Facelift Buy cash or use a PCP?

h5djr · Jan 14, 2017

My new A3 Sportback has just left the factory and I will soon have to decide whether to buy it using a PCP or cash. I have more than enough money in the bank and as it's earning so little in interest it may be better to use the cash than go down the PCP route. What do others thing? Any advantages of use a PCP?

DrEskimo · Jan 14, 2017

You have any other use for the cash mate? Property development, other high debts you could clear?

If no, then yea cash will save you a shed load of money from the interest you end up being charged on a PCP.

Would probably be still better to pay in cash, and then borrow off a personal loan if you need it for anything else, as the interest off a standard bank loan is peanuts compared to a PCP.

deanshaw24 · Jan 14, 2017

The interest in on a PCP will be around £6000, you will not even get half that in interest from the banks

DrEskimo · Jan 14, 2017

deanshaw24 said:
The interest in on a PCP will be around £6000, you will not even get half that in interest from the banks

On a 48month one.

I'm on a 24month one and it's about £2800. When you consider I got an extra £1000 contribution for using their finance, it's not too bad.

But yea, no point having money sitting in the bank doing nothing, while paying large amounts in interest on borrowing.

lledwoc · Jan 14, 2017

Well, cash is always best, so 'get' the car on PCP to take advantage of the dealer contribution which is actually a discount but they're not allowed to say so, drive for a 9-12% discount by checking broker sites.

When the car comes as it is an FCA regulated product you have a 14 day cooling off period. Pick the car up sign for it and such, after a few days ring the finance company and cancel the finance for which they will send you a bill for the invoice price, which includes the discount and contribution.

If you're not afraid of ******* a lot of people off it's a great way to save a boat load cash.

musicegbdf · Jan 14, 2017

Yep , that is what I did . Though I left it for a couple of months as I know then the dealer gets a kick back . Cost me very little and might help me next time

DrEskimo · Jan 14, 2017

musicegbdf said:
Yep , that is what I did . Though I left it for a couple of months as I know then the dealer gets a kick back . Cost me very little and might help me next time

That's a good compromise I like that. Well if your salesman does a good job.

Did you ask how long you need to leave it?

Jassyo06 · Jan 14, 2017

Dave keep your money in the bank mate.....simples......never buy a new car Cash....pointless OR change the payment agreement and fire in a little more dosh.....

DrEskimo · Jan 14, 2017

jassyo06 said:
Dave keep your money in the bank mate.....simples......never buy a new car Cash....pointless OR change the payment agreement and fire in a little more dosh.....

Hmmm don't agree...Money in the bank will earn 0.5% interest, whereas it will cost him thousands in interest to get a PCP! Makes no sense...

Of course my advice might be 'don't buy a new car', but thats a different topic and not helpful for the OP

Jassyo06 · Jan 14, 2017

DrEskimo said:
Hmmm don't agree...Money in the bank will earn 0.5% interest, whereas it will cost him thousands in interest to get a PCP! Makes no sense...

Of course my advice might be 'don't buy a new car', but thats a different topic and not helpful for the OP

Age dependant.....rainy day.....

DrEskimo · Jan 14, 2017

jassyo06 said:
Age dependant.....rainy day.....

Yea fair enough. As I mentioned though, put in a big chunk and get a personal loan at 3% for the rest. That will cost only a few hundred quid in interest as apposed to thousands.

deanshaw24 · Jan 14, 2017

DrEskimo said:
On a 48month one.

I'm on a 24month one and it's about £2800. When you consider I got an extra £1000 contribution for using their finance, it's not too bad.

But yea, no point having money sitting in the bank doing nothing, while paying large amounts in interest on borrowing.

You can still get the contribution if you pay cash, just take out the PCP initially and pay it off within 14 days

CraigI · Jan 14, 2017

No one on here can answer this question.
So many variables: mortgage outstanding, savings in bank, pension pot (I have a feeling the OP might be of an age where that matters), other finance, credit cards, holiday plans, family, etc etc.
Silly question really.

