to hand it back like a hot potato and dont pay a penny more.

 

[Falmouthboy]

As a '4th way' consider Personal Lease which seems to be catching up with PCP as the 'go to' way into a new car. Slightly less flexible than PCP but usually far cheaper on the monthly payments.

Ultimately, with the discount and deposit contributions on a PCP it can work out cheaper than a cash buy (if you invest the saved equity wisely). You can also do a 'sneaky', take the benefits and cancel the PCP almost immediately.

As a cash buyer you may also get a better deal in an ex demo or nearly new example.

 

[DrEskimo]

The thing is say the car was, in reality, worth 15k after 3 years trade in there is no doubt your GFV on a PCP would be like 12k or something. This means you paid the 15k real depreciation, 3k made up depreciation to help fund the amazing attention grabbing headline discount offer and the 3.5k interest.

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Yes absolutely. My example was just to to show the fundamental difference in the amount of interest paid.

I agree, the term equity always makes me laugh, because as your rightly say, it's just the amount you have overpaid had they set the GFV to a more accurate figure to begin with!

Also agree with other points, but again for simplicity I was just assuming for all three you traded it in with WBAC, for example. Private sale could gain you more, but then it would be the same for all three.

My GFV in November when my deal ends is £27k. I'll have a 2yr old S5 with about 15k miles on. I'm guessing they will offer me about £28/£29k. Could probably sell it privately for £30/31k. But then, finding a private buyer for that amount of cash is difficult, and taking a loan out for £27k to buy it will incur costs as well...think it will be easier to just trade in! Unless someone has any good advice?

 

[DrEskimo]

GVF does have one key advantage to it. If the used car market for your vehicle drops like a rock (say for example, you bought a diesel and the govt decided to ban them from city centres - something that is becoming increasingly likely and will hammer diesel values), and your car ends up being worth tuppence at the end of your contract, then you get to hand it back like a hot potato and dont pay a penny more.

This has been a life saver for my father in law. Got a Nissan Leaf on a cheap PCP and the cost of the monthlies was less than the petrol he was spending. Saved him a fair bit over the 2yrs.

Problem is EVs depreciate ridiculously fast! His GFV is £15k but only getting offers of £7k trade in. So he can just walk away

 

[GSB]

This has been a life saver for my father in law. Got a Nissan Leaf on a cheap PCP and the cost of the monthlies was less than the petrol he was spending. Saved him a fair bit over the 2yrs.

Problem is EVs depreciate ridiculously fast! His GFV is £15k but only getting offers of £7k trade in. So he can just walk away

Most early adopters buying the Leaf on pcp will have thanked their lucky stars for this. The batteries are the big problem, as they don't last forever, and replacement costs mean you're better off buying a new car. Renaults option to buy the car and lease the battery protects you from this risk to a certain extent. But then you still have the risk of obsolescence of the car. The new Zoe has a vastly superior range to the old one, making last years model worth about £30. 18 months ago you could lease a new Zoe for £0 down and £70 a month, plus battery rental.

Have do doubt about it, EV'a are the future, and personally I think there's a better than 50/50 chance that the next car I get will be all electric, but it will be leased. I don't want to end up holding onto a Betamax after 3 years!

 

[DrEskimo]

Most early adopters buying the Leaf on pcp will have thanked their lucky stars for this. The batteries are the big problem, as they don't last forever, and replacement costs mean you're better off buying a new car. Renaults option to buy the car and lease the battery protects you from this risk to a certain extent. But then you still have the risk of obsolescence of the car. The new Zoe has a vastly superior range to the old one, making last years model worth about £30. 18 months ago you could lease a new Zoe for £0 down and £70 a month, plus battery rental.

Have do doubt about it, EV'a are the future, and personally I think there's a better than 50/50 chance that the next car I get will be all electric, but it will be leased. I don't want to end up holding onto a Betamax after 3 years!

I want my next car to be EV but I have no way to charge the blooming thing at home, and most importantly there's only one I even remotely like the look of and it starts at £60k...!

Tried to entertain the idea of getting the A3 E-Tron. My GFs work place is only 7miles away so could of easily done her weekly commute on nothing but electric. They are about the same cost as a decent A3 1.4tfsi when you factor in they are well equipped (tech pack, stop start, etc). But I live in a terraced house with no parking outside it, so it would be pointless...

S3 it is I guess....!

 

[JeremyS3]

With the lease deals that were available last year (are they still that cheap?) then I think you would be crazy to look to buy one outright, the PCP numbers I saw from Audi started at over £450 for an S3!!

