Is car finance the way to go now?
Discussion
So after three years I'll be taking a test drive of a new car tomorrow. In those three years the market has changed entirely from buying a car to leasing a car (HP or PCP). I remember car adverts three years ago were mostly showing the price of a car and then you could ask for a PCP/HP quote.
Nowadays, all adverts lead with finance.
I've only ever purchased my cars - usually cash + p/x + bank loan.
However, car prices have risen dramatically in recent years - sometimes in excess of 25%. I guess this is to put people off buying a brand new car outright and force people down the finance route.
Is this the way to go now? I guess the salesman will push me towards finance.
Nowadays, all adverts lead with finance.
I've only ever purchased my cars - usually cash + p/x + bank loan.
However, car prices have risen dramatically in recent years - sometimes in excess of 25%. I guess this is to put people off buying a brand new car outright and force people down the finance route.
Is this the way to go now? I guess the salesman will push me towards finance.
I wouldn't say so, without blowing my own whistle if you were smart you should do what I did. This will only work with a good credit rating though. But borrow the money from a bank!
Why is it better?
a) You can pay it off over a longer time
b) You own the car from the get go
c) Dealers offer huge discounts to cash buyers
and
d) It is just cheaper in general to use a good bank loan.
Now I get this might not be to everyones taste but it worked well for me. Got my Ibiza down from £16,995 to £12,500 and I'm paying it off over 5 years.
Why is it better?
a) You can pay it off over a longer time
b) You own the car from the get go
c) Dealers offer huge discounts to cash buyers
and
d) It is just cheaper in general to use a good bank loan.
Now I get this might not be to everyones taste but it worked well for me. Got my Ibiza down from £16,995 to £12,500 and I'm paying it off over 5 years.
Car finance simply means you can buy a younger or better model with the same amount of cash in your pocket. If you have £10k, then instead of being limited to buying a £10k car, you can get a £30k car, with £20k on tick.
If you are buying a NEW car, some manufacturers offer 0% finance with a certain amount of deposit which can be beneficial. In the days of high interest rates it made a lot of sense but money doesn't do anything in the banks these days so it's not so "productive" these days - however, money is so cheap to borrow at the moment, it's almost - almost - crazy not to.
If you are buying a NEW car, some manufacturers offer 0% finance with a certain amount of deposit which can be beneficial. In the days of high interest rates it made a lot of sense but money doesn't do anything in the banks these days so it's not so "productive" these days - however, money is so cheap to borrow at the moment, it's almost - almost - crazy not to.
smiller147 said:
c) Dealers offer huge discounts to cash buyers
Always found the best deals are found by taking their finance on whatever terms they want you to (to get the best discount) and then settling up the finance with the finance house (not the dealer) within 14 days 
Often allows you to get manufacturer contributions, free servicing packs etc too!
Either that or leasing....some of the "deals" on the lease thread are cheaper than ownership, especially if not keeping L/T and wanting new
All depends what you want to do with the car. My current F10 M5 is on Contract Hire as i did the deal when the crazy low offers were on, so what i'll have paid over 3yrs at best would only cover 60-70% of the depreciation & that doesn't include the cost of money etc. with the cash i didn't spend on the car accumulating 5+% interest which i'll use towards my next car.
That said, we've just ordered a new Volvo XC60 & they offered 24mths 0% finance on a PCP scheme with a sizeable cash deposit, huge discount & the wife intends to just pay the balloon payment in cash at the end of the term. Both these examples are finance of sorts & have cost significantly less than paying cash.
That said, we've just ordered a new Volvo XC60 & they offered 24mths 0% finance on a PCP scheme with a sizeable cash deposit, huge discount & the wife intends to just pay the balloon payment in cash at the end of the term. Both these examples are finance of sorts & have cost significantly less than paying cash.
kiethton said:
Always found the best deals are found by taking their finance on whatever terms they want you to (to get the best discount) and then settling up the finance with the finance house (not the dealer) within 14 days
Often allows you to get manufacturer contributions, free servicing packs etc too!