I can give some advice, cancel the order and try something else - 9th A3...................

DrEskimo · Jan 14, 2017

deanshaw24 said:
You can still get the contribution if you pay cash, just take out the PCP initially and pay it off within 14 days

Yea sure, but I can't imagine taking out a PCP, then a week later taking out a large personal loan will look too great....!

Alright if you have the cash in hand.

Tom.H · Jan 14, 2017

The OP has the cash, so wouldn't need a loan to pay the finance off.

DrEskimo · Jan 14, 2017

Tom.H said:
The OP has the cash, so wouldn't need a loan to pay the finance off.

Yea I know. Was just pointing out that in my case, I wouldn't feel comfortable getting the PCP, then applying for a personal loan and settling it within 14days in order to keep the finance contribution. So in my case, getting the PCP over just 24months didn't earn that much more interest compared to a personal loan, when you factor in the additional contribution.

Appreciate it was a bit OT, sorry OP!

h5djr · Jan 14, 2017

My situation is probably quite different to some others. I have quite a lot of money 'in the bank' - certainly more than enough for a rainy day. I am 69, retired, have no mortgage, own my own house, own my current A3 and have no outstanding debts. So in a lucky position! The £18k I would have to pay to buy the new A3 cash would not make a much of a hole in my savings. I was just trying to see if there were any other advantages to purchase it using a PCP. Also I regard my sales guy , who is now a Specialist Sales Manager, as a friend having known him since I purchased my first A3 from him in 1998 and all the other nine since.

DrEskimo · Jan 14, 2017

h5djr said:
My situation is probably quite different to some others. I have quite a lot of money 'in the bank' - certainly more than enough for a rainy day. I am 69, retired, have no mortgage, own my own house, own my current A3 and have no outstanding debts. So in a lucky position! The £18k I would have to pay to buy the new A3 cash would not make a much of a hole in my savings. I was just trying to see if there were any other advantages to purchase it using a PCP. Also I regard my sales guy , who is now a Specialist Sales Manager, as a friend having known him since I purchased my first A3 from him in 1998 and all the other nine since.

I would hazard a guess that your situation isn't down to luck, but rather a sensible head and hard work.

Main advantage is increased contribution. I would just try to negotiate a fair discount and pay cash if I were in your shoes mate.

Or as above, take the finance and settle it a few months later. You'll save on the extra contribution, which will probably be still more than what little you do pay in interest in that time, and your salesman fiend gets nice bit of commission on selling you the car with finance...? Everyone wins if this is indeed how it works??

On a less serious note...sod the A3 and buy an R8

h5djr · Jan 14, 2017

DrEskimo said:
I would hazard a guess that your situation isn't down to luck, but rather a sensible head and hard work.

Main advantage is increased contribution. I would just try to negotiate a fair discount and pay cash if I were in your shoes mate.

Or as above, take the finance and settle it a few months later. You'll save on the extra contribution, which will probably be still more than what little you do pay in interest in that time, and your salesman fiend gets nice bit of commission on selling you the car with finance...? Everyone wins if this is indeed how it works??

On a less serious note...sod the A3 and buy an R8

I already have a 11.3% discount which I'm happy with and a reasonable trade-in price so perhaps I will have a word with my sales guy as I would not want him to loose anything over the deal.
As far as the A8 is concerned I think they are great to look and to drive once in a while, but not a car I or my wife would want drive on a day-to-day basis. We both much prefer a small, comfortable and quality car with a fair amount of go. The are too many things I don't like about the S3, so it's a 184 s-tronic quattro A3 for me.