 

[DrEskimo]

With the lease deals that were available last year (are they still that cheap?) then I think you would be crazy to look to buy one outright, the PCP numbers I saw from Audi started at over £450 for an S3!!

I generally agree, some lease deals are ridiculous. Wish those Golf R deals for like £200per month were about right now....

But...you need to keep in mind that lease prices are for bog standard cars. Audi's as we know are particularly stingy with what comes as standard. When you start adding options, the deposit and monthly isn't far off a PCP with a good discount achieved through OrangeWheels, CarWow, etc.

I was offered a S3 hatch with a few options including metallic paint for £360per month with £2,500 down. Was a black edition with 14% discount. Don't think any lease deals were close to that?

 

[JeremyS3]

I was offered a S3 hatch with a few options including metallic paint for £360per month with £2,500 down. Was a black edition with 14% discount. Don't think any lease deals were close to that?

For how many miles?

 

[Tom.H]

I couldn't believe it when my brother told me what comes as standard in the new Golf GTD, they've just ordered one for the sister in law.

It has the digital dash, heated seats, parking sensors front and rear, ACC, ambient lighting pack, folding heated mirrors, sat NAV, hill hold assist, LED headlights, car net app and car net app services 3 year subscription all as standard

 

[DrEskimo]

For how many miles?

Just 5,000 mate.

 

[JeremyS3]

Just 5,000 mate.

Thought as much, the prices I were quoted by Audi for PCP on the S3 were just as mental, the lease is £315 a month, with £1900 down for 12k/year - you could lease an S5 for the price of the S3 on PCP!

 

[DrEskimo]

Thought as much, the prices I were quoted by Audi for PCP on the S3 were just as mental, the lease is £315 a month, with £1900 down for 12k/year - you could lease an S5 for the price of the S3 on PCP!

Over what period...lol My PCP figures were 36months.

That lease does sounds good though. I had about £1500 worth of options so that would be about £60 more if it was 24months? Thats still decent!

 

[HulkRS3]

The way I see it is, no matter which way you choose you buy your car whether it be PCP, H/P or outright, it is still going to depreciate the same way. Yes PCP means that you're just essentially paying for the depreciation of it, and when you hand it back (if you choose not to refinance what's left at the end of your agreement) then the dealer is going to sell it on again for more than they offered you for it. Sadly that's the reality, but if you can set that aside then it's good.

I PCP because I would not otherwise be able to afford such a car on a hire purchase agreement, thankfully for me it kinda works because I also get bored very quickly and PCPing gives me the option to hand back and get a new one, walk away and leave it entirely or refinance what's left and buy it outright.

Whatever car you buy, 95% of them will depreciate.

Also, last year, 95% of cars were bought on PCP. There's a statistic for ya

 

[Soulboy]

All good and well as long as the cheap PCP and lease deals are about.
Tread very carefully......it's a financial bubble.
https://www.theguardian.com/money/2...s-driving-us-towards-the-next-financial-crash

Personally, I use PCP - but save up enough to buy the car at the end.
I don't want to be caught without a chair when the cheap PCP/ lease music stops.

 

[DrEskimo]

The way I see it is, no matter which way you choose you buy your car whether it be PCP, H/P or outright, it is still going to depreciate the same way. Yes PCP means that you're just essentially paying for the depreciation of it, and when you hand it back (if you choose not to refinance what's left at the end of your agreement) then the dealer is going to sell it on again for more than they offered you for it. Sadly that's the reality, but if you can set that aside then it's good.

I PCP because I would not otherwise be able to afford such a car on a hire purchase agreement, thankfully for me it kinda works because I also get bored very quickly and PCPing gives me the option to hand back and get a new one, walk away and leave it entirely or refinance what's left and buy it outright.

Whatever car you buy, 95% of them will depreciate.

Also, last year, 95% of cars were bought on PCP. There's a statistic for ya

Yes but as I pointed out, a PCP isn't free money. Depreciation is the same whether you buy cash or PCP, but the PCP can cost you thousands in interest on top of that.

/stop reading here if you don't want to read boring stats stuff....

And sorry I'm going to be geeky and pedantic here...but the proportion of private new car sales bought with finance was 86.6% in 2016 based on those financed through the FLA.

http://www.fla.org.uk/index.php/research/motor/

While they presumably don't provide finance for all cars, they seem to be the largest, so it's likely to be a representative figure.

Couldn't find a breakdown of all car sales (used car sales must be tricky to track) and those specifically bought with PCP finance..

Not that it matters as your point that most new cars are bought with finance still stands!

/End of geeky-ness.

As you were...

 

[HulkRS3]

Yes but as I pointed out, a PCP isn't free money. Depreciation is the same whether you buy cash or PCP, but the PCP can cost you thousands in interest on top of that.

