Car deal - cash or finance?

[PHB1969]

Hi - been very spontaneous and agreed to buy a new car which I haven’t seen in the flesh.
I have discussed different finance options and they have provided a pcp deal that meets the payment I want to make. I am happy with the monthly cost. I could pay cash for the car (along with my part ex). Cash in the bank gets very low rates of return. The benefit is no ballon payment and no mileage penalties (directly if annual mileage exceeded).

So can I refuse the finance and pay cash or is this the main area they are making their money? Can they refuse to allow me to pay cash? I haven’t asked them yet, but I wondered if there is any experience of this - 2 other dealers I spoke to over the weekend said they can not discriminate over cash or finance....

[gavsw20]

Deal should be the same if paying cash.

Pros and cons for the cash vs. finance discussion. Personally I like to see cash in my account as you never know when your going to need it and if you can afford the finance then why not.

On another note I was in the same boat recently for a £25k used car. Finance was pretty poor from the dealer but Zopa give personal loans for 2.9%. Applied on Tuesday, in my account by Friday and didn’t have to speak to a human being...bliss. Was almost £100pcm cheaper than the finance the dealer offered me too.

- - - Updated - - -

Deal should be the same if paying cash.

Pros and cons for the cash vs. finance discussion. Personally I like to see cash in my account as you never know when your going to need it and if you can afford the finance then why not.

On another note I was in the same boat recently for a £25k used car. Finance was pretty poor from the dealer but Zopa give personal loans for 2.9%. Applied on Tuesday, in my account by Friday and didn’t have to speak to a human being...bliss. Was almost £100pcm cheaper than the finance the dealer offered me too.

[PHB1969]

Deal should be the same if paying cash.

Pros and cons for the cash vs. finance discussion. Personally I like to see cash in my account as you never know when your going to need it and if you can afford the finance then why not.

On another note I was in the same boat recently for a £25k used car. Finance was pretty poor from the dealer but Zopa give personal loans for 2.9%. Applied on Tuesday, in my account by Friday and didn’t have to speak to a human being...bliss. Was almost £100pcm cheaper than the finance the dealer offered me too.

- - - Updated - - -

Thanks - that’s really interesting about zopa, I will have a quick look. I will see what the dealer says tomorrow, but 0.25% in a savings account is a big difference to 6.9% dealer rates on pcp.

[valleywatch]

Whenever Ive bought a car (I dont buy expensive cars though! maybe max Ive borrowed is 8-10000)..the banks always offer lower rates.

[gavsw20]

Thanks - that’s really interesting about zopa, I will have a quick look. I will see what the dealer says tomorrow, but 0.25% in a savings account is a big difference to 6.9% dealer rates on pcp.

No probs.

I posted something similar a few months ago and it was a member here who put me onto them.

I’m in the process of doing something similar, had a PCP on a car (finishes in August) and ended up with a chunk of equity and a good PX price. So got a loan to pay off the new car and used current car as PX (dealer paid of balloon with payment I made for newer) plus a couple of grand in the bank for me.

[Gromdal]

Depends if your savings would outstrip interest on the loan - https://www.bankaccountsavings.co.uk/ says that I could make nearly £500 a year on £15,000 in the bank if I put it in the right places and have the right direct debits, a 2.8% loan over 5 years at 2.8% from Sainsburys would effectively cost me £1077. I'd take the loan if you've got time to arrange it, my last car I should have taken the loan but ultimately needed to pay cash due to need for securing the car due to it having the exact spec I wanted.

[kevkojak]

We went for my wife's last-but-one car as cash buyers and I couldn't believe the crap deals we were offered.
Saved the most in the end by haggling a deal, paying with their (peugeot) finance package and paying it off in one lump sum the following month.

Lots of messing about but it did save us more than we could have negotiated with cash strangely enough. Just check there is no early repayment fee.

[Claret67]

I’ve heard dealers are pushing out cars near to cost, on proviso finance packages are taken up, as they earn a sweet commission on the packages.

[hogthrob]

I don't think there's a huge difference between PCP and buying with cash, once you take depreciation into account etc. Some car manufacturers also seem to make 'deposit contributions' (for example Skoda are offering £1250 on a Karoq) when you take a PCP, and I don't think those are available to cash buyers. Ford appear to be doing 0% finance at the moment.

[smalleyboy1]

I was pricing up a mini earlier this year and the dealer could offer me a manufacturers contribution of £1,500 if I went PCP but couldn’t offer me the same cash discount. Salesman worked out the figures and buying by PCP was cheaper than cash and he said I should then settle the full balance 6 months and 1 day after signing the PCP deal if I wanted to own it outright. There is a clause that allows you to do so.

