PCP loan to buy a used Volvo - £10k deposit?
Guys, just wanted some feedback/ advice please.
I want to buy a 2/3 year old Volvo XC40. Price maybe £30k. Want as low an APR as possible and lowish monthly payments (say, £250 per mth) over 3 or 4 years. Is it worth putting in a £10k deposit?
Any other ideas to more efficiently loan fund the car?
Many thanks!
Well technically yes as it reduces the amount you’re paying interest on, but overall PCP on a used car is a very expensive way to buy.
There are so many variables that you need to consider…GFV, annual mileage, are you planning on keeping the car?
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The APR on a second hand car is likely to be 10% plus so even putting £10k down leaves a balance of £20k which equates to approximately £2,000 pa interest (I know it’s reducing but not by much if you’re only paying £250 pm).
Paying £250 per month only pays a little over £1000 pa off the loan so you’ll still owe around £15k in four years time.
Low repayments on high apr loans is a very expensive way to go about it.
You’d probably be better going for a new one, paying a bit more and getting a lower apr, it will probably be cheaper overall.
My wife has just been through exactly the same thing with Volvo (looking at a 2 year old XC40 or XC60).
We had a similar budget iro £300 per month and it was nowhere near. Partly due to decent used cars being the same price as new - the only benefit being you can drive them away the same day rather than waiting 9-12 months for delivery.
A large deposit on PCP just to keep the monthly down a bit is no good IMO, the money just goes into a black hole as you never own the car (unless you re-finance to purchase outright at the end of the term). We did that on our first PCP on a Nissan Qashqui - traded in a £6k Peugeot and added almost the same in cash, completely mis-sold the deal, we were clueless on what PCP actually was. If you're buying then the bigger deposit the better but on a PCP the best I'd ever do is trade my current car and use that as the deposit.
Volvo do a cracking lease deal where they cover basically everything but the fuel for 2 years, but if I recall that starts at about £400 per month. We almost went for it but the hybrid model was a LOT more, pushed it to £550 or so. In the end we had to walk away, absolutely no room to negotiate a deal, it's just not a buyers market.
Last edited by kevkojak; 16th May 2022 at 08:36.
i assume you are leasing it to maintain the option to give it back in three years, if so you may be better off leasing a new one,
If you put down £15k and borrow the rest you could repay around £350 over 4 years. I'd rather do that than PCP otherwise you risk losing your £10k if you don't pay the balloon.
Just get a £25k personal loan on circa 3% pay difference as cash deposit.
Post Office
2.9%
£328 per month over 7 years
Yes it’s longer than 3-4 years but it’s not secured on the car so in 3-4 years you can sell and upgrade.
Last edited by dougair; 16th May 2022 at 10:55.
Unless you are wedded to a newish car I would by a slightly older car - one owner low mileage minter to fit your budget using a much lower interest rate
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Thanks Guys, for all the input so far. :)
What about borrowing the balance against my property (i.e. adding to the mortgage), but paying this additional borrowing off over 4 years?
Low apr loan would be my preference as suggested above, I certainly wouldn’t have it tied to the house even short term.
Best of luck.
Cheers
Rory
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Out of idle curiosity I looked at some personal pcp offerings rather than dealer in house offerings and the Apr was ~18.5%
Certainly a personal loan would be a cheaper offering
It would be a dealer purchase, with APR of about 7%. However I think there are personal loans available at the moment at 2.9%, so I may go down that route, plus a larger deposit.
Not a Volvo but I bought a merc last year. £28k put £8k down and financed the rest. Looked at pcp figures from both Merc and Admiral, in the end I got it from the bank at £314 a month well over £125 a month cheaper than pcp. Took it over 66 months though but I have the car at the end and when I get bored I can sell it and get another anytime I want. This was the only time I’ve taken gap insurance out.
I know people will wince at the though but it’s worked for me.
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Big difference between leasing and pcp.Originally Posted by adrianw
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I’ve just been through this exact exercise on an XC60.
£11200 px for my c300 hybrid, and I was able to pay a maximum deposit of £14k ish for pcp, but i wanted to put as much in as possible to keep the repayments down - another £15k or so, leaving around £16k to finance. It worked out cheaper overall and with lower repayments to take out a personal loan (at 3.3% with first direct) for the balance.
I could have paid outright from my own savings but that’s my slush fund to cover possible disruption to employment so decided that the minimal (c£500 IIRC) charges for finance were worth it for peace of mind. The total charges for credit for pcp were closer to £6k. Big difference.
On the plus side though, the XC is a lovely car, you will both love it!
Volvo Selekt regularly do interest free credit events. I’d keep an eye out
It looks as if the days of low cost financed cars are over
I purchased a brand new BMW 18 months ago.£15k off list price (purchased it at the end of December) Paid £1500 deposit finance is at 2.9% APR. I could have purchased it out right however my money is better used elsewhere. The car is almost still worth what I paid for it (that’s shear luck though!)!
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If you have a rerasonable deposit and your credit rating is decent go for a personal loan while banks are still falling over themselves to offer loans and rates are still low.
But you only live once and never know when it’s going to end.
If you want something and can afford it, then buy it. Money was designed for spending after all!
Not the whole picture at all, what if you want to use the capital elsewhere in investments but still want/need a car that is new(ish).
What if you are looking to pay down a mortgage coming to the end of a preferential rate change.
You have a nest egg sufficient to buy the car but would rather keep that liquid than tied up in goods.
What if you have a car allowance and you are required a car of a certain age/type but want to turn that to a asset rather than lease.
There are many reasons to take finance for a car rather than a simple only buy what you can afford from cash?
Not everyone who buys on finance has to borrow and affordability isn’t just about being able to pay for something outright or else practically nobody could afford to buy a house for example.
Everyone is different and uses money/finance accordingly and what is right for one person isn’t necessarily right for anyone else and certainly not for everyone else.
FWIW, I’m with you wrt to cars but appreciate that it’s probably not the best solution financially for me or others. I even go so far as being happy to spend fairly substantial amounts to keep older cars on the road. People may say that it’s throwing good money after bad but spending, say, £1000 a year to keep an old car on the road is more cost effective than buying a higher priced car and losing a greater amount in depreciation.
Each to their own though and my views are certainly not aligned with the majority. On the plus side, if people didn’t buy expensive new cars, there’d be no cheaper older cars for us to buy.
That is my perspective currently too, especially for the next period until electric dominance.
Have had dealer finance deals before but two years ago I bought a Saab 9-3 for £2k, spent a few hundred getting it straight and now only pay for MOT and service, no monthly or balloon payments. Has never broken down or given me any trouble and is a great family car.
I'm happy keeping old cars on the road too - I currently have a BMW 3-series convertible 335i (2008 model) - with 204k miles on the clock.
I've owned it since 2011 (when I bought it at 50k miles) and it has been maintained regardless of cost. Just fancy a change now and can still get £3.5k minimum for it. :)
Same here, I'm a car guy but have an Octavia diesel estate for everyday, it runs lovely, pulls well, comfortable, nice interior, gets around 530 miles per tank, I service myself for about £35 using Eurocarparts and touch wood I have only had to replace the ignition switch (£10) and 2 tyres.
I paid £1600 for it 3 years ago, put around 20k miles on it so far and current value is still about £1600+, I hate losing money on everyday cars and dont like stressing where I park, my other car though is locked up in the garage and only comes out on dry days, its a nice balance that provides me with cheap quality motoring.
Cheapest money is your own, set up the direct debit to pay your self back,
Hitachi, who i have used, for a personal loan, rate are very good,
Dealer money is last resort
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