/stop reading here if you don't want to read boring stats stuff....

And sorry I'm going to be geeky and pedantic here...but the proportion of private new car sales bought with finance was 86.6% in 2016 based on those financed through the FLA.

http://www.fla.org.uk/index.php/research/motor/

While they presumably don't provide finance for all cars, they seem to be the largest, so it's likely to be a representative figure.

Couldn't find a breakdown of all car sales (used car sales must be tricky to track) and those specifically bought with PCP finance..

Not that it matters as your point that most new cars are bought with finance still stands!

/End of geeky-ness.

As you were...

86% was the figure I meant. 95% would be way too high. As for the interest, I only buy cars with very little no 0% APR on the deal anyway so I needn't worry.

 

[DrEskimo]

86% was the figure I meant. 95% would be way too high. As for the interest, I only buy cars with very little no 0% APR on the deal anyway so I needn't worry.

Where from...!? Spill the beans!

 

[MB01]

I was under the impression that you had to wait until after the 14 day cooling off period before paying off the PCP to ensure you kept any deposit contributions included in the deal. Am I right in thinking that if I paid off the PCP after the first months payment for instance I would I only be charged a months worth of interest?

 

[DrEskimo]

I was under the impression that you had to wait until after the 14 day cooling off period before paying off the PCP to ensure you kept any deposit contributions included in the deal. Am I right in thinking that if I paid off the PCP after the first months payment for instance I would I only be charged a months worth of interest?

Never done it so could be mistaken, but think you can pay off whenever. If you did it in the 14days, you would keep the contribution and incur no interest charges. After a month you would have paid the first months interest only, and so on.

I think where it gets messy is that any commission that the dealership or salesman makes from selling you the car on finance gets clawed back....! So you make many friends at the dealership...!

If you did it after a month I don't think it gets clawed back, so maybe that's a good compromise

 

[Ictus]

Never done it so could be mistaken, but think you can pay off whenever. If you did it in the 14days, you would keep the contribution and incur no interest charges. After a month you would have paid the first months interest only, and so on.

I think where it gets messy is that any commission that the dealership or salesman makes from selling you the car on finance gets clawed back....! So you make many friends at the dealership...!

If you did it after a month I don't think it gets clawed back, so maybe that's a good compromise

I was told you have to wait until the 14 day cooling off has passed to keep the contribution. Again I was told the dealer does not get the full finance commission until six payments have been made. Its never been a issue with Ford or Audi and you can get a settlement online. For me it was slightly more than a months interest, I could not get the figures to work how interest was calculated. Was also refunded a payment as it took 10 days to process.

 

[steeve]

If you can afford it pay cash. It always works out cheaper.

 

[msdmjb]

Finance is easy to understand, if you were loaning money to me you asses the risk and charge accordingly.

Cash is king and is almost always cheaper than finance
A normal hire purchase is cheaper than PCP as there is no guaranteed value so is a simple maths calculation
PCP (long term hire) is usually the most expensive as it gives you both flexibility and a guaranteed value at the end so you are only part financing the car

Car manufacturers are not mugs, most people can't afford cash so they make it as easy as they can for people to take a debt particularly when selling what the UK regards as status/aspirational/emotive products........."oooooo a new S3 for only £400 a month etc etc". You could try and beat the system by taking out an HP/PCP and pay your instalments whilst investing the cash you didn't use to return more but that is a gamble and only for those who can afford to play with the money. A lot of people use words like equity/upgrade when they have PCPs and hopefully they understand they are well and truly playing Audi's game with Audi winning financially, PCPs are a good way to drive nice cars but by taking out a new one every few years you are paying loads in depreciation as opposed to buying slightly used or keeping for longer term.
If you aware of the game like Sam Millar (refreshingly honest) above no worries enjoy yourself, not everybody is.

I bought cash, I know where I stand at any point and for me having no debt is high up the list and can get cash tomorrow if I need it.

All depends on your own circumstance, cash is cheap at the moment so one way might be to take out a low cost HP for the difference between your current car and the new one and pay off other more expensive debt e.g. credit card/mortgage. If you think you will keep it for a good few years (an S3 will easy do 100k miles and 300bhp is always quick enough) then PCP wouldn't be the way.........look at the cost per mile for keeping an S3 for 2years then again 5years.

 

[S3sportback86]

I went with a lease on a brand new car.
S3 FL sportback S-tronic, upgraded with Daytona paint and tints. Over 2 years, 10k miles p/a, £1900 up front, £320 a month.
Couldn't get anywhere near that on a PCP/HP.