We've rented together for 10 years so can manage finances but am extrememly cautious of the fact that at the end of the fixed mortgage period that repayment could go through the roof!

That's the other option however I'd imagine 0% finance deals on cars are a little thin on the ground at the moment (or only apply to poo models! )!

Yeah i was really lucky!

I am paying 5.6% on a 5 yr fixed that comes to an end in Feb....Went in to see a mortgage adviser the other week about moving and come Feb our rate will go down to 2.5% (a rate that will never go more than 2% above the base rate). at 2.5% our mortgage will come down over £200 a month!

50% deposit then 2 years interest free, sorted

Good rate - about 6.3% i think.

Not as good as my 0% though

Not enough deposit unfortunately

I think the banks were quoting 7.9 at the time so it worked for me. As other people have mentioned its very dependent on circumstances

Yeah i was really lucky!

I am paying 5.6% on a 5 yr fixed that comes to an end in Feb....Went in to see a mortgage adviser the other week about moving and come Feb our rate will go down to 2.5% (a rate that will never go more than 2% above the base rate). at 2.5% our mortgage will come down over £200 a month!

Yes I was lucky and fixed for 5 years at about 5.5 just before the rates crashed. To add insult to injury it cost £700 to fix it.

Yes I was lucky and fixed for 5 years at about 5.5 just before the rates crashed. To add insult to injury it cost £700 to fix it.

Yep and now my house is worth the same as what i paid for it 5 years ago and i have spent about £15k on it :'(

I personally would stay away from a loan for a car. I have always tried to save a little bit towards another one, even if its just a 6 / 7 year old Skoda, at the end of the day I own it. If I loose my job I still have my car, not the worry of a big loan over my head. I wouldn't mind a new car although the depreciation is shocking! Its bad enough on a second hand car. :(

Personally, I wouldn't knock PCP's.

Basically, the monthly repayments are lower, the final agreed value is usually low enough that if you look after your car you'll get most (if not all) of your deposit back and if you're desperate to keep the car longer then take out a bank loan at the end of the PCP to pay the final payment.

Also as the PCP deals are manufacturer backed, the dealers make a profit out of them and may well be willing to do a better deal on the car.

people do though.....I know of 2 people straight away that are on it and the one is trying to sell her car just to pay off the finance...She can't just give the car back as she isn't far enough into the agreement and the value of the car now will leave her in negative equity. A personal loan on the other hand, she could have sold car and paid off loan or if the value wasn't enough, just carried on making the monthly payments.I never said leasing or PCP was a rip off but finance from a dealer is which encompasses these options schemes. How can a finance deal at 12% APR be a better deal than a personal loan at 6% regardless of the circumstance?A personal loan will always be better:Whatever term you wantPay redeem when you wantnot secured on the loanno minimum depositno final payment

In the case you've cited She'd still be in neg equity, so I dont see how thats PCP's fault. Sounds more like struggling to keep up with payments (obv due to the current climate), which would be the same with a loan. Likely worse as the loan payments will be higher than PCP is by between 1/3 and 1/2 in many cases.

There are a number of dealer PCP deals which are much cheaper than bank loans out there. As has been said, all depends how you move between cars and how frequently.

The biggest issue with a bank loan is if you like new cars (1st owner), and/or change regularly. You're more likely to be saddled with needing to carry on paying for a loan after the car's gone due to neg equity than with PCP as the guaranteed value protects you from this so long as you reach the end of the agreement or the halfway point.

If you like changing every 2-3 years, PCP will be better and cheaper as you're never looking to own the car anyway.

If you like to keep cars for 3-4 years, then a bank loan over HP will be better and cheaper.

In the case you've cited She'd still be in neg equity, so I dont see how thats PCP's fault. Sounds more like struggling to keep up with payments (obv due to the current climate), which would be the same with a loan. Likely worse as the loan payments will be higher than PCP is by between 1/3 and 1/2 in many cases.

There are a number of dealer PCP deals which are much cheaper than bank loans out there. As has been said, all depends how you move between cars and how frequently.

The biggest issue with a bank loan is if you like new cars (1st owner), and/or change regularly. You're more likely to be saddled with needing to carry on paying for a loan after the car's gone due to neg equity than with PCP as the guaranteed value protects you from this so long as you reach the end of the agreement or the halfway point.

If you like changing every 2-3 years, PCP will be better and cheaper as you're never looking to own the car anyway.

