Car Finance (HP) versus Personal Loan

[raymont]

right, so you are going to earn £100 in the year!


I assume you can afford the £416 per month for the 12 months?

You said

'If you wish to own it, cash is the cheapest way to own it. And nobody has yet, despite billions of posts, threads or otherwise, has even been able to prove this wrong.'

What did you mean?

You seem to have just said that credit would be cheaper than cash?

 

[scumbag]

You said

'If you wish to own it, cash is the cheapest way to own it. And nobody has yet, despite billions of posts, threads or otherwise, has even been able to prove this wrong.'

What did you mean?

You seem to have just said that credit would be cheaper than cash?

no I didn't. I asked if you can afford the monthly payments. If you finance it, you have to be able to afford that or it becomes academic!

Now you need to add the £416 montly payments into the equation.

This would mean, if you put that in the bank, instead of paying a loan at 0% you would have £5054 at the end of the first year of ownership.

You have to wait a year for that interest to acrue along with the interest you will earn on what you did not use to pay the car. All £100 of it. £46 more than if you had paid outright.

I assume this finance was also free of charges, set up costs etc? [-edit, it was, I have just re-read to original example set]

The answer to your question is very simple.

The car cost £10000 whichever way you fund it! Niether is cheaper.

but I do recall saying this.

However, fiat are running 0% a present. so if you have the cash, it may be better to finance a Fiat and keep the cash.

So, which £10k car have you got a 50% deposit on and the rest at 0% over 12months, with no charges? or was it just a made up example?

 

[raymont]

no I didn't. I asked if you can afford the monthly payments. If you finance it, you have to be able to afford that or it becomes academic!


Yes I can, I will take it out of the £5k in the bank which is earning interest.

Now you need to add the £416 montly payments into the equation.

This would mean, if you put that in the bank, instead of paying a loan at 0% you would have £5054 at the end of the first year of ownership.

I'm funding the repayments from the original sum which is earning interest

You have to wait a year for that interest to acrue along with the interest you will earn on what you did not use to pay the car. All £100 of it. £46 more than if you had paid outright.

I assume this finance was also free of charges, set up costs etc? [-edit, it was, I have just re-read to original example set]

The answer to your question is very simple.

The car cost £10000 whichever way you fund it! Niether is cheaper.

It's an example.

 

[hawk20]

"Better" doesn't necessarily mean cheaper. Many people would consider it better to hang on to their money, as a PCP or PCH deal allows, rather than commit their capital.

I considered it better to pay cash for my car, as it gave me certainty in uncertain times.

Sadly, unless you intend to keep the car for its whole life there is no certainty available about depreciation when buying for cash. The great advantage of PCP's and contract hiring is that the depreciation risk is taken by the finance company not by you. That is why in these uncertain times it can well pay to take a PCP or contract hire.

In addition the person who does a PCP and changes cars, say, every three years has certainty that they will have no repair bills as they are under warranty. Many like that. You get known costs and a new car every three years, if that is what you want.

Or if you change your mind you can buy the car for the GFV -but this is all old ground.

 

[scumbag]

I'm funding the repayments from the original sum which is earning interest

well, in fairness, that would make it less attractive although we are talking about peanuts of amounts really.

you would be better off, paying per month rather than eating into it but it does give you that chance.

And of course, even though the example was wieghed in the favour of a 0% deal, you can't get finance with out some set up costs so it would pretty much be a close run thing as to being able to have £10000 outright, and £10000 (£5000 up front and the remaing 5000 / 12 equal monthy installements) being able to fund the car with no additional costs!

What was your question again?

 

[scumbag]

Or if you change your mind you can buy the car for the GFV -but this is all old ground.

now in relation to the OP, this maybe useful.

It could be, due to the deals around, or perhaps, about to come, that a PCP would work out cheaper then any other form of finance.

I am sure however, it would not be as cheap as a lease for the lenght of term, but that itself asks a further question.

if you lease of contract hire a car, do you get the chance to keep it at the end of the term? and when do you find out how much it would cost to keep it if you can?


It does come back to knowing what the OP intends to do with the car really.

 

[jaymanek]

anyone noticed how these debates are never ending..

its different for every person..

 

[scumbag]

oh I don't know.

If we find out the intent of the original posters needs for the car, and maybe if they have a car in mind, you actually will have a way to find the answer to his question, which could be based on working examples and actual facts that are available today, rather than made up examples that don't exist.

still, I am simple and always wrong.

 

[raymont]

well, in fairness, that would make it less attractive although we are talking about peanuts of amounts really.

The amounts don’t matter, I was trying to establish the principle that credit can be cheaper given the right numbers.

There is no one definitive answer to the cheapest way to acquire a car.

It depends on the numbers on the table at the time.

Sometimes cash will be best, at other times personal loan, HP contract hire, pcp etc will be better.

It depends on the numbers and what the acquirer wants out of the deal in terms of ownership, known costs etc.

