Buying a car on finance

The last statement happened to someone I knew years ago - he still owed money and the car wasn't worth it. 

My son has gone on the Leasing route (through Motability) and seems to think that works well. 

I once purchased a car on a PCP basis and vowed never to do so again. This was a few years ago. The idea then was that the car would be worth more than the outstanding part of the loan which would give you a deposit on the next car. The trouble is the value of a car at three years old is often not predictable especially if there is a model update/change between buying and the end of the agreement. In my case the amount left over for the deposit was so small as not to be really worthwhile so I ended up taking out a loan to buy the balance of the car which locked me into six years of ownership. I think the whole idea of the PCP schemes is to make new cars appear more affordable although I am not convinced that is the reality? 

I purchased a new car last September. It was the same model car that I had before but with an upgraded spec. The manufacturers were doing interest free finance so I opted for that. I could have paid cash but it would have dented my savings so the interest free option seem the best way forward. I suppose if you were buying a new tow car which would cost much more than mine you have to be happy that the monthly payments are manageable.

David

We had a variation on finance deals.

Like you, Ian, we have always bought our new vehicles by paying off, whatever the balance after trade in, in one lump sum. However, when we bought our new car last year the salesman offered us a substantial discount if we took the manufacturers finance which he assured us could be settled in full with them after just 2 monthly payments. We thought it too good to be true but after studying the T&C couldn't see a catch. (We also know the salesmans Aunt and promised to rat on him if he was conning us!). So after paying 2 instalments we rang the finance company for a final settlement figure and it was true! No penalties and a big discount of the list price. 

First time we've had finance for ages. When you're out of the loop for a while you become rusty with whats available.

No such thing as a free lunch. The finance deal has to have something in to cover the finance, despite the fancy wordings. Cash is king. Just changed my Suzuki and whilst there was a finance deal available I got a much better deal but had to haggle hard and left the garage only for them to return two days later to meet my offer. With interest rates so low not worth keeping the cash.

We've always used loans, usually looking around for the best deal (the car dealer may not have the best deal), and always over 3 years, never longer, and we always did well and never any bother with it.  Its always good if you mean to keep the car.  I've never had experience with lease type paperwork, so can't comment on that, but with that you do get a car every few years, the car was never yours and you paid out for ever.  Don't go down the route of re-mortgaging your house to afford a brand new car, as remember, you pay for that car over the next 25 years or whatever you have left of your mortgage, so you could basically still be paying for that car when you've sold it years back

I agree with a lot of the above and I've never been happy with paying interest. Like David, when we bought our curent tow car, Volvo were doing interest free credit. We were all ready to pay cash in full, but after checking and re-checking the t&c's we decided to use the free credit for a chunk of the price......and just paid it back from our savings, which stayed invested.

But here's another consideration though.

I've been looking to see what discounts are currently available. Most dealers quote two discounts - one for cash and another if taking finance. The second one is always a higher amount of discount.

It appears that this extra 'discount' is often actually a 'manufacturers contribution' towards the deposit.

With VW this is currently £5 to £6,000 extra discount - more than the amount of interest payable over three years! So it seems that they effectively pay your interest and give you a bit of extra discount as well.

I need to do more research on this, but some of the comments above have confirmed my fears that the amount outstanding at the end of the three years (typically) might not leave enough for another deposit and might not even cover the outstanding balance.

I'd be very interested in any more opinions.

I don't care which way they wrap it up as long as I pay the lowest amount I can get away with. In our case "Cash wasn't King", well not immediately.

I thank you all for buying new cars ..... never had a new one & never likely to have .... I don't  like what I could afford new and have usually bought top spec large cars a few years  old, letting someone else take the hit on initial depreciation 

Although I have never gone down this route, I did look at it at one stage and seem to recall that the dealer offered a guaranteed trade in value in three years time, which would enable renewal of the contract with a new car.

Do they no longer do that?

When we changed the wife's car back in 2012 she picked the car she wanted but found an ex demo model which was 3 months old when all sorted I asked I asked what discount they would give us for paying cash, the reply was nothing we would have to pay the price they wanted. after sorting everything out he told us if we had taken the car on through their finance company he would have been able to do a deal on the price. so not all dealers offer two discounts.