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Cash buy verus PCP suitable for keeping car 5 years?

Home Forums Buying a Car Cash buy verus PCP suitable for keeping car 5 years?

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This topic contains 4 replies, has 1 voice, and was last updated by Avatar Ray 4 years, 9 months ago.

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  • #49428 Reply
    Avatar
    Ray

    I have the cash for new car buy. I usually keep cars for 5 years (60000 miles). Is a cash buy better (cheaper) than PCP in this situation? If so, why?

  • #49434 Reply
    Stuart Masson
    Stuart Masson
    Keymaster

    Hi Ray. Overall, a cash buy will cost less because you are not paying any interest. With a PCP, you are paying interest on every pound financed (including the GMFV), so over 5 years that will add up to quite a lot.
    It is more a question of how you use your money. You can pay for the car now using cash, but then that cash is gone so you can’t use it on anything else (mortgage, investment, holidays, expenses, etc.). If you finance, you will pay more but you are spreading it over 5 years so you still have most of your cash available now.
    One is not better than the other, it is a matter of how you prefer to manage your money. Cheers, stuart.

    Editor, TheCarExpert.co.uk and

  • #49436 Reply
    Avatar
    Ray

    Stuart: thanks for that. Fortunately, I don’t have the outlays you highlight. I note on the forum it is suggested that with a cash buy without a trade-in, one should get the figures for a finance deal first, so as to see the best figure being given for the retail value of the new car. Then negotiate the figure for the cash buy. Would one expect the two figures to be the same and would a trade-in complicate this route? Ray

  • #49439 Reply
    Stuart Masson
    Stuart Masson
    Keymaster

    The complications usually lie in dealers trying to blur numbers to suit themselves. By all means get a written breakdown of the numbers for various means of purchasing. Bear in mind:
    – the dealer gets a profit from the finance, so they will always encourage you to take it. There is often also a contribution from the finance company towards the price of the car as well, which reduces the price (but you pay interest on the borrowing, obviously).
    – a part-exchange (trade-in) can sometimes complicate matters if the dealer is trying to undervalue it to add profit to the overall deal. Make sure you check the real-world value of your vehicle (We Buy Any Car is a good start) before going to a dealership to make sure they are valuing your car realistically.

    Editor, TheCarExpert.co.uk and

  • #49481 Reply
    Avatar
    Ray

    Thank you Stuart for that. I now see that the two figures will probably be different. I will just have to keep my wits about me with the dealer. Ray

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