Current PCP rates - what is realistic?

[Bob Fossil]

Hello all,

I'm in the process of changing my car, and am looking at a few different options - one of which is financing via a PCP.

The rates I seem to be getting quoted are in the region of 8.8-9.8% - is this really the best that is out there right now? I'm on 7.9 on my present agreement.

I was quoted 5.5% (definitely APR, not flat rate) by a dealer, but I've a suspicion they must be using some of the margin in the car to buy the finance rate down (seems too low in this climate)?

Value of the car is £25k.

If anyone thinks they can offer something more competitive, feel free to drop me a PM...

Thanks in advance,

BF

[Phooey]

Consider borrowing/drawing down on your mortage (obviosly presuming you have one) and pay cash for the car.

[playerone]

5.5% APR would be getting subsidised as they would be losing money offering that rate. 8-10% would be a normal range.

[Welshbeef]

Phooey said:

Consider borrowing/drawing down on your mortage (obviosly presuming you have one) and pay cash for the car.

pcp provides an INS policy on the gfv mortgage drawdown doesn't. You need to calc if the difference is worth the potential max loss.

[TVR1]

Phooey said:

Consider borrowing/drawing down on your mortage (obviosly presuming you have one) and pay cash for the car.

Possibly singularly the worst possible suggestion of a way of funding a new car. Ever.

If you wish me to explain why? I would be happy to do so.

[Phooey]

TVR1 said:

Phooey said:

Consider borrowing/drawing down on your mortage (obviosly presuming you have one) and pay cash for the car.

Possibly singularly the worst possible suggestion of a way of funding a new car. Ever.

If you wish me to explain why? I would be happy to do so.

Go on then, educate me


I'm not taking the pi55, seriously am interested in why this is the worst option.

[Edinburger]

Phooey said:

TVR1 said:

Phooey said:

Consider borrowing/drawing down on your mortage (obviosly presuming you have one) and pay cash for the car.

Possibly singularly the worst possible suggestion of a way of funding a new car. Ever.

If you wish me to explain why? I would be happy to do so.

Go on then, educate me


I'm not taking the pi55, seriously am interested in why this is the worst option.

Because a car is, generally, a depreciating asset so unless you’re very wealthy / very stupid why on earth would you want to invest in a depreciating asset using funds drawn from a mortgage?

[Edinburger]

OP - I think those rates are quite competitive. BMW website quoted me 12.9% on a used 520D...

[Phooey]

Ok. Maybe my original suggestion was too general and needed more detail. For some, e.g. if you have an offset mortgage, it can be an easy way of borrowing at a less then high rate of a PCP deal. I don't really have a mortgage at present, but when i did, i could of borrowed back on the loan or extended the funds at the current rate of interest on my mortgage, then all i would of done would be to overpay the *extra* back over a 1,2,3,or 4 year period. I believe paying cash for the car will give the OP the best deal. If you can use cash from a mortgage and strictly pay this back within a short period of time (overpay) should, and i would of thought, incur the least charges of interest. I have always been wary of PCP's, many a time i have done the sums on these schemes and found the *total* cost of the loan to be much higher than any other method of funding. After all, you are paying interest on the balloon (final payment) which is sat there at the end of the deal AS WELL AS the initial monthly payments. There are other benefits too of arranging your own finance rather than being tied to the dealers scheme. Borrowing on your mortgage does and can benefit some people.

Please feel free to correct me on anything above - this is all imo, and am always happy to listen to anybody who can show me a better way of doing something.

[sidicks]

Edinburger said:

Because a car is, generally, a depreciating asset so unless you’re very wealthy / very stupid why on earth would you want to invest in a depreciating asset using funds drawn from a mortgage?

Clearly if you increase your mortgage to fund a car purchase, and then only pay that money back over the normal term of the mortgage (20+ years then that would be a stupid and expensive thing to do.

I'm sure no-one is seriously suggesting taking that approach.

Depending on the terms of the mortgage, borrowing at the mortgage rate and paying it back over the same period as you would a normal car loan / PCP is likely to work out much cheaper (as clearly a typical mortgage rate is much cheaper then a typical PCP rate).

Sidicks

[Sarnie]

sidicks said:

Edinburger said:

Because a car is, generally, a depreciating asset so unless you’re very wealthy / very stupid why on earth would you want to invest in a depreciating asset using funds drawn from a mortgage?

Clearly if you increase your mortgage to fund a car purchase, and then only pay that money back over the normal term of the mortgage (20+ years then that would be a stupid and expensive thing to do.

I'm sure no-one is seriously suggesting taking that approach.

Depending on the terms of the mortgage, borrowing at the mortgage rate and paying it back over the same period as you would a normal car loan / PCP is likely to work out much cheaper (as clearly a typical mortgage rate is much cheaper then a typical PCP rate).

Sidicks

Correct.

If you don't over pay to the effect of what the PCP/loan payments are, then this is a very bad idea.

If you do, it's a great way of doing it.