Audi Bairn · Jan 14, 2017

h5djr said:
My situation is probably quite different to some others. I have quite a lot of money 'in the bank' - certainly more than enough for a rainy day. I am 69, retired, have no mortgage, own my own house, own my current A3 and have no outstanding debts. So in a lucky position! The £18k I would have to pay to buy the new A3 cash would not make a much of a hole in my savings. I was just trying to see if there were any other advantages to purchase it using a PCP. Also I regard my sales guy , who is now a Specialist Sales Manager, as a friend having known him since I purchased my first A3 from him in 1998 and all the other nine since.

And good luck to you too @h5djr
I'm sure you've earned it

Daveotto · Jan 14, 2017

I used to believe cash purchase and/or personal loan was best and my last 4 cars have been purchased like this. So I have been paying large sums up front and then see my investment depreciate by at least £300 -£400 a month.

Seriously thinking now of going PCP with a low deposit . Keep my cash in the bank and pay £300 -£350 a month from everyday money with the option of trading in every 2-3 years or handing the car back if circumstances change.

With my current 18 month old S3 I could sell it, clear up finance, put a PCP deposit on a new S3, put maybe £4000 in the bank and have monthly outgoing on the new car only £50/month more than current cost of existing loan

Always depends on your personal outlook and opinion, mine is changing

Scottyg · Jan 14, 2017

One thing that hasn't been mentioned here is depreciation. The money in the bank maybe making little to no interest, however it isn't losing anything either. Paying the 18k in cash you will lose money, it is a car after all. What you need to work out is if the interest being paid on a PCP negates the money lost in paying it with cash. Otherwise, look towards the end of the cars 3 year life, I'm sure you only keep your cars that long @h5djr ??? Is the final payment to make it your plus what the cars worth then make it a good deal or not. My guess is you'll be bringing in a decent pension, so paying £250-£300 per month won't be an issue especially with the back up in the saving account. Something or not to consider.

Broadstraik · Jan 14, 2017

I faced a similar dilemma in October when purchasing my S3 which I had already negotiated a reasonable discount of about 10.5%. I always was of the opinion that paying cash was going to be my best option but thought I would investigate the PCP route anyway. Having discussed this with the dealership finance representative this was confirmed that it would only make sense doing a PCP if there where very large dealer and Audi deposit contributions which only happen on certain models and times when they want to shift cars. As previous posters have mentioned even if these large deposit contributions were available to justify taking out a PCP, the trick is to then cancel the agreement within a few months having benefiting from the dealerand Audi contributions but before incurring much interest on the PCP.

DrEskimo · Jan 14, 2017

A car still depreciates whether it's paid in cash or on a PCP.

There is no doubt that paying for the car in cash rather than PCP has only one difference, you are saving thousands of pounds in interest.

The only other advantage would be if the car was worth less than the GFV on any PCP agreement. I mean....diesels are hardly 'in vogue' at the moment, so it could be that in 3 yrs it plummets in value, and then you can just hand the car back to Audi and let them swallow the short fall. BUT, that's highly unlikely and Audi tend to ensure the car is worth more in trade compared to the GFV.

You can trade the car in exactly the same way whether it's on finance or you own it. The difference is you can sell it privately much easier and make more money if you own it as you don't have to worry about settling outstanding finance for the new owner.

DrEskimo · Jan 14, 2017

I'll use my car as an example.

RRP is £47k. Let's say you negotiate the same discount for both cash and PCP purchase of £38k. On a PCP I pay £380pm and put down £6k. At the end of the term I'm offered £30k trade in, which is +£3k on my GFV of £27k.

So over he 2yr PCP the car has cost me (380*23 + 6000 - 3000 back in equity) £11,740.

Now if I bought it for £38k and then traded it in for the same amount of £30k at the same time...it's only cost me £8k. Cash buyer has saved £3,740 over 2yrs.

Simples.

You can also factor in that the cash buyer could easily get £1-2k more if they find a private buyer, which is much easier if you own it outright. Suddenly the cash buyer is saving nearly £5k over a PCP.

Scottyg · Jan 14, 2017

Put it like that @DrEskimo and it's a no brainer if you can afford it.

