Finance People

[jord79]

Surely it all depends on your means. If you've got the full amount in cash, that is the cheapest way to proceed. If you don't, then outright ownership isn't even an option.

I have a reasonable deposit and also want to keep my options open. My current plan is to use the car as a DD for 5 years, but financing the full amount will be tight on repayments, so the PCP works well for me. By the end of a 3 year contract I should be able to save enough to pay off the bulk of the balance, but should my circumstances change, or I want to change the car or invest in something else, I can always give the car back.

My only gripe is that the Ford finance rate is quite high, but at least 5.8% is a little less than it was last year. (6.2, 6.3?)

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[Kiwimatt]

If you don't plan to keep a car then that's the thing to do. You end up with lower monthly payments over the same period of time and equity at the end for a new model from any brand.

CAUTION.......You are in no way guaranteed any equity in the car at the end! So even though you pay lower monthly you could end up with zip at the end. So when handing it in you may have to stump up another deposit etc.

The best and always the cheapest way is to buy outright for cash, always has been always will be. That way you end up with all the equity. This is obviously not an option for all, but PCP has traps. Be careful and read the terms. Obviously GFV does not mean equity.

http://www.telegraph.co.uk/motoring/news/10683988/Is-PCP-finance-a-good-deal-in-the-long-term.html

 

[slowhand99]

Surely it all depends on your means. If you've got the full amount in cash, that is the cheapest way to proceed.

Not always. If you do a quote for a Mondeo on finance (not PCP) Ford give a deposit 'contribution' which is more than the interest over the full term. That's what our dealer friend was trying to explain with the Fiesta example I think. It works for cars with good margins. For low or no margins (e.g. Mustang) there is no such offer. The clue is often the amount you can get off by using a broker (e.g. coast2coastcars.co.uk). If there is a broker discount available then paying up front is still cheaper.

 

[SteveS]

Not always. If you do a quote for a Mondeo on finance (not PCP) Ford give a deposit 'contribution' which is more than the interest over the full term. That's what our dealer friend was trying to explain with the Fiesta example I think. It works for cars with good margins. For low or no margins (e.g. Mustang) there is no such offer. The clue is often the amount you can get off by using a broker (e.g. coast2coastcars.co.uk). If there is a broker discount available then paying up front is still cheaper.

Up-front the deposit contribution makes it look like a cheaper option but to me the key is the margin. With finance you're introducing an additional party to the deal and both the finance house and the dealer/manufacturer has to make their money. If they'll give you a deposit contribution to use finance then surely you could negotiate a similar discount for cash?
I don't know much about this, that may be obvious, but I'm just applying logic to it. I assumed that offering finance was a way to get bums on seats they otherwise couldn't afford, not as a way to offer cheaper cars to punters and less profit to car manufacturers.

 

[Jimboy2]

My other niggling worry is the amount of money I have to borrow and the chances of being declined. Haven't been declined for anything over the last 5 years or so but never attempted to borrow 25k! I'm a home owner with no mortgage, and about 8k on credit cards.
Just finished a loan of the same monthly payments but I don't think they'll look that deepley into it.
I feel with a finance through the dealer there is more security for them rather than through a bank loan, so it feels there is less chance of complications come paperwork day if I go through dealer. Genuinely don't know how it works so am probably completely wrong.

 

[Stark]

Ok so I went to the dealer today to double check a few things. Can anyone remember and/or has a screenshot of a ford finance quote they did online last year? The reason I ask is I 100% remember the balloon payment being just over £17000 at the end options deal and the interest rate set at 6.8% (£500 payment per month). Now the interest rate has dropped to 5.8% this quarter but the balloon payment has also dropped, which in turn has made the amount you pay for the car over 3yrs go up and monthly payments slightly increase (£515). Not sure how this has all worked out, will do it tomorrow but wanted to know I wasn't going mad that the balloon payment has also changed lol??

 

[slowhand99]

.............. surely you could negotiate a similar discount for cash?

For a Mondeo or Fiesta, yes. But not for a Mustang (or a Nissan or a Land Rover at the moment as it happens).

 

[SteveS]

Don't have a screenshot but I agree with your recollection.
Sounds like massaging the figures to make the Ford deal appear more competitive, ie lowering the rate but keeping the payments the same.

 

[Col3371]

Ok so I went to the dealer today to double check a few things. Can anyone remember and/or has a screenshot of a ford finance quote they did online last year? The reason I ask is I 100% remember the balloon payment being just over £17000 at the end options deal and the interest rate set at 6.8% (£500 payment per month). Now the interest rate has dropped to 5.8% this quarter but the balloon payment has also dropped, which in turn has made the amount you pay for the car over 3yrs go up and monthly payments slightly increase (£515). Not sure how this has all worked out, will do it tomorrow but wanted to know I wasn't going mad that the balloon payment has also changed lol??

