There’s a lot of negative press about the way we are deciding to finance our cars today, PCP finance is on the increase and in some instances just isn’t sustainable.
It seems to be the norm that many will consider buying a car purely for the badge and kudos in purchasing a certain make of car, rather than one that will suit their requirements. In 2016 alone £30bn was loaned to finance new cars. This is just a crazy amount and one that I can’t quite comprehend, when a majority of us a feeling a squeeze in our everyday lives.
Why we needed a new car
The car that my wife owned was old even before I met her and already had a small fortune spent on it as a result of an accident that was not her fault.
The car started to become unsafe and unreliable to the extent that getting into the car was a lottery whether it would get us from A to B.
It was not uncommon to be driving and have one of it’s warning lights pop up or to stop at traffic lights for other drivers to tell us that it was bellowing smoke.
We don’t have a family yet, but I didn’t feel anywhere near comfortable knowing that if we did, she would be driving around in an unsafe rust bucket.
What were the advantages of buying a new car?
My wife had a shortlist of cars that she wanted, though was confused by the choices available to her. After having a large powerful car she was adamant that she didn’t really want to go smaller.
Neither of us was fussed about buying a new showroom spec car, instead deciding to buy one second-hand so long as it had been looked after, had a low mileage and we both liked the look. I think that the colour was probably more important to my wife than anything else.
The car that we were getting rid of was a bit of a boy racer car. Looking back at it now, it wouldn’t have looked out of place being driven by some plonker doing doughnuts in the local supermarket car park.
We knew that by buying a newer, but second hand car would mean that:
- First and foremost my wife would be safe in the car
- Insurance premiums would be lower
- It wouldn’t cost as much to fill up
- The car tax would be lower
Why we chose to buy a car on PCP finance
Buying a car on PCP wasn’t a decision that we made likely and the pros and cons of financing a car in this way was something that we discussed for months before.
My major concern was being what would happen should we take a drop in our household income and we were no longer able to afford the repayments. This could potentially have a harmful effect on our credit scores.
So not only did we consider PCP, we discussed other financing options too. The others were either take out a bank loan or borrow from family members.
I for one am not a huge fan of borrowing from family so ruled this option out straightaway and taking out a bank loan would mean that we would potentially be paying more in monthly repayments and then have the burden of owning the car outright after the term, together with all the hassle that comes with owning a modern car today.
In the end, we decided to buy the car on PCP for the following reasons:
Before making the commitment to enter into a PCP agreement we both sat down and discussed what we could realistically afford also factoring in the unknowns such as what would happen if our household income were to drop and either one of us was left having to try and cover the monthly payment on our own.
- It was only a runaround, so we knew we would go over a set mileage
- We had the option of handing it back after the term and maybe upgrade to a bigger car, should our family circumstance change (granted this would potentially mean entering into another PCP agreement)
- We weren’t bothered that we couldn’t say that we owned the car
- We had a good deposit so knew that this would bring the monthly repayments down
- The agreement that we looked at included a some other options, including servicing, paint work jobs in case of a minor accident and alloy repair to name a few.
Is PCP for everyone?
Honestly, I don’t believe that it is.
Just because it was the right option for us and our circumstances, doesn’t mean that it would be right for everyone else.
There are a number of things that must seriously consider before committing to a PCP agreement, the most important being that of affordability. While it would be nice to have a nice new shiny BMW or Audi on your drive, do you really believe it is really going to add anything to the owning experience based on what you will be using the car for.
I’m sure if my wife had her way she would have quite gladly purchased a top of the range car with all the trimmings, but this wouldn’t have been necessary purely as a run-around.
secondly, is this really the cheapest way that you can finance a car. Do your research, you might find that taking out a loan is actually a cheaper alternative and there are plenty of loan best buy tables available to make your research so much easier.
The last question, but no means less important than the others, is the question of whether you actually need to buy a new car. Just because your current car doesn’t have all the bells and whistles you would like on it, doesn’t make it a lesser car. It gets you from A to B, doesn’t cost you much money to maintain and is reliable, for me that is definitely a car worth keeping.
I love my cars, and probably spend more time on YouTube than I should watching car clips.
My current car wouldn’t be one that I would ever say is my dream car, but do you know what, maybe that’s not important to me as it once was, I’m not out to impress people that don’t know me or care what I drive and there are a lot more important things out there than driving a car that will depreciate in value as soon as I put my hands on the steering wheel.