Buying a new S5 on PCP

[ED 209]

Hello - New member here. I currently own an Audi A5 3.0 TDI Sline but I'm considering upgrading to a brand new Audi S5 on a PCP deal. I've always owned my car outright but I thought I would give this PCP marlarky a go.........or at least take adavantage of the huge discounts on PCP through Carwow and then eventully buy the car outright.

I realise that sales are currently suspended on the S5 but I wanted to get some peoples opinions on purchasing a S5 using PCP. Best offer I've had so far is £8,200 (16%) discount through Carwow. With some optional extras, I have configured a S5 upto £51,000 (before discount).

One possible way to own the car would be to take advantage of the Carwow offer on PCP finance and use my current A5 as a deposit (approx. secondhand value is £15,000). The rough numbers are as follows:

£51,000
- £8,200 (carwow discount)
- £15,000 (part x current A5 for deposit)
= £27,800 remaining.

Then, if possible, borrow £25,000 (personal loan at 3% interest over 5 years) with £2,800 from savings to pay of the remainder. A £25K loan at 3% would acrue only £2,000 interest over 5 years - a lot less compared to the PCP interest. This option would only work if it is possible to buy the car outright within the first few months of the PCP contract - is this possible???

The Audi dealer (for obvious reasons) is wanting me to take the PCP deal with a low deposit of £5,000 for a 3 year contract but this would mean paying £5,600 total interest over a 3 year period and I would still have a £26,000 final payment at the end of the agreement or give the car back and walk away with nothing.

Is my option above of taking advantage of the PCP finance discount and then buying the car outright a good idea or should I just stick with the PCP process for the 3 year period?

Any feedback would be great!

 

[Buck]

Hi

Buying on PCP vs loan vs cash outright is a purely personal thing but your rationale looks fine to me and you will save money in the long run as long as used prices don't freefall.

If you take out the PCP you have a fortnight in which you can cancel the PCP and settle the full amount and you will still keep the discount available.

PS welcome to the forum!!

 

[ED 209]

Many thanks Buck for the welcome and advice.

So there is no chance of settling the PCP beyond the initial fortnight period?

Also, one thing I can't get my head around is the equity in the S5 at the end of the 3 year PCP agreement. Will a 3 year old S5 be worth more than the final £26,000 payment to generate any equity to use on the next car????

 

[Buck]

You can settle later but you'll find that in the first 12 months or so you will only be paying off interest on the loan.

I had a PCP on my previous car and paid it off early but didn't save a vast amount.

Re your question on future value? Nobody knows but Audi wouldn't set it at that figure if they thought it'd be less as everybody would just hand it back and move brand.

 

[FBF01]

Wow. Some discount, here was me thinking only 12% was possible! Some deal

 

[ED 209]

Thanks Buck - I definitely need to give this more thought before I proceed and PCP is very popular nowadays, so it can't be all bad.

Although an old build from 5 weeks ago, the dealer said the 16% discount is still on the table. I did a more recent build last week and the best offer was £7200 discount (14%). I've been doing numerous builds for the past 6 months and the best offers have been averaging at over £6K off through a PCP deal.

 

[Nham68]

You can settle later but you'll find that in the first 12 months or so you will only be paying off interest on the loan.

I had a PCP on my previous car and paid it off early but didn't save a vast amount.

Re your question on future value? Nobody knows but Audi wouldn't set it at that figure if they thought it'd be less as everybody would just hand it back and move brand.

How can that be the case ? If you settle early, like 6 months in , you will save 30 months of interest.., by law, finance company can an only charge 2 months interest penalty for settling early.. so if the finance cost is say 4K over 3 yrs, if you pay off after 6 months you'll save upward so of 3k.. since settlement amount will be the outstanding balance ..

 

[Buck]

Because the finance model doesn't split interest equally across every month.

Yes you'll save a lot of interest compared to completing the PCP then the final payment but the cost of finance in the short term is high.

 

[Nham68]

So, it's still well worth paying early if you're 6 months in.. though biggest gain is if you withdraw within 14 days...