DrEskimo · Jan 14, 2017

Scottyg said:
Put it like that @DrEskimo and it's a no brainer if you can afford it. View attachment 114709

What's interesting is I compared the cost of my used A5 that I bought outright before my S5 and with all the maintenance and service items that it needed due to mileage, it didn't work out much cheaper than my current S5 deal.

Now that I've calculated what it would of cost to buy my S5 outright compared to PCP, it means that buying a brand new S5 with cash would of been considerable cheaper than my 3yr old used A5....!

All of sudden buying new cars with a decent discount with cash doesn't seem so nuts to me after all. Shame I don't have the sort of capital to afford to do it!

This is only if you swap cars every 2/3yrs mind. Keep it any longer and a used car would be cheaper eventually I reckon.

New S4 Man · Jan 14, 2017

We where also had a similar dilemma recently while looking for an S3. For us it really came down to the total cost of ownership. Once we added up the total interest on the principle sum, the "balloon payment" etc etc it just didn't really work for us.

After some excellent advise on here we ended up going used with a personal loan (3.3% APR). Appreciate this isn't for everyone as some people want new cars, but we found it very cost effective (under half the cost in total) had we gone down the PCP route!

CraigI · Jan 14, 2017

DrEskimo said:
I'll use my car as an example.

RRP is £47k. Let's say you negotiate the same discount for both cash and PCP purchase of £38k. On a PCP I pay £380pm and put down £6k. At the end of the term I'm offered £30k trade in, which is +£3k on my GFV of £27k.

So over he 2yr PCP the car has cost me (380*23 + 6000 - 3000 back in equity) £11,740.

Now if I bought it for £38k and then traded it in for the same amount of £30k at the same time...it's only cost me £8k. Cash buyer has saved £3,740 over 2yrs.

Simples.

You can also factor in that the cash buyer could easily get £1-2k more if they find a private buyer, which is much easier if you own it outright. Suddenly the cash buyer is saving nearly £5k over a PCP.

Few things wrong with this. PCP will always gain more discount over cash buyer, PCP buyer can also sell privately, it's not exactly difficult to clear finance.
Audi contribution on new S5 for those that take finance is £2500, available dealer discount is applied after that. It's how these guys make money, so will always be incentivised, so it appears to be a better deal.
To further offset your difference, you could conceivably be offered more to trade in a PCP car to take another PCP car, when compared to a cash purchase, as again it makes Audi more money and locks that buyer further into the Audi merry-go-round, so will have additional part-exchange sweeteners thrown in.

The reality is there's very little in it.
Some folk prefer to have the funds in the bank, so that they can be accessed, rather than have them tied up in a car.

DrEskimo · Jan 14, 2017

CraigI said:
Few things wrong with this. Pcp will always gain more discount over cash buyer, pcp buyer can also sell privately, it's not exactly difficult to clear finance.
Audi contribution on new S5 for those that take finance is £2500, available dealer discount is applied after that. It's how these guys make money, so will always be incentivised, so it appears to be a better deal.

The reality is there's very little in it. Some folk prefer to have the funds in the bank, so that they can be accessed, rather than be tied up in a car.

As already mentioned, if you have cash, take it on PCP and then clear it.

Even still, unless the contribution is upwards of thousands, then it still works out cheaper. Discounts on the A3 SB are £800 and I think half of that is finance contribution...so yea...hardly compares to the ££££ in interest paid.

OK, ignore the part about the private sale. Still ££££ better off though.

As also mentioned, if the OP wants money in the bank, take out a personal loan instead. Will only cost a few hundred in interest, in contrast to thousands on a PCP.

AllanG · Jan 15, 2017

I was in the same position as you, Dave, when I bought my A3 nearly three years ago, and paid cash....and that's what I'd do again in your position, as I can't see why you'd want to pay Audi unnecessary interest.

