I'm very close to choosing an approved BMW 320 M Sport Touring on an 06 plate. It's £21000, which is well over my original budget that I set when looking for a new car. The problem is that with the £15000 budget I had, I couldn't find anything that I REALLY liked.
Now if I got this car, I would either have to go for a deferred loan through a bank or the BMW pcp scheme. BMW have said they would be prepared to drop the APR from a high 10.9%, but wouldn't give an exact figure until I committed to buying. Payments (with a £7200 deposit) would be £171/month (at original 10.9%) with a GFV after three years of £10500.
The deferred loan would be about £11000, at %6.4 would work out around £210/month with approx £4500 left. (Are you keeping up!)
I've never considered a pcp before as I never liked the idea of being tied in. Dealer assured me there were no penalties for early settlement. Just looking for experiences of others and any comments regarding pros and cons. (I know neither option is the sensible thing, but I might get run over by a bus tomorrow....and the wife gets my money then)
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We had both smarts on PCP - the major cons are the APR (which if you can get to anywhere near a bank loan well done), set up and release fees, the mileage restriction (smart was 10,000 and as a second car never a problem), keeping the car tidy and damage free.
The pro was ability to hand it back - which we did with the second one. I prefer bank loans as they are not attached to the car giving me the freedom to sell the car should I wish to.
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The phrase that rings alarm bells for me is that the dealer won't confirm the APR until you commit to buying. Its illegal, for one thing, not to state the APR of a credit deal clearly. It also suggests that the rate is nothing to get excited about - if he was offering a good deal, he wouldn't be so coy about it.
Just a thought, but is it not time to have another look at whether you can find a decent condition 3 series for your £15,000 budget? After all, there are lots of enjoyable ways to spend £6,000 plus the extra cost of credit!
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Sorry if I'm missing something, but on the defered loan, assuming the deposit is the same as the PCP (£7200) then the totals over 3 years don't even add up to the price of the car?
I think APR's always look higher on PCP's than conventional loans, although I'm not clear why. I guess they won't give you an APR because it varies depending on the deal.
if you go down the PCP route then it might be worth having a look at a new car PCP - after 3 years the car will be worth more and there might be deals / support available from BMW to shift new cars.
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All figures were off the top of my head. The bank loan route would entail me putting in about £11000 cash plus the loan. Trouble with £15000 grand BMWs is that they're all 3-4 years old (at least the models I'm looking at) and I couldn't bring myself to spend that much on a car that old.
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I've looked into this quite a bit over time.
I think if you get a bank loan (see moneysupermarket for good rates) and set the term longer, to perhaps 7 years, then you will be able to mirror the 'deferred' part of the pcp, i.e. the main benefit, but not have to stick to the more rigid limits.
If you are really brave you could increase the term of the loan to such a point that the loan will be equal to the residual value of the car. Of course this means you need to work out how long you want to keep the car and then look into a crystal ball (or guess) for the residual value.
For example you might get a loan for 7 or 8 years. Keep the car 5 years at which point the outstanding loan balance is matched by the cars value.
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I've never managed to keep a car longer than two and a half years. Poor show I know...but that's just me! I'm certainly undecided about the deal, I liked the car, but those run flat tyres ugh!!
(How difficult can it be to spend so much money!!)
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"BMW have said they would be prepared to drop the APR from a high 10.9%, but wouldn't give an exact figure until I committed to buying." - Would you be prepared to buy a used car of this man?? How can you commit to buy until you know the exact costs?? LOL!
How about a brand new Subaru Impreza WRX 2.5 Wagon for under £15k (from www.newregcars.co.uk) with three year warranty etc? Terrific fun to drive and very sturdy. They also do Legacy wagons at similar good discounts.
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I'm not quite the mug I sound!! He would have to be much more specific before I signed anything. The Imprezza is a bit too 'hard core' for me. (I'd I'd be forever worrying about it getting knicked. A Brera is still an option, assuming I can find a suitable neckbrace (for the inevitable stiff neck) and if it has a Focus in the boot to give to the wife and kids.
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Unless it's really necessary, why not pay cash. My puritanical streak always baulks at usury, you're simply paying more for it,
and if it can't be bought with existing funds, can it really be afforded?
I've looked into all the alphabet soup combinations of credit buying, all without exception offer
worse deals than cash., no matter how 'easy' they're touted as - someone's always riding on your back.
In 6 months, presuming the dream car is bought, it'll be worth £4-5 less than you paid for it, and with your
declared itchy 'car' feet , it's a good way of destroying capital. Why not wait a while, let your 'ideal' car creep
down in value & in the meantime add to your cash pile, hopefully the 2 will meet & you'll be several £k's better off.
All imho , of course.
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That, of course, is the sensible thing to do . As is keeping my 100%, paid for, Vectra Sri with leather and sat nav!!! I'm just not very sensible when it comes to cars.
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Should have said 100% reliable!
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I've looked into all the alphabet soup combinations of credit buying, all without exception offer worse deals than cash., no matter how 'easy' they're touted
I bought my MB from MB Direct for cash, and they dropped their HP rate to 2.9% flat so that (even with the charges, and the tax my wife pays on the interest) I'd have been sightly better off taking the loan than using my own money. As savings interest rates have risen, I'd be even better off now.
I still paid cash (just because I was all set in my mind to do that) and the salespeople were distraught - so there must somehow still be money it it for them, even if it looks like a loss leading rate.
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>>I bought my MB from MB Direct for cash, and they dropped their HP rate to 2.9% flat so that (even with the charges, and the tax my wife pays on the interest) I'd >>have been sightly better off taking the loan than using my own money. As savings interest rates have risen, I'd be even better off now.
>>I still paid cash (just because I was all set in my mind to do that) and the salespeople were distraught - so there must somehow still be money it it for them, >>even if it looks like a loss leading rate.
BP, have you factored-in that 2.9% flat-rate actually works out roughly, to 6.2% APR ?
So, (and if I'm calculating correctly + excluding any tax-free accounts) your savings say on , £10K, have to earn about (assuming 22% tax) circa 7.5% APR gross
to make it worthwhile in the narrow financial sense.
I would also hazard to suggest that the actual price of the car was fairly fixed & might not be entirely competitive with a Drive-the-Deal or similar
deal - although I'm guessing at this point. No wonder the salespeople were distraught. Your cash decision still looks good to me.
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BP, have you factored-in that 2.9% flat-rate actually works out roughly, to 6.2% APR ?
I never take any notice of APR's - I simply add up the monthly payments & deposit so I can see the total cost in £. I'm not sure it's valid to compare APR's on savings and loans anyway?
In very simple terms, if you borrow £20K for 2 years then you pay interest on £20K for the first year, then on £10K for the second year.
The £20K you kept in the bank earns interest on £20K for both years (plus of course interest on the first years interest).
I think the savings interest rate was 4.25% (3.3% net) and even adding on the set-up & final costs (which with such low interest rates start to look considerable) the loan would have been cheaper. Now interest rate is 5% (3.9%) net it would have been even cheaper to have taken the loan.
I would also hazard to suggest that the actual price of the car was fairly fixed
This was at MB Direct, who sell used MB's, and the car was a well loaded 5mth old C270 Avantgarde Estate which was listed at £26995 and I paid £23500.
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