Possible not....
I see your point. I guess theoretically, if you work out the difference in monthlies between say £5k deposit and £10k deposit, then put away that difference each month into your savings after putting in £10k, you will be in an identical position.
But in reality, I imagine this doesn't happen often...!
That's exactly what I do. I can't be the only one, can I?
I have a dedicated savings account just for the car. It does keep the monthly payment nice and low which is a bonus, but it's only one factor, and it seems to be the one obsessed over by buyers and sellers alike, for all the wrong reasons.
One aim of my doing this is to be in a position where I can pay the GVF at the end of the term. I may not need to, but I think it's good to have the option.
My other aims when using pcp and paying largish deposits are all about credit rating and insurance;
Whether you like it or not, and there's a sizeable chunk of people on both sides of the fence here, consumer credit (or DEBT if you really want to grab a headline or two, or be a bit judgemental.) is the basis of our economy and is way these cars are bought. Not only that, but it's also the reason these cars exist at all. There's no way anyone but the most dedicated and disciplined saver could afford to drop £35k in savings on a warmed over shopping car with an outrageous surfeit of power like an S3, and anyone that sensible would buy a Kia anyway. Without the system of finance there would be no demand, and thus no nice cars to buy. Look to east Germany prior to 1991 to see this in action.
So, credit is the basis of the economy, and if you want to get along in this economy you go with it. Hence, most mortals buy on finance.
This of course makes the ability to get finance (DEBT), when you need it very very important. Life with a bad credit rating is extraordinarily limiting. Can't rent or buy a house to live, can't get an overdraft, cant go on holiday and rent a car, can't do anything except try to save some money and live hand to mouth. Been there, couldn't even borrow a fiver, no rush to go there again. Having a good credit rating is just as important as having a rainy day fund, and I protect mine jealously.
So, the reasons I put a big deposit down and then save the remainder of the GFV? (Those questioning the use of the word deposit, please consult a dictionary)
Putting in a sizeable chunk reduces the size of the debt. The amount of money you owe or have access to on credit is one of many factors used by lenders to work out how much you can afford to borrow, and how much of risk you are. Putting £10k less on credit lowers my risk factor and also (theoretically) means I can get my hands on £10k extra on something else, like a mortgage, should I want, or more importantly, 'NEED' to.
Savings are a good thing. Again, your cash position and a demonstrable level of responsibility are good for your credit rating. The low monthly payments of a pcp compared to a straight loan makes having savings really easy. If you could afford the loan payments of £600 per month, but take out the same debt on pcp at £200 per month plus balloon, you get to save £400 a month. You get the same car, you end up in the same position, but you've been a good little saver along the way and scored extra brownie points with the banks and lenders, who see your savings and offer lower rates, better deals, and many other perks.
The GVF in a PCP is a security blanket, but is rarely seen as such. If the car is worth more than the GVF I get to keep the extra. But if the market shifts due to say, a monumental VAG emissions cheating scandal, or a GM-Saab style total business failure, or another global financial crash, and suddenly I find my three year old overpowered, inefficient and expensive to run S3 is worth £500, then I'll be glad of the GVF. It means I'm protected against the car costing me any more than my limited payments to that point and any catastrophic loss is Audi's loss. I'm willing to bet there's a great number of diesel owners currently on VW financial services books glad of such protection. That protection is not there on HP or bankloan funded purchases, and is an insurance policy in itself.
Finally, If the **** hits the fan, and I find myself out of work or unable to pay the repayments then I'm in a position where I am able to hand the car back, satisfy the lender, and close the account without damage to that all important credit rating. Yes, it may be a highly inefficient and expensive way to have bought the car, but even if I was the mythical super saver and had bought the car in cash, I'd be no better off in those circumstances.
That's my reasoning behind my use of PCP and paying a 30% deposit. It won't work for everyone I admit, but I thought l it might be a useful addition to this debate.
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