Dan-1981 · Jan 15, 2017

we are in the dealers today and yesterday, he said the less you put in the less you loose as CP is designed around monthly payments, unless the car will retain the same residual value your big deposit could be wasted. That is what the wife was advised, so she will be putting in the minimum amount.

DrEskimo · Jan 15, 2017

Dan-1981 said:
we are in the dealers today and yesterday, he said the less you put in the less you loose as CP is designed around monthly payments, unless the car will retain the same residual value your big deposit could be wasted. That is what the wife was advised, so she will be putting in the minimum amount.

Put in a high deposit and work out the total cost with the monthlies and do the same for a low deposit.

You'll see the dealer is talking nonsense....

Dan-1981 · Jan 15, 2017

I think that depends if you want low monthlies, to keep the car afterwards, change early or keep the car.

I personally can't get my head round taking finance out on a car, the whole not owning it thing doesn't sit with me. We are fortunate that the Mrs gets a car allowance from her work.

I'm not really sure what the cash you out in does other than lower your monthly payment? Are you guaranteed to seeing again when you trade it in?

Sent from my HTC One_M8 using Tapatalk

SteveMcB · Jan 15, 2017

Was in exactly the same 'predicament' last year with the SQ5. I'm reasonably good with numbers but eventually gave up trying to work out all the different permutations, 'fxxx it' was the term that springs to mind. Ended up going the cash route although still don't know if it was the right decision.

DrEskimo · Jan 15, 2017

Right I am bored and feeling in a nerdy mood so done some calculations based on 5 different options;

Cash
PCP with minimum term and high deposit (£10,000)
PCP with medium term (36months) and medium deposit (£5,000)
PCP with maximum term (48months) and minimum deposit (£1,000)
Cash up to £10,000 and the rest on a personal bank loan at 3.9% over 36months

Now on a standard A3 SB Sport 2.0TDI quattro, orangewheels quotes a £3,708 discount, and that a cash purchase would not gain a £500 finance contribution. Based on this, the amount of interest you would pay (roughly) on each of the 5 scenarios above is:

Cash = £0
PCP 1 = £1,800
PCP 2 = £2,700
PCP 3 = £4,000
Cash + Loan = £1,000

So there you go. You can see that low term and maximum deposit is the cheapest way to PCP a car. Even after accounting for the additional £500 contribution, £1300 saved is still a substantial saving in my eyes. On cars where the contribution is higher, might be a different story, but then I would just use the tactic above, take it on PCP to gain the additional discount, then pay off in 14days, so its a moot point really.

What is striking is just how much you interest you incur when you put a minimum deposit and go for the maximum length. You can see why the dealers love to use the line, as above, of "it's money lost, go for maximum term to save on your monthlies and put min deposit down as you'll never see it back...!" Complete rubbish. It makes them a shed load of money that's why. You are saving over £2,000 by putting more in and going over a shorter term in my example.

Of course, people may see the lower monthlies and more money in the bank as a good thing, but its still very costly...

S32B · Jan 15, 2017

Completely off topic! But it reminded me of this, my wife knows someone in work who blew £200 in one night playing bingo and other related games there!!! and she goes weekly!

My S3 is my weekly bingo and at less than half the cost

pburv · Jan 15, 2017

S32B said:
Completely off topic! But it reminded me of this, my wife knows someone in work who blew £200 in one night playing bingo and other related games there!!! and she goes weekly!

My S3 is my weekly bingo and at less than half the cost

HOUSE!!!

SteveMcB · Jan 15, 2017

£200 paying bingo!! How many cards does she play? Took my mum once, I could hardly keep up playing 1, she must be like a demented drummer!

Dan-1981 · Jan 15, 2017

Dr Eskimo, completely get that, but the Mrs get dosh from work and will inevitably change it in year two.

For me secondhand all the way!

Sent from my HTC One_M8 using Tapatalk

Facelift Buy cash or use a PCP?

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