Stark. Back in October when I ordered mine, I insisted that my dealer does a finance deal to make sure all was well. My GT total was £36,175.00 & is now £500 more quoted (although I'll be paying old quote of course). Was 6.8% now 5.8%. I'm paying max deposit which was £12,661.25, now £12,836.25. Monthlies gone up about £34. Ballon payment was £17,907, now £16,301. All this is on 6k max per year although I notice that they've increased the excess mileage cost from 10p per mile to 12p! Sneaky!
I initially wanted to pay a little more deposit but this is the most on a PCP so I was going to bank extra per month to reduce the balloon.
Now it's on 16k, I think I'll leave it & be happy with the deal (assuming that it don't change for the worse meantime of course, mine isn't due until May/June/July???.
Anyway, hope this helps & congrats on the car too.
If you need anything else, just ask.

 

[j-rowe14]

I'm wondering what to do as I'm thinking of only keeping the Mustang for three years. Suppose it depends if the optional final payment on PCP ends up being less for a decent deposit.

I can do you figures if you want?
Just need mileage, spec of the car and how many payments up front

Thanks
James

 

[Toploader]

There are specific circumstances to meet the best credit deals, being young and seemingly debt free is only a part of it, if you own property outright, that's another part, a LONG checkable employment history is a major part.

In my experience personal loan headline rates are pure fantasy !

Above average credit rating, main property owned outright, second property 50% LTV so good equity, very minimal borrowing credit cards etc. Never been offered anywhere near to the advertised rates !

Up until now I've thought PCP's were bit of a mugs game but I'm starting to think if used right then maybe they're not so bad.

Base V8 GT PCP with Ford Credit at the moment - if you can put in the max allowed deposit of £12k on a PCP the monthly payments are £263 X 36 with just over £16k final payment based on 6000 miles a year.

Sure it's going to cost but I've got the 12k deposit, the final payment shouldn't be a problem to pay off in full at the 3 year term and then can decide to either to keep or sell the car at that point.

Is there any other way to get into a new GT for £263 a month ?

Go down to 24 month PCP and you can get it to £210 a month which is pretty amazing - the downside being good bit more at the final payment.

 

[marks]

Im not sure i fully understand PCP but i agree at first glimpse it seems a bit of a con. The first three years of a car are when it depreciates the most and so if you change it every three years you are getting hit by the maximum costs? Secondly, even if you do decide to buy it after three years the interst rates of circa 6 or 7% are outrageous bearing in mind rates are 0.5% and you can get a personal loan at 3.8% and remortgage for about 3%. And if you can afford to buy it after the third year then surely you could put down that initially as a deposit anyway and pay less interest? Maybe im completely wrong?!

 

[Timewarp]

Im not sure i fully understand PCP but i agree at first glimpse it seems a bit of a con. The first three years of a car are when it depreciates the most and so if you change it every three years you are getting hit by the maximum costs? Secondly, even if you do decide to buy it after three years the interst rates of circa 6 or 7% are outrageous bearing in mind rates are 0.5% and you can get a personal loan at 3.8% and remortgage for about 3%. And if you can afford to buy it after the third year then surely you could put down that initially as a deposit anyway and pay less interest? Maybe im completely wrong?!

Sounds about right.

You could get a separate loan if you decided to keep the car though at a lower interest rate. Or you could use the difference between guaranteed final value and market value as a deposit on another new one.

I guess the advantage is that your payments are much lower if you're not intending to keep the car as after three years you don't necessarily owe money on a depreciating asset unless you want to keep it via another loan.

 

[marks]

Sounds about right.

You could get a separate loan if you decided to keep the car though at a lower interest rate. Or you could use the difference between guaranteed final value and market value as a deposit on another new one.

I guess the advantage is that your payments are much lower if you're not intending to keep the car as after three years you don't necessarily owe money on a depreciating asset unless you want to keep it via another loan.

I see, thanks for clarifying.

 

[Toploader]

I'm no PCP expert .. at all .. but from what I know about the ones I've looked into one of the key points that I see to bear in mind is that you are paying interest on the deferred amount from day one .. i.e. interest on the balloon payment / final value or whatever you want to call it .. the manufacturers aren't just forgetting about that big lump sum of money for 2 or 3 years ! .. it sounds obvious but a lot of folks don't seem to realise or think about that .. They just put the final value to one side to deal with at the end of the PCP itself without any real plan .. If you PCP your Mustang ( or whatever ) for 36 months then finance the balloon at the end for another 36 or 48 you're most likely to be stretching out into a lot of interest.

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