Finance options

[andy]

Just interested in your thoughts on the pros & cons of PCP vs good ol' HP. To set the scene a little, I have been using PCP deals over the last 8 or so years and have owned or used 3 cars on this finance scheme so I'm fairly comfortable with the option if I want to just use the car and move on. However when I looked at an 2008 RS6 this deal was not available through Audi finance due to the age but I have found 3rd party car finance companies that will do this.

Now alongside buying a new car I'm also selling my Ducati and that will give me either some money in the bank or a larger deposit to reduce my monthly payments. Now this got me thinking about how I wanted to treat my ownership of this car and thought I would ask you guys how you viewed your ownership of such a car. Is this something that will need to be prised from your dying grip or something you will happily change once out of your system? Obviously everyone is different but this seems much more of an enthusiasts car as opposed to something that's nice for a couple of years?

So where I am at right now is do I treat this as short term fun and keep the cash in the bank or should I look to own the car in a few years and put in a heathly deposit upfront? There is a third option of keep the cash in the bank, PCP the finance and pay off the final sum but that's giving you spear to many options and I wanted to keep it simple

I know only I can really answer this but just interested on people's views that have lived with the car for a while now and how they viewed long term ownership.

[Ceveman73]

Tough one. It really depends on a few factors:

1. How long and if you plan to keep the car.

2. Weather you prefer to pay out as little as possible on interest, or prefer to essentially 'rent' the car for a few years to keep your monthly obligations as low as possible.

The main problem is depreciation. It is clear from looking at the way that the car has already depreciated, plus the way that the C5 continues to fall, that the C6 has still a heck of a long way to fall yet. It's fair to assume that an earlier 70k mile car after 3 years will be worth about £15k, plus the £5-10k you will have sunk in interest.

If you are having to juggle money to simply get into the car, then I would say it is a BAD idea. You could easily end up in severe negative equity at the end of the term, but will definitely have a higher mileage car that will be very hard to sell and that will suddenly seem less attractive to own and run.

I think unless you're rich, then buying into one of these right now on finance will be risky and a long term commitment. If you think you'll change or get bored quite quickly, then I don't think it's a good idea.

Hope that helps for starters.

Mart.

[xs2man]

The thing is though, in general, with a PCP, you have guaranteed future value. Albeit it is usually pretty low so you are meant to have equity left over for the next deposit.

On that basis, you are essentially reducing your risk with respect to the cars future value. This is less risky on a cheaper diesel, for example, but who knows how fast the RS will depreciate over the next 3-5 years, depending on your term.

I currently have a car on a PCP, albeit not as much of a beast as the RS6, its just a diesel A4. But, the idea when taking it was that I would likely end up keeping it for good. Or, at least 7 years. But, having taken it on a PCP, it means that if I have a falling out with the car, at least I will always have the option of taking a guaranteed value. Okay, so I may pay some interest on that, and it will be more than I could make by banking it, but it a little bit of security that lets me know I can walk if the car isn't as I desired for whatever reason, or its value drops below that value.

You have been doing this for a few years now, so you know how it works, obviously. So it is entirely your decision. But if it was me, and I had that option, that would be the way I would buy the car. At least you will know that in x amount of years, it will be worth no less to you than £x. I always consider the monthly payments the cost of the depreciation, and the deposit the cost of driving that particular car. With my head screwed that way round, I find the cost of ownership easier to swallow personally.

[Dave_Hedgehog]

For me it comes down to the total cost of the debt and the APRs

Try financing it all 3 ways and go with the one that costs you the less interest.

On my R32 (pre bank crash) PCP worked out about £500 cheaper because of the low rates they where offering and the moderately high guaranteed value

On my OHs polo GTi last year a straight HP worked out better as the interest charge was slightly less and we got free servicing chucked it for taking it

On my RS3 it was cheaper to take out 2 smaller personal loans (at 6.7%) than to take the lease (PCP) or HP deals on offer, more so given the high predicted resale values (and so far they are hanging on to there money incredibly well)

[PhilT]

Have a chat with Jamie at Performance Car Finance. Top chap and usually has some great deals.

I used him for my RS6 and had an amazing deal.

[luffenham1]

Also i would give bridford a ring. A great company. i'm on a LP with a day to day variable rate facility through ING. The rates change due to the Libor rate which is currently not changing much. Generally my payments go up or down a couple of quid over the past six months and with the current climate the way it is, it should not change that much. Loads cheaper than HP or fixed deals with ballons

[andy]

Some great info there, thanks guys.

As I say I'm used to the way PCP works as I've used that method for a few years now. One of the attractive sides to this offer I have right now is the future value is very strong and set at £18k! Match that with a purchase price of £35k and it's quite a strong deal. So even if the bottom falls out of the market and the value of these things goes out the window, I don't need to worry about it. So I think I'm settled on keeping money in the bank, using a lower deposit for a PCP deal and saving towards the final payment as an option for owning the car if I find I can't be parted from it

However I will check out those other companies and thanks for the suggestions. So far I've been dealing with Oracle finance for the PCP deal and they have been very helpful although the apr is slightly high at 12%! So I can probably do better but it depends on the future value provided. Swings and roundabouts as they say.

[barryrs]

12% is pretty high; I would be expecting to pay around 8% on a personal loan at the mo.

That’s a difference of almost £3k on £25k loan over 5 years.

[andy]

Yes I agree that 12% is high but I'm trying to get some comparative quotes for PCP currently. The pure HP quotes I have are all around the 8% mark though.

[GLM]

i would try Kevin Moss at capital car finance - i have been quoted more like 4%....

http://www.capitalcarfinance.co.uk/

[andy]

Have a chat with Jamie at Performance Car Finance. Top chap and usually has some great deals.

I used him for my RS6 and had an amazing deal.

Just got off the phone from Jamie and he has provided me with a much more attractive deal Thanks for the info as that has just saved me about £150/month!!

[barryrs]

Im personally not a massive fan of PCP deals but for it to be comparative with an 8% loan the PCP rate would need to be about 9%.

On ordinary finance at 8% you will repay £25k (£10k deposit) over 5 years at £507 per month - total car cost £30,415 + deposit = £40,415

PCP at 9% on £25k (£10k deposit) you will pay £431 per month over 3 years with £15k final fee - total car cost £30,516 + deposit = £40,516

That way after 3 years there would be about £12k left owing on both options if you saved the £76 per month difference in payment.

I have used online calculators so the figures are very rough.