 

[Tan]

Hi

Thanks for all the replies, we do want to own the car outright and intend to keep it for many years, considering the loss we are suffering on the Audi.

 

[Rory]

That is why in these uncertain times it can well pay to take a PCP or contract hire.

It's important to bear in mind that there are many different personal circumstances that may apply, as well as many different deals.

In my case, the uncertainty was 3 years ago, and it was that my employer might have been going to be taken over, that I might get made redundant, and that I might, with others, start my own company. All of that did happen.

What I didn't want was to go into all that with chunky monthly payments to make. In the end, I was actually offered an HP deal by Mercedes that meant, especially with rising interest rates on my savings, that I'd have been better off taking the HP. They were quite dismayed when I still refused it!

I dare say there are an increasing number of people now who have lost their jobs or taken a much lower paid one and won't be able to pay the GFV on their PCP and won't be able to get credit to take another one out. So they're car-less.

 

[scumbag]

Hi

Thanks for all the replies, we do want to own the car outright and intend to keep it for many years, considering the loss we are suffering on the Audi.

so have you a car in mind? do you have any quotes for the finances for it.

If you can afford the repayments, even if you do have the cash, it not be a good idea to use all your savings on a car, while you can afford the repayments, however, it will cost you a bit more if you do that. But you will still have the savings in the bank when the car is paid off.

You will probably need to so some homework, but if you find the car you want, put in on here and see how many others can locate a decent deal. Many hands make light work and all that.

You will then find the answer to the elusive question as to which is best!

That I can assure you.

 

[hawk20]

The amounts don’t matter, I was trying to establish the principle that credit can be cheaper given the right numbers.

There is no one definitive answer to the cheapest way to acquire a car.

It depends on the numbers on the table at the time.

Sometimes cash will be best, at other times personal loan, HP contract hire, pcp etc will be better.

It depends on the numbers and what the acquirer wants out of the deal in terms of ownership, known costs etc.

Absolutely correct.

 

[Will]

Just noticed this thread and lightly chuckled to myself.

Same old story...

Some people just refuse to budge on their viewpoint, even when they know they are wrong - it's funny

Will

 

[robpow]

If you look around you can get a lot more car for your money with some leasing deals. Some new, expensive cars depreciate say £20K over three years but the leasing cost could be as low as £14-16 over the same time. Plus you can invest the £20K and earn interest or capital gains, or if you were going to borrow the £20K then obviously you have saved the 5-8% interest cost.

Food for thought..

 

[st4]

Hi and welcome to the forum. A really interesting 1st post and openning up an age old debate on here.

As hawk20 says (read thru his posts on the subject over 9 months and 3 threads) MB do some very good PCPs which give the car a very high residual meaning a low monthly payment. This suits some, it doesn't suit others. You'll see scumbag (over 9 months and 3 threads debate the virtues of a cash purchase). This suits some, it doesn't suit others.

Depends on how you want to finance the car and if you want to "own" it or have a predictable outlay for it.

 

[robpow]

Hi and welcome to the forum.

Hi and thanks for the welcome. My dealer emailed this morning to say he's secured the car we've been looking for so if all goes well I'll be updating my profile in a couple of weeks with my first Merc! And it's on a personal hire contract by the way!

Cheers,
Matt

 

[Mudster]

I've looked into this a number of times with my accountant as I have a business (therefore tax) implications.

If you want a new car and want to change it for another new car every 2-3 years finance deals can sometimes (not always) be cheaper than paying outright in cash.

If you intend to buy a car and keep it indefinitely until it's value is zero or scrap then I see no value in paying finance costs but very few people actually do this.

One thing often overlooked (ignored actually) is the fact you can often buy a better car via finance than you could afford through a single cash purchase.

I can comfortably lease £25,000 cars (we have three) but being asked to stump up £75,000 in cash in full up front would be a whole different ballgame and in reality probably would never happen (as in my case I want to use that to buy stock for my business).

There is no black and white answer.....but there are a few generalisations that ring true.

I'd never consider buying a £50,000 Mercedes in cash.....however I would consider buying that car in full at 3 years old when it's worth £20,000. But if I could lease that car for three years new with a total cost of £20,000....then that makes me think...do I want a three year old car when I can have a new one with all the warranties and choose my spec for the same money.....food for thought.

 

[hawk20]

Hi and thanks for the welcome. My dealer emailed this morning to say he's secured the car we've been looking for so if all goes well I'll be updating my profile in a couple of weeks with my first Merc! And it's on a personal hire contract by the way!

Cheers,
Matt

Good luck. Is that contract hire or a PCP (MB call it Agility) that you are doing?

 

[robpow]

Good luck. Is that contract hire or a PCP (MB call it Agility) that you are doing?

Hi and thanks,

I've already had the finance approved ahead of time and a holding deposit paid this morning so we're nearly there.. I'm buying via a broker so I'm not sure what the underlying finance is called exactly but it's a personal hire contract rather than one with a fixed baloon. All should become clear in the next couple of days.

Cheers,
Matt