Buying new car advice

[Gemmzl]

Hi,

I went down to VW today to have a quick look about. The salesman there was telling me about their 6.2% rate.

Once i sell my car and with the money i've saved i'll have all but 4-5k depending on final spec for the new car. The salesman was saying most people buy cars these days on plans such as the one i was offered and people bank their money as you'll get a better rate for your savings. So in theory saving money in the long run.

I was wondering what people here do for their new purchases?

Thanks all

Darren

[Mook]

Sorry, Darren, the salesman is talking complete bollox.

When you buy a car by borrowing money, there's no way in hell you're "saving money". Pls can you find out from the salesman which savings account gives you 6.2% foxed for 3 years - oh and don't forget that'll have to be AER (i.e. after tax). I'd love to know, then I can stick some of my savings in that account.

Now the harsh reality is that the salesman is technically mis-selling to you. The Financial Services Authority (FSA) would come down on the dealer like a tonne of bricks for giving you advice like that.

The only thing I would advise is to only buy a car you can afford, regardless of how much pressure you may feel put under by any salesman

Also, once you've been given a rate by the salesman (or the finance specialist at the dealer) then go out and find competitive rates from as many places as you can (do a trawl on Google for the same type of finance deal you've been offered, plus search the back pages of mags like EVO and CAR). Once you've got the best rate, go bakc to the dealer and ask them to match the monthlies.

If they won't do it, then just walk away...

[JonC]

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(edit...) Pls can you find out from the salesman which savings account gives you 6.2% foxed for 3 years - oh and don't forget that'll have to be AER (i.e. after tax). I'd love to know, then I can stick some of my savings in that account.

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Cahoot (www.cahoot.co.uk and internet trading name of Abbey National) give 6.20% AER if you have £500k plus. Their savings rates have been historically good since I joined them 8 years ago - Not that I have in excess of £500k saved, but you get the picture

[jhibbin]

I do actually use PCP schemes but you need to understand what you are paying for as it does cost you more in the long run but it's really a question of cash flow and timing. If you have the money in the bank and nothing to do with it then buying the car outright is the cheapest way to own it, the only time that is not really true is if you see a 0% scheme. Or a very low interest scheme and you are buying via traditional HP and intend to own the car for longer than the HP length.

Although 6.2% is a good rate it is not better than saving and the two main reasons are that you pay tax on saving income which means you would need a much higher savings rate to net more than you loose on the interest, and PCP schemes will front load the interest so that you pay the interest on the full amount borrowed but only pay off a small amount of the capital.

However, that said I have used these schemes to buy a GTI and would do so again because I do not want all of my available cash tied up in an asset that I drive around in and I don't have enough cash to buy outright.

If you compare PCP with leasing rather than buying outright then it makes more sense. Lots of people rent houses for the exact same reason; when I drive a car on a PCP it's not really mine I just have use of it for a number of years and options to buy it at the end. Make sure you can afford the payments and that the final value is guaranteed.

Of course I'm talking from my own view point but I think the mantra "PCP is bad" is a little short sighted. It is only bad if you are looking for a way to own a car for 10 years if you want to rent one for 2 years then it can be just the ticket.

Whatever you do enjoy driving it

[Gemmzl]

I think in my situation it would be best to borrow the 4-5k and use what i've saved.

I can see how this scheme would help others, but as i'll on have to borrow a small amount, it seems like the best option for me.

[JonnyGTi]

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I think in my situation it would be best to borrow the 4-5k and use what i've saved.

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yep, I tend to agree with you in the circumstances.

If it was me, & given the amount, I would even try and find a credit card that is offering 12 months interest free credit on purchases (with no penalties), and use that for a year !!