Many of those who bought cars for cash two or three years ago are far worse off than those who did PCP's because secondhand values have plummetted. Those who bought have lost big time. The PCP guys have a guaranteed residual.
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you keep putting that, but failing to point out that those who own the car, still have it, and have no additional cost to find now, When times maybe hard for them.
still, lets not get into that nonesense about depreciation. Your point clearly establishes the best way to offer an answer here is to know if the OP wishes to own outright at the end, or is prepared to take a choice!
Lovely.
Notice how this posting first says it pays to pay cash. And then contradicts itself by saying that some finance deals are better than paying cash. The latter statement is correct; it does not always pay to buy for cash.
Well it doesnt actually quite say what you are inferring does it?
It actually says it
cheaper to buy a car cash.. If you are able to get a 0% deposit and 0% finance deal, then keeping your money in the bank will pay you interest on whatever you have, and you are not charged for interest on what you borrow. You are making that out to be finance is better than cash!
Problem is, a, you don't get £0 deposits. and you still have to find the repayments. If the 0% deal is over 12 months for example, you have to find a monthly payment that you may not be able to afford. In those circumstances, a low rate 36 x HP/LOAN or PCP will be better than a 12 x 0% deal won't it? In monthly repayments terms anyway! It also assumes that the car value is in the bank at the outset. I have never said a 0% deal, nor actually have I ever said PCP's may not be a good way to buy a car. However, they have drawbacks. one of which is making the repayments, one of which is paying more for the money you borrow, which you have in the bank, and one of which is owning the equity in the car. Which brings you back to what I first said, cash is the
cheapest way to buy a car.
Of course you could always argue that you can negotiate on the lenght of term! I doubt you can over a 0%deal., Hence the part where I said it
may be better to keep the cash (and earn interest on it). If its currently a 5yr 0%, its 5yrs. that means 5 years of payments. Only your circumstances will dictate whether 5 years repayments at 0% works out better than keeping cash in the bank. It would not be wise to suggest that this is beneficial for all as it may have taken the OP 10 years to save up enough for a Fiat Panda, and you are suggesting that finance is better than leaving the money in the bank. clearly under those circumstances, that would be foolish at best. It does not take into any consideration that if you pay cash up front, you can save the monthly repayments in the bank every month, where as on any finanace deal, you pay money out. 0% mean no interest. you pay out every month and keep you dosh on the bank. paying cash, you pay out upfront and fill your bank account every month. your circumstances may show that keeping your money in the bank is a good idea, as the amounts with 0%, and the repayments, and length of term, means that at the end it won't have cost you much. but its hardly likely to be as cheap as paying it up front.
But that then leads into, should they buy new, 2nd hand etc? which is a different question altogether.
And in my point, I mention a specific. FIAT. I don't know how many others are offering 0% deals, but i gues MB won't be. So that limits your type of car too. A fact clealy you have not adding into your mistaken point.
And further. before taking out 0% you would need to find whatever the deposit is! this clearly adjusts the repayments, and the benefit of keeping cash in the bank.
And although the OP did not say pay cash. it does say which is the best way to finance a car. Cash is the best as you own it from the outset and you are not in any debt to anyone from day 1. unless you think having debt is in someway beneficial?
However to answer his question better, we need to know does he want to own the car outright at the end of the term (Personnal loan, low rate finance/HP etc), does he want a choice (PCP), does he want lowest repayments and least hassle and can secure another car after a defined term (CH type arrangement/lease etc)
If he wishes to own it, he needs to work out the monthly repayments and total amount paid. This should prove which is the best today. tommorrow maybe different.
for example.
to own
car price £5. (cash, its yours)
HP 1 monthly repayment of £2, 3 of £1.5. cars yours for £6.50p
Loan. 4 monthly repayments at £1.55p car yours at £6.20p.
for the best choice
PCP. £4.98P deposit 20 monthly repayments at 1p, and GMFV £1. car yours for £6.28 or hand it back having paid £5.18.*
no ownership.
CH/Lease etc.
20 x £0.10p. total cost £2 for 20months.*
CH/Lease with full maintenance etc
20 x £0.30 total cost, £3 for 20months.*
check the mileage clause.
you can fiddle about with the figures to make them match actual deals, but that gives you a basis of total outlay. That being the money you give someone else to own, or rent, your car.
It does not take into consideration hard haggling right at the beginning, nor any money you have in the bank or part-ex, deposits etc. all of those will adjust the final amount you have to pay out.
as a point to bear in mind, in my examples above. if you earn £1 a month, the loans are not suitable. PCP and leasing are. Alos in my examples above, it maybe you can PCP a signifcantly more expensive car, for the same monthly repayments as the loan, knowing you can give it back. This means you can swan about in a car you can't afford lording it above the hoi-poloi.
it also does not take into account the issues if you default for any reason. It fair to say however, if you default on any contractual agreement, somewhere down the line you will have to pay. You may also have some early redemption clauses, some of which may be quite harsh.
I see depreciation has been mentioned so its worth bearing this in mind.
All cars lose value. it maybe the FIAT panda loses 60% of its worth in 1 year, which sounds a lot, but as you can pick a new one up for £5500, money wise, its not a huge amount.
A £30k merc may lose 25% of its value in year 1. enough to pay for the Fiat Panda outright and throw it away at the end of year, and still have a holiday.
buying a car on finance means someone has given you money, and will charge you for it, and your car may lose more value, than what you own on it, right up until the day you finish the finance term, then its yours to do as you please with. You need to calculate the various ways to buy the car, to show which amount is the least at this point. some people believe that someone else will pay for depreciation.
