zero_to60

Has anyone had any experience of such deals whereby you use your current car as a deposit plus any cash you may have, then pay a monthly payment with a baloon payment at the end?

Is this an expensive way to finance a car?

Kelk

Are you talking about a PCP (or is it PSP ) loan Z?

If so I know of a lot of people who have done this and find it better because you can either finance the balloon at the end if you haven't saved up for it over the time or just hand the keys back at the end. Yeah, you lose what you have already paid in with no product / ownership at the end but if you have opted out of a company car scheme and get an allowance then this seems to be a useful way to do it.

Bassoctopus

Yes

But as someone who is completely anal about every penny (that's not an insult!), you already know that Paul!!!

Work out exactly the price of the car and you'll see that you're paying a massive amount.

I also worry about the amount of negative equity you end up with in those deals. I have no problem borrowing money for a car, but I always like to make sure that should the worst come to the worst I always have positive equity in a car. If that's not the case I won't borrow over the odds.

dreamer

No, but I have a loan where I put in about 40% as deposit and have a balloon after 3 years. Only downside I can see is you are paying interest on the outstanding amount, and as there's a balloon the outstanding amount is higher than it would be without the balloon. Most of them have options to pay off bulk amounts and I'm doin gthis, reducing the balloon

The Woman

In my opinion yes. I don't like these, especially as you never repay enough, so at the end, you either have to part with the car or start again. You become stuck with this type of finance to keep you on the road unless you bite the bullet at some point. Plus the APR is often fairly high IMO.
I had to use pen, paper and calculator a while ago to demonstrate to The Man how much more we would be paying with one of them (although the monthly outgoing is lower during the contract) and how at the end of it we still would not own the car unless we pay quite a sum.

However, depending on your financial situation, it can be the only way to afford a vehicle sometimes. But be aware that those deals are also influenced by the expected residual value of the vehicle at the end of the (say) 3 years period. This could be a sticky point. Difficult to estimate accurately. Sometimes, it could be worth a very different value (up or down). I would not enter these deals unless it was my last option to keep me on the road. You take a gamble there. So you could win, you could lose. This is again a personal choice based on personal circumstances.

Any financing decision needs to involve serious comparisons. So get your pen, paper and calculator and compare the cost over the life of the asset you are buying. Ok you can use a spreadsheet too. These decisions are influenced by personal situations, and preferences (towards risk....etc). This is not entirely black & white. There are a lot of shades of grey in between.

scov

Zero
You have been in the business. You know that

Rob2005

Having been in Car sales for a while i would never recommend PCP unless its the last resort. As others have already said you will pay massive amounts of interest especially if you re finance the balloon payment.

If you finance the car you should be able to get a base rate of about 4% (9%APR)flat as sales are very slow at this time of the year. Benefit of finance is its against the car and not you as such, you can also hand the car back to the finance company after half the period has been paid. This wont effect your Credit in anyway.

A Personal loan is always the best option though with declining finance deals in my branch and many others it shows that people are wise to the old dealer finance package as this is where they make extra money in commission.

I'm with Nat West and i have a loan for 6.9% APR thats about 3%base rate which is really good.

Do yourself a favour to and dent take out any PPP even if they tell you it wont go through without it, its an old trick (loads of commission for the salesman if you have it).

Hope this helps.

zero_to60

thanks all.....

just running through options at the moment....part of me is happy owning 'the shed' outright but the temptation of having something more comfortable and quicker is strong at the moment

scov

That's the way to do it.

Take finance. The salesman gets a commision and the dealership takes a commision. Negotiate a better price. That should be easier as they will build their finance commision into their numbers and a bigger discount on the car will be easier to agree. Ensure that there are no penalties for early payment. Then take a cheaper high street loan and pay off the balance.

The salesman will rarely lose his commision. But the dealership will get a charge back.

How do I know this? Because some sales people use this ploy to close sales and generate more in their pay packet.

I ought to write a book.

M9 JOC

Bank of scotland take out a loan its as simple as that.
only 6.1% at moment up to 25K