I bought a 6 month old car for cash in the end as I didn’t want the depreciation hit which was around £5k.

[solwisesteve]

Just purchased a car on PCP.... my first ever on finance. I've always done cash.

In my case VAG are giving a very nice contribution to your PCP deposit which is not available for a cash purchase. So Audi were offering from £2700 to £4700 extra discount if purchased on PCP. That just about paid for the interest over the period of the lease so it was a no brainer really. As long as it's over the period that suits and the mileage that suits then it's perhaps worth thinking about but look at how much the interest is really costing you over the lease. Of course the bad thing for the consumer (and good thing for the dealer) is you end up going for a car which is more than you would have considered if you were having to slam all the cash down - the manufacturers love this and it's helped push consumers onto buying new each time and also meant they can keep on sneaking the RRP up. So I was initially looking at a 25K RRP car but ended up with a 39K RRP car! Also I'll have nowt to trade in come next time so I need to make sure I'm putting away extra each month to cover that.

[mk2driver]

You can take PCP for any contributions and then settle within 14 days with no penalty in most cases

Means overall the car costs less and if you do it within 14 days it’s also complete withdrawal from the agreement

[ALindsay]

I recently bought a BMW and was ready to pay cash in full until I was offered an even bigger discount if I took some finance. So, I took the min. £10k on a two year deal to get the additional discount which would save me £1k after paying the interest of £400. Then, after taking delivery and having the finance set up I rang BMW finance (on advice of a TZ forum member) and simply paid off the finance in full over the phone to clear the debt and avoid the interest. Don't ask me how this works to help BMW make money, I have no idea!

[solwisesteve]

Yes a good point... I'd forgotten about that clause. I'm sure the huge majority of PCP takers would never think or want to do this.... they just want to treat PCP much like our parents used to use HP; just a way of buying on the never-never. The advantage (it might be small - I don't know) is you don't have to worry about resale value at the end, simply hand it back.

I'd like to know some stories and figures about the conclusion of PCP deals i.e. did the punter get hit with a load of 'not-fair-wear-and-tear' type penalties? I'm also interested to know how accurate the PCP company is on their prediction of the final value of the vehicle? Do they normally get it spot on? I'm curious because I wonder how often the vehicle is ever worth more than the foreseen value so you can then decide to buy it back or treat the extra towards your next purchase. Also... who decides the value at the end? Yes I know there's the fixed value as originally predicted by the finance company BUT what about the true market value at the conclusion of the lease? So my dealer said if it was worth more than the final amount then the extra could be used as a trade in but who decides on that value? I guess it would be best for the dealer for them to say it's worth nothing extra i.e. forcing you to stump up more money.

Anyway, for me, this first time is to act as a weather vane as to whether I'll ever do a PCP deal again. The way interest rates for finance are going then I'm not convinced I'll do it again but that's a couple of years away now and a lot can happen in that time especially considering the political and financial turmoil over the next 12 months.

[Dave+63]

The GMFV is the guaranteed minimum future vale and the amount that’s left for you to pay in order to own the car outright.

Usually the car is worth a fair bit more than this so that you have a figure to use as the deposit fir your next car. It’s their way of keeping you in the system.

It’s almost never better to just hand the car back although it goes occasionally happen; some of the deals on the Nissan Leaf in the early days were so good, coupled with very poor residuals, that the car was worth far less than the GMFV. This isn’t the case any more as EVs have become more widely accepted; the deals aren’t as good and the residuals are higher.

[solwisesteve]

The GMFV is the guaranteed minimum future vale and the amount that’s left for you to pay in order to own the car outright.

Usually the car is worth a fair bit more than this so that you have a figure to use as the deposit fir your next car. It’s their way of keeping you in the system.

It’s almost never better to just hand the car back although it goes occasionally happen; some of the deals on the Nissan Leaf in the early days were so good, coupled with very poor residuals, that the car was worth far less than the GMFV. This isn’t the case any more as EVs have become more widely accepted; the deals aren’t as good and the residuals are higher.

Okay... not what I expected i.e. the final value higher than predicted. So who decides on the final value? WBAC or what ever the dealer wants to offer I suppose.

[gavsw20]

I have a Cayman 981 on a PCP ending in August this year. Final balloon payment is £19,038.

WBAC offered £23k, however a specialist dealer offered me £26k.

Private sale I could put it up for about £28k but would rather PX as it’s just less hassle / time burnt.

[gavsw20]

I have a Cayman 981 on a PCP ending in August this year. Final balloon payment is £19,038.