That's a smart man there ladies and gentlemen. Take notice. This is how to do it.Often allows you to get manufacturer contributions, free servicing packs etc too!
For some people, absolutely. Dealer finance has been around for a long while, but the finance market has never been as competitive as it is presently.
MrsC70 will probably be getting a C4 Cactus in the coming months (I quite fancy getting her into something new and more practical), so I've been shopping around. So far it seems significantly cheaper to take one on a lease than it would be to buy via PCP, which was news to me.
We're probably buying a second property during the same period, so cash (for the requisite stamp duty shafting) is better off lining our pockets than a dealer's. £250 is an amount of money that we won't notice going out every month, and in turn it provides us with a car that leaves no headaches for things like MOTs or breakdowns.
I can understand the position of some PHers who would look down on people who finance cars (I've never personally borrowed - but wouldn't rule it out) - because taking finance on a depreciating asset is normally a recipe for disaster. However, when you add it up, provided that you're not stretching yourselves financially, I can't see any reason not to lease/finance.
MrsC70 will probably be getting a C4 Cactus in the coming months (I quite fancy getting her into something new and more practical), so I've been shopping around. So far it seems significantly cheaper to take one on a lease than it would be to buy via PCP, which was news to me.
We're probably buying a second property during the same period, so cash (for the requisite stamp duty shafting) is better off lining our pockets than a dealer's. £250 is an amount of money that we won't notice going out every month, and in turn it provides us with a car that leaves no headaches for things like MOTs or breakdowns.
I can understand the position of some PHers who would look down on people who finance cars (I've never personally borrowed - but wouldn't rule it out) - because taking finance on a depreciating asset is normally a recipe for disaster. However, when you add it up, provided that you're not stretching yourselves financially, I can't see any reason not to lease/finance.
kiethton said:
Always found the best deals are found by taking their finance on whatever terms they want you to (to get the best discount) and then settling up the finance with the finance house (not the dealer) within 14 days
Is that quite a straightforward/routine thing to do? Apologies if it's a stupid question - I'm thinking of going for a new Fiat Spider and was thinking of the finance route.(No trade-in).When you say 'settling up the finance' is that paying off the loan completely? Are there not any penalty clauses?
Thanks!
smiller147 said:
I wouldn't say so, without blowing my own whistle if you were smart you should do what I did. This will only work with a good credit rating though. But borrow the money from a bank!
Why is it better?
a) You can pay it off over a longer time
b) You own the car from the get go
c) Dealers offer huge discounts to cash buyers
and
d) It is just cheaper in general to use a good bank loan.
Now I get this might not be to everyones taste but it worked well for me. Got my Ibiza down from £16,995 to £12,500 and I'm paying it off over 5 years.
Good for you, and I'm not suggesting a bank loan wasn't the cheapest way to finance the car, but you're still on the hook for 5 years, which some finance companies offer regardless.Why is it better?
a) You can pay it off over a longer time
b) You own the car from the get go
c) Dealers offer huge discounts to cash buyers
and
d) It is just cheaper in general to use a good bank loan.
Now I get this might not be to everyones taste but it worked well for me. Got my Ibiza down from £16,995 to £12,500 and I'm paying it off over 5 years.
Also, I'm assuming you bought your car from a dealer, what difference would it have made if he took your banks 12.5k, or the finance companies 12.5k? He would have been paid in full before, effectively at least, before you took the car away and he may of even got some form of kickback on the finance.
In any case, the car you bought was never a £16995 car, and the way you funded it certainly didn't turn it into a 12.5K car.
Edited by f1nn on Friday 2nd September 16:49
jhonn said:
kiethton said:
Always found the best deals are found by taking their finance on whatever terms they want you to (to get the best discount) and then settling up the finance with the finance house (not the dealer) within 14 days
Is that quite a straightforward/routine thing to do? Apologies if it's a stupid question - I'm thinking of going for a new Fiat Spider and was thinking of the finance route.(No trade-in).When you say 'settling up the finance' is that paying off the loan completely? Are there not any penalty clauses?