 

[Buck]

Because it's a finance agreement they have to give you the 14 day cooling off period which has no penalties attached so that's the golden window to opt out and replace the PCP with your own loan or hard cash.

 

[ED 209]

I'm no expert on these matters but surely paying off any loan early at any time must save you money. As Nham68 says, best gains would be to settle within that initial 2 week period. Therefore, I would need to have the personal loan in place before purchasing the car through the PCP offer. If I order the car now, expected delivery date isn't until Nov 2017, so plenty of time to source a loan to pay off the remaining finance? If no joy there then I guess I can continue with the PCP agreement for the full 36 month period.

 

[Buck]

Yes, I'd get the agreement in place in good time then you know you have the cash ready and waiting.

 

[neg]

If you are getting some additional PCP discount then you need to ensure you don't lose this. There was a few guys that did a similar thing on a VW - £1500 if you took PCP, ran it for a few days/weeks and then settled - so just to get the additional discount.

Biggest killer with PCP is the interest only you pay on the GFV, it boils down to a part repayment loan plus part interest only loan. On 26k GFV you are probably paying £60-70 a month just on the interest for this part.

Figures I were given on a large deposit and just borrowing around £5-6k still worked out at around £150 p/m of interest only (over the term, 36months)

If you can borrow (personal loan) the money they it will be cheaper for sure. You could even go as far as doing your own PCP type loan, borrow over a longer term so after the 36months you owe around the same or less than the GFV, it should always be worth more than this but it is a gamble. Few pro's and con's of course - you take the gamble the car is going to be worth more, you cannot just hand it back in - which in most cases would be a bonkers move anyway. Pro's - its your car and you can do what you like with it and when.

Some don't always have the choice as PCP is really designed for smaller deposits to get you into a car you wouldn't normally afford. If you do think about it...

 

[ED 209]

Either way, both routes are a good deal because of that £8,200 (16%) discount though I would not like to lose £5,600 on interest through the PCP full term of 36 months with a final payment of £26K. The personal loan route would mean monthly repayments of 450 / month for 5 years of which £2K would
be interest on the £25K borrowed and the car would at least be mine for the whole duration. Although, I do like the flexibility of PCP and John Paul Getty once said "if it appreciates buy it, if it depreciate then lease it".

 

[ED 209]

Just like to add a thanks for all the replies above - very helpful. I had forgotten how useful forums are - it's been nearly 10 years since I was a member of one and that was during my Fiat Coupe days where advice was essential!

 

[chanlon1]

Could you not contact Audi Finance and ask them directly?
Not sure if they will only talk to those who have a PCP with them or not.

https://www.audifinance.co.uk/en/private_customers/manage_your_agreement/contact_us.html

 

[Chris4410]

If you have the cash and can obtain a loan for the remaining amount I would advise going that way, as someone currently on a PCP I don't think its a great way to pay for any car. Its only advantageous if you want to pay a small up front deposit, if you have a decent amount to put down I would get a standard loan and pay it off that way.

 

[lozzermo]

I took delivery of my S5 Coupe in June. I agreed to take the PCP because of the £2500 allowance and overall I saved 13.5% (ordered in January).

A week after I took delivery I phoned Audi Finance and told them I wanted to settle the agreement. They calculated the interest to that point (about £40 on a £31k balance) and said I had 30 days to make the payment.

They asked why I was settling and I said I had found a cheaper finance deal. That was it.

I Paid by bank transfer a few weeks later. Job done!

This is the first time I have done this and was fairly painless. Apart from a hit on my credit rating for taking the agreement, which will reset in a few months, no other issue.

Would advise that if you are going to take a cheaper loan to settle the PCP make sure it's in place beforehand as a credit check will show the PCP agreement and some lenders may not lend on top of that.

It worked for me as I had the cash so basically got an extra £2500 discount over what I would have got as a cash buyer.

Hope this helps.

 

[lozzermo]

Meant to say. I did the same with my son's used A1. Took HP finance as it had free servicing and then paid it off the following week and kept the service plan.