PCP coming to an end...

[TobyAnscombe]

Hi guys - this is an odd question as I know that in order to answer it you probably need to see the details but..

We've had our XC60 D5 for 2.5 years and bought on a PCP from a local dealer - the monthly payments were ok and a reasonable trade in on our Audi. We went for 12,000 miles a year and have been really happy.

However, we are now 6k over the total milage and are into the 15p for the first 5k and 30p for each mile after that with 6 months to go - my guess is going to be about £2k in charges by the time we get to Feb (month 37).

The options as i see it are:

Wait till Sept, hope that there is a glut of MY14's and get a face lifted car as a straight swap. I'm guessing that the guaranteed value should kick in (less milage) which can be offset against the purchase price of a new (to me) car.

Find a 0% credit card/cheap loan and in Feb pay off the ballon payment then either WeBuyAnyCar it to become a cash buyer or trade it and see..

The WeBuyAnyCar price is about the same as the future value price so another option is to use that to offset the ballon price and come out flat but means that we are starting from zero for the next car...

I've never done finance before, always been a cash or personal loan buyer, hence my confusion. Going up to the dealers at the end of the month so they can value it and give us a price - I'd love a new XC90 (because its new and looks cool!) but the kids are not big enough yet to warrant it. We want another XC60, probably the R-Design again and pretty much the same spec as we have now - the only thing keeping me from going down the "buy outright" option is its worth £12k now, in another couple of years it won't be worth much (but accept that we would have had the usage) so this feels like the best trade in time.

In an ideal world we'd drive up to a dealer, hand the keys back, pay a little bit of money and drive away in a new car with the monthly payments being about the same - is this realistic?

Sorry for the ramble..

[John_C]

The charges only kick in if you hand the car back. If you're happy with the car and it meets your needs at the moment then I'd just pay off the balloon/final payment the cheapest way possible (0% credit card could be a good option, or personal loan rates are as low as 3.9% APR at the moment) and keep the car. You won't pay the excess mile charges if you do that.

This is actually a bad time to trade the car in. It's taken the bulk of the initial depreciation and the depreciation curve is levelling off. You will save a fortune keeping it compared to replacing it.

PCP is designed to keep you coming back for the low monthly payments but is actually the most expensive way to buy a car. That final payment/MGFV? You're paying interest on that right up until the end of the loan.

[tickedon]

I agree with John, that there might be some merit in keeping the current car for a bit longer. It shouldn't drop that much more in the 4th and 5th years vs 1-3.

There have been quite a few changes to the engines and range since you purchased, so I'd also look at the other costs - VED, fuel economy etc. - and see how that stacks up, and what savings you might make from switching over.

As a final point, PCP can be great value on a brand new car. I have yet to see it make sense on a 'nearly new' or 'used' car. Manufacturers provide "support" for the new car deals and their finance packages, and so they typically have a much lower APR (5.9%-ish) vs 9.9-10.9% APR on the used car finance packages.

Perhaps one of the best things to do, is to keep the current car for a bit longer, and use the monthly savings to build up some more capital that could go towards a replacement vehicle?

[Considered1]

Originally Posted by TobyAnscombe

In an ideal world we'd drive up to a dealer, hand the keys back, pay a little bit of money and drive away in a new car with the monthly payments being about the same - is this realistic?

Yes but I'd pay off the balloon yourself to avoid those penalties and trade at your leisure. I ended up with a new car mainly due to the finance rate being less than half of that on used cars and the massive DTD discount to show to your local dealer(s!)

[volvorocks]

Originally Posted by TobyAnscombe

....the only thing keeping me from going down the "buy outright" option is its worth £12k now, in another couple of years it won't be worth much (but accept that we would have had the usage) so this feels like the best trade in time.

A 2.5 or 3 year old XC60 is worth more than £12k, so if this is the settlement figure I would pay it and:-

1. Keep the car or
2. Sell it for more than £12k or
3. Part ex it for more than £12k

If you pay the settlement figure look on it as getting a '£2k discount' - that very £2k you will not be having to pay in excess mileage charges.

Regards loans:-

Try Tesco @ 4.1% APR

Regards

EDIT:- what is the exact model of XC60 you have?

[TobyAnscombe]

thanks for the reply's - good food for thought!

VolvoRocks = its a '61 plate R-Design D5 AWD. Its the 205hp version with nav, leather, heated seats & mirrors, electric front on drivers side, remote child locks, booster seats, rear tints, normal cruse control, hill decent - or at least thats all i can remember.

Its a good car and we would/will happily keep it - we're used to the monthly cost and would only really trade if the numbers actually worked out. At the dealers 2 years ago it all seemed really easy; buy now on pcp, guaranteed future value (which was stated to be lower than they would actually give us so we would get more at trade up time) and all we had to do was come back in 3 years and choose another car and it would be a simple transaction.

Obviously as I (and MrsToby) start to look at the practicalities its never as easy as a salesman would have you believe (I know - what a shock!!!) At the time we needed the car - a toddler and a baby and the A5 (lovely car) that we had was too low in the rear to lift in and out after a C-Section so from that side we did rush into it but were happy with the trade in and finance deal.

I will also be getting some inheritance money soon so could quite easily use that rather than take out cheap credit so there are always options..

[Considered1]

Nice car keep it whilst it serves your purpose

[bobarctor]

Originally Posted by TobyAnscombe

I will also be getting some inheritance money soon so could quite easily use that rather than take out cheap credit so there are always options..

Also worth bearing in mind that Volvo are running a 0% finance deal at the minute: 50% deposit and then balance over 24 months at 0%. Makes for a fairly brutal monthly payment but it's over relatively quickly

It was the 0%, the 5 years servicing for £500 and the new Euro VI compliant D4 engine that swung a new XC60 purchase (vs used) for me.

[swishtony]

Originally Posted by bobarctor

Also worth bearing in mind that Volvo are running a 0% finance deal at the minute: 50% deposit and then balance over 24 months at 0%. Makes for a fairly brutal monthly payment but it's over relatively quickly

It was the 0%, the 5 years servicing for £500 and the new Euro VI compliant D4 engine that swung a new XC60 purchase (vs used) for me.

Exactly the same case for me, plus the discount I was able to negotiate after delving into the dark side of DTD! I was on the verge of buying a nearly new one but after discount the new one only worked out just over £1k more than the used ones. As you say, that plus the interest free and service plan made buying a new one a no brainer really.

[2.4TSE]

I'd keep it too. The cheapest car is usually the one that you already have - even in the OP's case with the balloon payment.

Our views and priorities are all different (there is no right or wrong) but to share my rationale:

I purchased my V70 2.4T new in March 2003 with a view to running it for eight years - but eleven and a half years on from new I still have it. The reasons are simple; it is mine and paid for; my practical needs have not changed and the car is still well suited to them; I still enjoy driving it and looking at it; stunning reliability. All this means that the cost to change cannot be justified for any reason other than simply wanting a change. This will eventually happen, but not yet.

I keep a record of all expenditure including fuel. The running costs have worked out at 47.5 pence per mile (down from 49 pence per mile when I last gave an update in January 2013 and vs 60 pence per mile in my purchase costing) with absolutely everything included. This means even including the cost of the only major unplanned expense (steering rack), a BSR PPC remap over nine years ago and slightly higher Business Use insurance premiums because I am a Good Boy and declared the remap.

Not like-for-like with the OP because a major factor is BIK taxation, but if I had stayed in the company car scheme and had a new equivalent V70 every three years I would have spent at least £39,000 more than what I have actually spent and had no asset to call my own at the end of it. A very expensive way to buy peace of mind.