Buying a car on finance

When we bought the Smart, 3+ years back, we were set to pay cash, as we have always done. However things have changed since our last car purchase in 2006.

The Merc dealer worked out for us that it was cheaper overall to take the minimum finance for the minimum period.

By doing this we got the manufacturers contribution to the deposit.

We paid a £3000 deposit, they paid whatever, and the rest  was borrowed.  The minimum loan period was 6 months, so after that we got the settlement  amount and paid it off.  There was no extra charge for doing this.

When we got the new VW recently, we looked at the finance options, but they all meant paying more in total, so we just paid cash.

Luckily we had enough cash in the bank to do so.

  S-I-L got a new  VW 18 months back, he had to borrow the dosh as he did not have the cash.    DD looked at the dealer offerings and then  checked out a bank loan.  In the end, as a good HSBC account holder, she borrowed the required amount at 3.19%.   Not a bad rate overall.

When we bought the OH's Yaris  2 years ago, it was a no brainer. To buy on a 3 year plan worked out cheaper. I asked about paying outright, as we had the cash but they would not entertain giving me the equivalent of the manufactures contribution. That and the fact the finance over three years was 0% meant we went with the plan. As you say there is a value attached to the car after 3 years, which is dependant on mileage, condition etc. However, this only matters if you want to trade in or give it back. We will pay the final sum and keep it another 2 years, as it has a five year warranty. 

Considering the hullabaloo about emissions you might find that in 3 years time a diesel powered car might not be worth much at all.

We've never bought new, but got a "registered" car with about 60 miles on it.  Its then classed as "used".  If you buy a brand new car, it loses value by a couple of thousand pounds and that's before you've put your first 50 miles on it.  You get a far better deal with "registered".  AND DO REMEMBER FOLKS, FROM APRIL NEW CARS ARE GOING TO BE TAXED BY THE OLD SYSTEM, DEPENDING HOW LARGE YOUR CAR IS YOU PAY MORE TAX.  We have a Peugeot 508 that costs us £20 pa, when new in April it will be £130(+/-)

I have never come across one that guarantees a value whatever the condition. It is always dependant on mileage at the very least. Plus if you have scuffed the alloys, or suffered a supermarket trolley ding they would want to knock it down,

If buying on HP in addition to the Consumer Rights Act 2015 you have the backing and protection of the finance company if something goes wrong with the car.  Interest rates can be negotiated to a more favourable APR than initially proposed by the dealership.

The new amount from April is a flat rate of £140 for all cars other than electric/hydrogen, an increased first year amount depending on the car, and an additional £310 per year for the first 5 years for cars with a list price over £40k.

This only applies for new cars bought from April.

Other cars will remain on whatever regime they are already on.

The new car we bought recently was also "pre-registered" but not used other than it was driven from the dealership  that had it to the dealership nearest  us, so 45 miles on the  clock.  Discount on list price was £10k, so we were happy.

PCPs can be a good way to buy a new car, so long as you have both eyes wide open and know what you are getting in to. They are designed to lock you into a brand of vehicle. What usually happens is that before your contract expires you will be offered a new vehicle at a very good monthly rate. Most people take up this offer and get a new car every 3 years and there is nothing wrong with that. The sting is when you want to get out of the deal. You either have to refinance the vehicle, or pay cash, to buy the vehicle at the agreed value (plus any extra for damage and excess mileage) or you just hand it back and walk away with nothing. So, if you are happy with your chosen brand of vehicle it can be a good way to get a new car every 3 years, just keep making the payments, but remember you never actually own it.

Firstly most car salesmen work on commission. They increase this by selling as many extras as possible and not just accessories. So they will give a better discount for finance agreements as this bumps up their commission. However, in the end there is little difference in the total cost to own whether you use any form of payment. For me I pay the difference between the old car sales price and that of the new car by cash. Then I set up a standing order for the monthly amount I would have paid with a finance plan to go into a savings account ready for the next cash purchase. My reckoning is that the interest I lose on the initial cash, is far less than it would cost me for that of finance. Just remember the salesman knows the lowest selling price and if you bargain hard enough that is the price you should get.

Lastly, I am particular on choosing the new car. Picking a car, with a sound resale value ideally with a 5 or 7 year warranty helps maximise it's selling price. I then sell it privately using the remaining warranty as a selling point.

Can you get PCP on a second hand car that is under 2 years old and has low mileage?