Thanks!
May make it harder to get approved for credit elsewhere (a bank) if needed though
Composite Guru said:
I'd rather keep my money in something that will go up in value so quite happy to pay a monthly installment for a car.
Why save up £30k for a car and watch it disappear over the course of 3 years. Ok no monthly payments doing that but you are losing your money either way.
If it's really cheap finance, yes but if it's a car that's in demand you will be paying an extra £5k for half a car on PCP! Why save up £30k for a car and watch it disappear over the course of 3 years. Ok no monthly payments doing that but you are losing your money either way.
C70R said:
£250 is an amount of money that we won't notice going out every month, and in turn it provides us with a car that leaves no headaches for things like MOTs or breakdowns.
This is the kind of statement that boggles my mind. I have enough disposable income to build up sufficient savings to buy a car, MOTs and breakdowns are not something I lose sleep over, if the cost is worrying then I've bought the wrong car. But £250 a month going out of my account every single month, even if I've only driven it a few times, is something I would most definitely notice. Just think what you can do with £250. A lot of people barely put that into their pension.Dr Jekyll said:
C70R said:
£250 is an amount of money that we won't notice going out every month, and in turn it provides us with a car that leaves no headaches for things like MOTs or breakdowns.
This is the kind of statement that boggles my mind. I have enough disposable income to build up sufficient savings to buy a car, MOTs and breakdowns are not something I lose sleep over, if the cost is worrying then I've bought the wrong car. But £250 a month going out of my account every single month, even if I've only driven it a few times, is something I would most definitely notice. Just think what you can do with £250. A lot of people barely put that into their pension.ambuletz said:
smiller147 said:
I
c) Dealers offer huge discounts to cash buyers
and
after reading threads on here I was given the opposite impression. That is to say that showrooms preferred you bought a car via finance as they get extra commission from the finance company.c) Dealers offer huge discounts to cash buyers
and
Dr Jekyll said:
This is the kind of statement that boggles my mind. I have enough disposable income to build up sufficient savings to buy a car, MOTs and breakdowns are not something I lose sleep over, if the cost is worrying then I've bought the wrong car. But £250 a month going out of my account every single month, even if I've only driven it a few times, is something I would most definitely notice. Just think what you can do with £250. A lot of people barely put that into their pension.
Pension? What the hell is a pension?Sorry im under the age of 30, we are shafted with s
t wages, higher cost of living than you older lot. Pensions are very low on priority list. My generation tends to live for now. We all struggle to get on housing ladder. Finance is usually a bad choice, but it depends on your situation. Most dealers offer me finance of like 14 percent interest, this is ridiculous.
A bank loan would be about 3 to 6 percent, getting better.
The best option for me was apply for a zero percent interest credit card. I got 26 months interest free on purchases with a 4k limit based on my income of roughly 20k a year.
I put 3k on that card to buy my car. Now I'm just going to pay it off soon as possible as I hate any sort of debt. I'm still losing out, the car I paid 6500 for from dealer is only worth 4500 as a trade in and 5500 private if lucky. Add on any repair costs and it's always going to cost you.
On the other hand I could probably run this car for the next several years and still get a nice chunk of change back, God bless the power of the Audi badge.
A bank loan would be about 3 to 6 percent, getting better.
The best option for me was apply for a zero percent interest credit card. I got 26 months interest free on purchases with a 4k limit based on my income of roughly 20k a year.
I put 3k on that card to buy my car. Now I'm just going to pay it off soon as possible as I hate any sort of debt. I'm still losing out, the car I paid 6500 for from dealer is only worth 4500 as a trade in and 5500 private if lucky. Add on any repair costs and it's always going to cost you.
On the other hand I could probably run this car for the next several years and still get a nice chunk of change back, God bless the power of the Audi badge.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff