I've always bought cars outright, however I'm considering buying from a garage and using finance. I understand the differences between HP and PCP in terms of how they work, but in real world terms what's the differences.

In some cases manufacturers offer you additional discounts and/or incentives to buy one of their cars on a PCP. However, if you choose to, you can take them up on their offer and then pay of the finance off almost immediately after taking delivery of your new car (still retaining the discount) with cash, if your finances allow.

 

General difference between PCP and HP is that on PCP you pay off the car by paying deposit, a number of monthly payments (24, 36, 48, etc.) and a final balloon payment (this can be paid off by p/x'ing your car against a new one or selling it and using some or all of the proceeds or all of the proceeds plus some cash). HP you pay a deposit, then pay off the balance over the term of the loan (e.g. 24, 26, 48 months, etc.).

 

Simply put, PCP monthly payments are lower but there's a balloon payment to make (around 30 to 40% of the cost of the car); HP payments are higher per month but no final payment.

Thinking of selling the volvo then??

I'm sort of board of the Volvo and feel my time owning an auto is up.

I like the idea of an RS Focus, the insurance is £9 per month more than the Volvo, and they've come down to a reasonable price. The only issue I'm having when the finance is calculated, on PCP the residual value is stupid. As in a £22k RS is valued at a "book price" of around £6k after 3 years. Thus the monthly payments are stupid. I've got no interest in keeping an RS long term so any long term HP finance or loans are really out of the question because I would be 100% part exchanging in 3 years.

I'm waiting to hear back about finance on a Mountune'd ST-3 though which seem to be a lot better on PCP.

That is fair enough, Never had an auto, only experiance I have ever had of one was a Land Cruiser we rented once,

 

The PCP is tempting as you generally get good deals against the car, it is a new car servicing, warranty etc.

 

but at the moment the only payments I make out are mortgage, car insurance etc. which is quite nice as have more disposable income!

Residual values are always set on the lowish side so that you usually get some cash left over at the end that the dealer hopes you'll use as a deposit on another car you'll buy from them.

 

One other point to note is that these days they don't allow for extras having any residual value, so if you get a bit giddy with the options list you'll pay the cost of them divided by the length of term, e.g. £800 on leather seats, say, will cost you an extra £22.22 per month on a 3 year deal. But also remember the key to affordability is choosing the right car and getting it (and any extras) for the cheapest possible price, so check out the Drive the Deals, Orangewheels,Carfile, Broadspeed, etc., etc to find out who's giving the best deals, then approach your local dealer and see if they can match, or even beat, the quote you've got.

In some cases manufacturers offer you additional discounts and/or incentives to buy one of their cars on a PCP. However, if you choose to, you can take them up on their offer and then pay of the finance off almost immediately after taking delivery of your new car (still retaining the discount) with cash, if your finances allow.

General difference between PCP and HP is that on PCP you pay off the car by paying deposit, a number of monthly payments (24, 36, 48, etc.) and a final balloon payment (this can be paid off by p/x'ing your car against a new one or selling it and using some or all of the proceeds or all of the proceeds plus some cash). HP you pay a deposit, then pay off the balance over the term of the loan (e.g. 24, 26, 48 months, etc.).

Simply put, PCP monthly payments are lower but there's a balloon payment to make (around 30 to 40% of the cost of the car); HP payments are higher per month but no final payment.

Very interesting. Thank you.

Its all very relevant for us lately as my dads going to be buying a new Mini Cooper within the next few weeks.

Hes a very anti finance guy and buys everything cash. But if money can be saved by initially buying in finance and then paying it off straight away (i know the salesmen prefer to sell you finance) in order to make a saving. That sounds a good idea to me!

Cheers. (And sorry for the slight thread hijack!)