WBAC offered £23k, however a specialist dealer offered me £26k.

Private sale I could put it up for about £28k but would rather PX as it’s just less hassle / time burnt.

Also, the guaranteed future value is set at the start of the PCP. They typically build in some value so you can use that as a deposit for the next vehicle but it is nearly always better to either refinance the balloon with a loan and then either keep or sell.

[Dave+63]

Okay... not what I expected i.e. the final value higher than predicted. So who decides on the final value? WBAC or what ever the dealer wants to offer I suppose.

The value will be whatever it’s worth in the market as with any other car. Also, you’ve no obligation to go back to the dealer you bought it from, you can trade it in against any other vehicle. As with buying any car, new or otherwise, it’s a case of getting the best deal for you. It’s just the same as if you own the car, the only difference is that there’s still an amount of finance to pay off and the whole trade in price isn’t yours.

As an example, say you’re looking at a £20k car and yours is worth £10k but you still owe the finance of £7k.
You would have £3k as your deposit left after paying the finance off and therefore need to find an extra £17k for your next car.

[solwisesteve]

Thanks for the info and lessons :-) Seriously... these were not things I was aware of and worth knowing.

[Dave+63]

Happy to help.

[jonny]

Hi - been very spontaneous and agreed to buy a new car which I haven’t seen in the flesh.
I have discussed different finance options and they have provided a pcp deal that meets the payment I want to make. I am happy with the monthly cost. I could pay cash for the car (along with my part ex). Cash in the bank gets very low rates of return. The benefit is no ballon payment and no mileage penalties (directly if annual mileage exceeded).

So can I refuse the finance and pay cash or is this the main area they are making their money? Can they refuse to allow me to pay cash? I haven’t asked them yet, but I wondered if there is any experience of this - 2 other dealers I spoke to over the weekend said they can not discriminate over cash or finance....

Whats the interest rate on the PCP? (and what car ?)
If the interest rate is high may make sense to pay off the finance early . Manufacturers offer incentives for taking finance so if even if you are a cash buyer always makes sense to take the finance and then pay it off.

[TikTokTrev]

Just to add some balance with my current end of PCP experience.

I have just come to the end of my 4th consecutive PCP.
The cars were a BMW followed by 3 Audi’s.
The first 3 I was able to trade in for a new car soon after the 2 year point. I played hard to get and each time the dealer was able to put me in a new car at lower monthly payments and settled the finance on the previous car on my behalf.
I was aware they were ‘massaging’ the figures to do this, and so this time round I have found myself with £2000 negative equity and so have given the car back and am starting again.

To answer another question giving the car back seems to be designed to be lot more difficult than renewing....dealing with VWFS and British Car Auctions who act on their behalf has proven to be a real headache, and the situation is ongoing even though the car was collected over 2 weeks ago. Grrrrrr!

I now have a new Mini being built. As others have mentioned I have elected to take out another PCP in order to gain the manufacturers contribution...I intend to settle this at the earliest opportunity...the dealer tells me I can do this after one month subject to a penalty of 55 days interest.
I am aware that I can cancel the agreement within 14 days, but I suspect the manufacturer will try to reclaim their contribution if I do.

[TomRea]

Thanks guys, some good info in this thread

[Slamdoor]

If the deal is interest free and you can pay off the balance as soon as you like then it’s a good idea if the finance contributes to the deposit. Did it myself with Toyota a while ago but watch the small print as some deals won’t let you pay off the balance prematurely.

[Dave+63]

If the deal is interest free and you can pay off the balance as soon as you like then it’s a good idea if the finance contributes to the deposit. Did it myself with Toyota a while ago but watch the small print as some deals won’t let you pay off the balance prematurely.

If the deal is interest free, you may as well keep your cash somewhere where it can earn you something; there’s no point in paying it off early.

[Slamdoor]

If the deal is interest free, you may as well keep your cash somewhere where it can earn you something; there’s no point in paying it off early.

True but I’d rather own the car than the finance company own it until the dept is paid off. I just don’t like owing money to anyone

[Dave+63]

True but I’d rather own the car than the finance company own it until the dept is paid off. I just don’t like owing money to anyone

What you’d rather do doesn’t make it a good option though; the financially astute thing to do is to keep the interest free debt and make the money work for you.

[jaytip]

To answer another question giving the car back seems to be designed to be lot more difficult than renewing....dealing with VWFS and British Car Auctions who act on their behalf has proven to be a real headache, and the situation is ongoing even though the car was collected over 2 weeks ago. Grrrrrr!

