PCP a new car or buy a 3/4year old car

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Newbie!

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So we find ourselves in the position where our current car has let us down a few times and I've no confidence in it anymore. So we're going to trade in. We are currently saving hard to do alot of house renovations within the next 2 years so using a huge chunk of that cash for a car is not an option. So I see our options as follows:

1. Buy a 3/4 year old car and use about 10k of our savings on top of the trade in.
pros
we buy a modest car that is probably more in our price range.
cons
We use a chunk of money that we will need for renovations
We buy a car that is likely out of warranty, will need nct's etc and will ultimately have a lowish resale value in 3-4 years when we trade again

2. We buy a new car on PCP
pros
We finance a car that we couldn't afford to buy outright and instead trickle cash into the repayments and pay the lump sum once our house renovations are done.
The car in question is a model that would retain a very good resale value
Car will be under warranty so no huge costs should surprise us.

Cons
Cost of this route is ~2.5k
I feel we are buying a car that we wouldn't usually buy yet the financing right now doesn't seem horrendous and the phased release of repayments might suit us.

To sum up, I want a good reliable family car with some (not talking high end) style (sorry, but if I'm spending alot of money I want a car I like). I don't want a high maintenance car which our current car has turned into and those unexpected costs floor you a bit.

Can anyone advise here as we just can't make our minds up? I'm nervous about PCP but I don't know why - I suppose we don't borrow for things like this so it makes me uneasy.
 
Watching this with interest OP - Hopefully this will develop into a good thread as I have a few parallels with your situation myself. (Am sure it will, always great advice on here.)

I can never decide between PCP and just going to the credit union and getting a manageable car loan.....
 
In yesterdays Sunday Independent there was a small booklet free that dealt with "motor finance options. Certainly worth a read.
 
You also have to remember that you will have a decision to make in three years under the PCP option: a) roll-over to a new PCP with a new car b) pay the balloon payment to actually own the car you have been driving for the past three years or c) hand the keys back.

With option b) you will need to save the GMFV or balloon payment which could be anything from €10K to €20K depending on the car.
 
I don't buy the independent but I'll see if the article is online. Reading the keypost now.
The balloon repayment would be about 11k which should be ok. We're good savers and usually good money managers. I would plan on making the repayment rather than the rolling over to new PCP.
 
That's great that you have factored in the balloon payment as there seems to a few people who get a shock...
 
Newbie! said:
I don't buy the independent but I'll see if the article is online. Reading the keypost now.
The balloon repayment would be about 11k which should be ok. We're good savers and usually good money managers. I would plan on making the repayment rather than the rolling over to new PCP.
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Go new via PCP, I've read all the scare stories on this site re_ PCP and all of them come from people who view debt as something to be always avoided

If you get a 3% rate, go for it, it's nothing over three years
 
Hi Newbie,

I was in a similar situation as yourself 2 years ago - going up the house and the car causing me a world of pain.

Depending on your house plans, you could easily burn through more money than you think. For example, I planned for 3-4 skips but ended up needing 7. That was an extra grand straight away. The last thing I wanted was a commitment for 30k plus on a car, which is what a PCP is (never mind the depreciation!)

So...I bought an Avensis. The logic being that I wasn't buying something I really liked anyway so I might as well buy something cheap and reliable. I had my first NCT last year and it passed 1st time (which was a first for me). Apart from new tyres I've spent the princely sum of 10 euro getting a puncture fixed.

The PCP looks attractive but you will be paying all of that money back in one way or another!

Best of luck!

Firefly.
 
@Firefly. We're looking at renovation costs of 100k so huge money really and that is probably hugely scaling back my grand plans. We plan to finance at least half of this in savings and the rest via our mortgage provider. My worry would be that they won't look favorably on us having a PCP loan also. To be honest, I think i'm answering my own question as I type here.....

BTW, An avensis is on our list of second hand preferred cars mainly for the reliability factor.
 
Newbie! said:
@Firefly. We're looking at renovation costs of 100k so huge money really and that is probably hugely scaling back my grand plans. We plan to finance at least half of this in savings and the rest via our mortgage provider. My worry would be that they won't look favorably on us having a PCP loan also. To be honest, I think i'm answering my own question as I type here.....

BTW, An avensis is on our list of second hand preferred cars mainly for the reliability factor.
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They won't care about a PCP loan, it's small and the debt enforceable
 
galway_blow_in said:
Then there are two questions here
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I was responding directly to your statement that mortgage underwriters won't care about a PCP. If you have a monthly commitment, whether PCP or personal loan, that's factored into your affordability. 300 per month could reduce your mortgage approval by as much as 40 to 50k. It all depends on overall affordability of course. Without a lot more details, it's not possible to say that the PCP won't have any impact.

In the right circumstances, there's nothing wrong with PCP. I have issues with how it's sold, and it's not suited to everyone, but I'm not one of the people that believes all debt is bad!

OP has outlined 2 choices:
Use savings to buy 2nd hand, (and therefore increase the amount they need to borrow at mortgage rate for renovations), or
Buy new via PCP, with a monthly repayment and hope to have saved up the balloon repayment amount in 3 years.

Personally I think there are other questions:
Should you buy new or 'nearly new', and secondly, how should it be financed. PCP is just a method of financing the new car.
OP has said:
Newbie! said:
Cost of this route is ~2.5k
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So they're only factoring in interest costs (I think) rather than total costs of ownership of the car.
We all evaluate things differently, but personally I never buy brand new cars.
 
RedOnion said:
Yes, Your monthly repayment commitment will impact on your affordability.
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Yip - whether the bank take PCPs into account is one thing...paying 300-400 on a car every month & having a balloon payment to worry about is another.
 
your choice isn't only new car vs. out-of-warranty car. You can get a 2 year old car that still has 3 years warranty on it, you may even be able to get PCP on it.

All the talk of resale value etc - a new car is more expensive than an old car, regardless of how you finance it. The first couple of years of depreciation will outweigh everything else.
 
shweeney said:
your choice isn't only new car vs. out-of-warranty car. You can get a 2 year old car that still has 3 years warranty on it, you may even be able to get PCP on it.

All the talk of resale value etc - a new car is more expensive than an old car, regardless of how you finance it. The first couple of years of depreciation will outweigh everything else.
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Not that simple, with a new car you can select exactly what you want, plenty of quality second hand cars but it takes time to find them

I've never bought new but will next time as I'm going electric next time
 
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