If you like to keep cars for 3-4 years, then a bank loan over HP will be better and cheaper.

Sorry not quite clear in my post....If she gives the car back to the finance company she would get nothing back and still have to pay £8k+ due to their ridiculous charges. If she sells the car she will have to pay the finance company as the car is security for the loan. This will leave negative equity but will a redemption to pay.

A loan on the other hand. You sell the car and either redeem the loan or continue to pay the loan monthly with the money you have got in the bank from the sale of the car. This way even if you are in negative equity you aren't forced into a situation where you have to redeem. You can then purchase a cheaper car should you need to and be able to tide yourself over with the monthly payments with the change if you are in a sticky situation.

The current PCP deal Skoda have gives you 3 years free servicing.

On a Fabia vRS my mum and dad are looking at the total interest of the loan term is roughly £1000. The servicing saves you about £600 making the cost of finance around £400.

Interest rate suddenly looks a lot better all of a sudden.

Roughly works out at about 4% interest rate (quicky maths here!).

Regarding people saying don't get the car secured etc against the loan. Well all I'd say to that is if you cannot afford at least 6 months living if you lose your job then you shouldn't get the loan.

Edited 22 June, 201114 yr by ardandy

(Stuff about PCP)

(Stuff about loans)

I can't really see the difference here...in either case, if you can't afford your repayments you'd liquidise the car to settle the remaining balance of the debt. In either case if you've got negative equity you're going to have a shortfall to make up. The only real difference I can see is that you're more at risk of being in negative equity with PCP as you're paying less of the debt off each month over the agreed term...

I can't really see the difference here...in either case, if you can't afford your repayments you'd liquidise the car to settle the remaining balance of the debt. In either case if you've got negative equity you're going to have a shortfall to make up. The only real difference I can see is that you're more at risk of being in negative equity with PCP as you're paying less of the debt off each month over the agreed term...

I can :

Loan - Flexible, can sell car without redeeming loan.

PCP, finance - Inflexible, high fees, have to redeem if sell car, secured to car.....one i forgot to add is they usually load the interest on the first 1/3rd of the term hence having higher redemption figures (as you have only been paying interest for first x amount of months)

I can :

Loan - Flexible, can sell car without redeeming loan.

PCP, finance - Inflexible, high fees, have to redeem if sell car, secured to car.....one i forgot to add is they usually load the interest on the first 1/3rd of the term hence having higher redemption figures (as you have only been paying interest for first x amount of months)

The flexibility really depends on the loan/finance you sign up too. You can get inflexible loans, you can get flexible finance; not all finance and PCP products have high fees, and some personal loans do; not all PCP/finance products load the interest at the beginning.

So really, it just comes down to the terms of redemption - and the only difference I can see there is you could "re-use" the funds from liquidising your car with the loan to buy a cheaper car, whereas you'd have to rearrange new finance from the PCP.

Bottom line is if you can get a personal loan at a decent rate (ie you have a credit history and it isn't bad) then a personal loan will always win hands down.

If you have no credit history or bad credit history you will have to have finance or PCP (again can't see the point of PCP unless you give your car back at the end of the 3, 4, 5 years, yes lower payments but you have the lump sum at the end or return your car so kinda defeats the object) which usually means much higher interest.

Besides 0% finance (which i have ) I have never seen or been offered finance which can beat a personal loan (i do have a good credit file though)

Obviously the important thing here is Total Amount Repayable......

I bought mine on a PCP.

My reasoning is that I change the car regularly, so a 3 year cycle means I will always have warranty cover, no MOT's to worry about etc. Because of this I don't see the point of financing the entire cost of the car. PCP's can work well, but you do need to check that the final payment is a good bit lower than the car will be worth in 3 years time, go on the generous side with your mileage estimate. The monthly cost goes up a bit, but the final payment goes down. If you then have a car that is well inside the mileage, it is worth more at trade-in and you have better equity to put into a new car. If it works out you swap to a new car and the payments stay the same. I do think that it works best on cheap superminis though. Buying a luxo barge on a PCP is a hell of a gamble.

But I have warranty, so my other costs are fixed to insurance, tax, fuel and consumables. That's it, no sudden £1k bill for a gearbox fault or air-con problem etc. I might not even need to change tyres this time

Don't use one to buy a car outright though, if you are going to keep a car long term, then it is bank loan/finance all the way, whichever gets you the best deal.

Bottom line is if you can get a personal loan at a decent rate (ie you have a credit history and it isn't bad) then a personal loan will always win hands down.

Unless what you're interested in is having a low monthly payment and aren't planning on buying the car at the end, in which case PCP will most likely win.

Besides 0% finance (which i have )

I don't think you mentioned that...

Am I old fashioned in not liking the idea of a PCP?

I've always prefered to own the car.

The idea of paying interest on money I'm not paying back (the balloon) for the whole term of the loan just doesn't appeal to me.

Plus if you don't have the money to buy a new car surely an older one is better?

Otherwise you are taking a huge hit on depreciation, then trading the vehicle in and starting the process over and over... it sounds more like renting.

Sure it's nice to have a waranty, but the depreciation is probably way more than any repairs will cost.

Are am I off the ball somewhere? :wonder:

When I bought mine I only had about 20% as a deposit so I borrowed 30% on a personal loan so I could take up the manufacturer offer of 0% finance with a 50% deposit.

Made it work even better by squeezing the personal loan term as much as possible, 18month and extending the 0% to the full 3 years. Still paid it off early mind you.

it sounds more like renting.

Yes, it basically is.

As to whether it's worth it or not comes down to what's important to you in a car...I like new cars because they're generally less problematic (at least in my experience), you have the warranty so you don't get unexpected bills for repairs, you get the latest generation of safety features, and they have new car smell. Given the choice, I'd rather pay for a PCP on a new car than own an old car outright.

Yes, it basically is.

As to whether it's worth it or not comes down to what's important to you in a car...I like new cars because they're generally less problematic (at least in my experience), you have the warranty so you don't get unexpected bills for repairs, you get the latest generation of safety features, and they have new car smell. Given the choice, I'd rather pay for a PCP on a new car than own an old car outright.

Plus for me if your going to change every 3 years anyway, it's like you've simply been renting it.

Usually penalties for early repayment are only linked to unsavoury loan firms - mostly the ones with higher APR's for folks who cant get credit else where easily. SWMBO works collecting defaults on these.

Most HP loan firms offer quite good redemption fees, a number wiping all remaining credit/interest charges. Certainly those I've dealt with do this!

Am I old fashioned in not liking the idea of a PCP?

I've always prefered to own the car.

The idea of paying interest on money I'm not paying back (the balloon) for the whole term of the loan just doesn't appeal to me.

Plus if you don't have the money to buy a new car surely an older one is better?

Otherwise you are taking a huge hit on depreciation, then trading the vehicle in and starting the process over and over... it sounds more like renting.

Sure it's nice to have a waranty, but the depreciation is probably way more than any repairs will cost.

Are am I off the ball somewhere? :wonder:

If I was to buy an older car, say a 3 year old Fabia, I would still have to buy it with a loan/finance. The payments for that would be about the same as a PCP, assuming you have the same deposit for both. Then you have the risk of having to make out-of-warranty repairs on top of that, (after another 2-3 years things will be wearing out and need replacing). Since I would be paying the same, I'd rather have the new car and no worries.

If I was buying a car to keep for at least 5 years, I would not go PCP. A PCP is basically renting the car with an option to just return it at the end of the term if you wish. Alternatively you can buy the car for the balloon payment at the end, which (by my estimate) will be nearly £3000 cheaper than the dealer would sell it for. I'd only do that if I was going to then run the car for at least another 5 years.

Why would I want to own a depreciating asset anyway?

Edited 26 June, 201114 yr by Mike Wrightson

I still think the safest path is to save up for it and then buy it outright. Then if your circumstances change you aren't stuck with a car you can't afford repayments on.

I still think the safest path is to save up for it and then buy it outright. Then if your circumstances change you aren't stuck with a car you can't afford repayments on.

If you save you'll need a cheap car whilst you do so, and will incur all the hassle and expense that comes with running a cheap car.

If you buy on finance, you get to drive a decent car without this hassle and expense, and it's only if your circumstances change and they come and repo your car that you'll need to suffer the cheap option. If your circumtances never change, you never have to drive a **** car.

Why would I want to own a depreciating asset anyway?

A house?

Houses generally appreciate in value.....

Well, they do at the moment anyway :S Whether they will continue to do so remains to be seen.

To answer the "save up and buy it" post, I could do that, but it would take me about 10 years to save up the purchase price of my Fabia. Then I would need to keep it for at least 10 years while I saved up for its replacement. That is not viable for me. If I got a £1k repair bill during that time, there goes a year's savings.