Little bit surprised by this. I did a VT on my last PCP and it was relatively straight forward.
I contacted VW and told them I wanted to do a VT on my car, they said BCA would be in touch. A guy turned up a few weeks later, inspected the car, gave me a print off and off he drove in the car. Job done

[TikTokTrev]

Little bit surprised by this. I did a VT on my last PCP and it was relatively straight forward.
I contacted VW and told them I wanted to do a VT on my car, they said BCA would be in touch. A guy turned up a few weeks later, inspected the car, gave me a print off and off he drove in the car. Job done

My experience thus far....the short version!
Given the wrong information by VWFS about contract end so had to postpone my new car order whilst this was sorted, and lost my build slot...I am without a car for the next 3 weeks as a result.
VWFS then instructed BCA to pick up a grey A5. My car was a black A3 so BCA refused to pick it up!
In the meantime VWFS tried to collect another direct debit payment even though the contract had ended.
Rebooked BCA for 2 consecutive days between 8-30 and 5-30. Inspection followed by pick up, so 2 days off work.
Day 1 inspector failed to show!
Day 2 car collected and was told it would be locked in a compound and subsequently inspected.
Yesterday 2 weeks after collection the car appeared at auction with 250 more miles on the clock and a scrape down one side!
The car was not inspected prior to auction and has now been sold.
Currently waiting for VWFS to investigate and confirm I will not be charged for the mileage and scrape! Luckily I took photos all round the car before it was taken away.

Seems you had more luck than me!!

[jaytip]

My experience thus far....the short version!
Given the wrong information by VWFS about contract end so had to postpone my new car order whilst this was sorted, and lost my build slot...I am without a car for the next 3 weeks as a result.
VWFS then instructed BCA to pick up a grey A5. My car was a black A3 so BCA refused to pick it up!
In the meantime VWFS tried to collect another direct debit payment even though the contract had ended.
Rebooked BCA for 2 consecutive days between 8-30 and 5-30. Inspection followed by pick up, so 2 days off work.
Day 1 inspector failed to show!
Day 2 car collected and was told it would be locked in a compound and subsequently inspected.
Yesterday 2 weeks after collection the car appeared at auction with 250 more miles on the clock and a scrape down one side!
The car was not inspected prior to auction and has now been sold.
Currently waiting for VWFS to investigate and confirm I will not be charged for the mileage and scrape! Luckily I took photos all round the car before it was taken away.

Seems you had more luck than me!!

Gotta say, that sounds a bit of a mare.

[TikTokTrev]

Gotta say, that sounds a bit of a mare.

Indeed!
The shame is I enjoyed the 3 Audi’s I had, but they have been really let down by VWFS...I will avoid them like the plague in future.

[PHB1969]

I have a Cayman 981 on a PCP ending in August this year. Final balloon payment is £19,038.

WBAC offered £23k, however a specialist dealer offered me £26k.

Private sale I could put it up for about £28k but would rather PX as it’s just less hassle / time burnt.

The car I’m buying is a 718 Cayman. I’m looking forward to it (but guessing a few may say it’s missing a couple of cylinders) :)

[PHB1969]

...and went cash....it made more sense for me and considering a couple of factors, the deal agreed had very little value taking finance and paying off (unless I used the 14 day cool off period and cancelled which would have stuffed the dealer, which although I could, it really isn’t fair).

[UKMike]

For the record the GMFV price is usually assessed by independent companies - Glass's Autovista being the default UK choice. They get to see the cars in advance of launch so they can advise the finance companies (BMW New X5 and 8 Series were shown to them this week even though they won't be launched to the public till later in the year ........... but I never told you this).

[gavsw20]

The car I’m buying is a 718 Cayman. I’m looking forward to it (but guessing a few may say it’s missing a couple of cylinders) :)

Good choice, just PXd my 981 yesterday for a 911.

Which OPC did you purchase from?

[PHB1969]

Good choice, just PXd my 981 yesterday for a 911.

Which OPC did you purchase from?

Glasgow....pick it up tomorrow...excited and nervous....pdk, metallic sapphire blue, nav, dab (both are now standard) and black exhaust.....I think that doubles the bhp :).

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...and a 3 hour drive to pick it up....

[Gareth-W]

For the record the GMFV price is usually assessed by independent companies - Glass's Autovista being the default UK choice. They get to see the cars in advance of launch so they can advise the finance companies (BMW New X5 and 8 Series were shown to them this week even though they won't be launched to the public till later in the year ........... but I never told you this).

With respect Glass's guide are simply not in this equation whatsoever. CAP rule the corporate/finance house underwriting world along with other data sources from the manufacturers to CAP.