[Hugrov]

Hi All

Am just after a bit of advice. I purchased my nearly new car in August on a PCP, my F20 was paid off so was used as a decent deposit (and I received a cheque back from the dealer as well). Have just paid a £1900 chunk off the finance which has taken my monthly payment down to £70!!

I'm hoping to be in a position by April to pay off the car completely but my question is, should I? My thinking is that it's always better to clear debt where possible but does it make financial sense to pay off early. I don't think I'll keep my current car for longer than 2 years so will be looking at getting another F30, at which point I could either have around £18k (ish) value part exchange against a new/nearly new car or pay off the £12k balloon and use the remaining £6k as deposit towards a new purchase if I don't settle early..........would appreciate your views.

Thanks

[RalphyBMW]

I have nothing constructive to add, but I'm intrigued as to how you have a PCP with an expected £6k equity at end of term - they are usually geared to leave very little.

[creepy coupe]

If the PCP % rate is higher than your savings account rate. And I can't imagine it won't be.It's simple maths. I whether or not you prefer the security of a lump sum for a "rainy day" Is another matter.

[rich100]

Typically the AUC rate is substantially higher than the new rate.

Assuming you are paying the typical rate id pay it off as soon as possible.

I'm intrigued by why the dealer gave you cash back on your trade in instead of applying that amount back to the loan.

Did your trade on at the time exceed the maximum deposit allowable? (40% from memory)

[DB118D]

As above - if you reckon you'll have £6k equity at the end of your term, then your salesperson has done an excellent job on you

[Hugrov]

Originally Posted by rich100

Typically the AUC rate is substantially higher than the new rate.

Assuming you are paying the typical rate id pay it off as soon as possible.

I'm intrigued by why the dealer gave you cash back on your trade in instead of applying that amount back to the loan.

Did your trade on at the time exceed the maximum deposit allowable? (40% from memory)

Yes the cheque was for exactly that reason, my part exchange value was more than the maximum deposit allowed so I received a cheque for the balance. I've just paid the value of that cheque off the account which has halved my monthly payment, the reason I opted for a balloon payment type deal was to keep the monthly payment lower. I'm probably been way too optimistic regarding GFV at the end of term considering the final payment will be just over £12k, car will be immaculate with FSH and mileage will only be around 18k at the very most (it's literally parked up for 6 months a year).

[rich100]

Originally Posted by dmp2273

Yes the cheque was for exactly that reason, my part exchange value was more than the maximum deposit allowed so I received a cheque for the balance. I've just paid the value of that cheque off the account which has halved my monthly payment, the reason I opted for a balloon payment type deal was to keep the monthly payment lower. I'm probably been way too optimistic regarding GFV at the end of term considering the final payment will be just over £12k, car will be immaculate with FSH and mileage will only be around 18k at the very most (it's literally parked up for 6 months a year).

My rationale was similar to yours when I bought my F31. I favoured putting in a larger deposit in order to keep the repayments down.

This wasn't really so much an affordability issue and more of a mental block on my part that I've always had with finance in that it's never really sat well with me. I structured a save as you earn scheme at work to mature and clear the balloon payment when it became due.

Swings and roundabouts really though as ultimately the GFV is static so you either choose higher deposit vs lower payments or lower deposit vs higher payments, the result is more or less the same.

Everyone has differing attitudes to this so I think it comes down to personal preference and there probably therefore is no right or wrong answer.

I do understand the logic of financing when purchasing a depreciating asset and paying for it using monthly cash flow but for me this makes less sense the higher the rate of interest that is charged. The typical AUC rate is a piss take in my opinion so I'd be looking to get out of that asap.

[Tengocity]

The other reason to stay with a PCP is to have the "security " of the final payment, in that if your car is worth less then you can just hand it back. If you settle, and we have financial armadgeddon in the next year (not entirely unlikely!) and used car values go through the floor then being in a PCP may be very handy.

Given how low the interest rate is for a new car on PCP that's the only reason I haven't paid ours off early.

[Hugrov]

Originally Posted by rich100

My rationale was similar to yours when I bought my F31. I favoured putting in a larger deposit in order to keep the repayments down.

This wasn't really so much an affordability issue and more of a mental block on my part that I've always had with finance in that it's never really sat well with me. I structured a save as you earn scheme at work to mature and clear the balloon payment when it became due.

Swings and roundabouts really though as ultimately the GFV is static so you either choose higher deposit vs lower payments or lower deposit vs higher payments, the result is more or less the same.

Everyone has differing attitudes to this so I think it comes down to personal preference and there probably therefore is no right or wrong answer.

I do understand the logic of financing when purchasing a depreciating asset and paying for it using monthly cash flow but for me this makes less sense the higher the rate of interest that is charged. The typical AUC rate is a piss take in my opinion so I'd be looking to get out of that asap.

Hi there, thanks a lot for your reply, it makes a lot of sense and pretty much mirrors my thoughts as far as financing is concerned and the mental block of putting down a lower deposit against higher monthly. Personally speaking, I just would prefer to own the car outright in the shortest possible time, although this probably goes against the whole point of PCP. I guess if I can afford to make the balloon payment plus the remaining monthly installment payments (minus any interest saved), then I should probably just go for it. Ironically, I'll probably end up getting another 3 or 4 series late next year or early 2018 (but this time being ultra picky about spec etc) and end up with more finance anyway!!!

[kzg1969]

if it were me

1. check there are no early redemption fees
2. calculate extra interest you will pay compared to settling
3. work out if your money is better in a building society/ISA (very poor rates)

if rates are within 2-3% then I would let PCP run

[Hugrov]

Originally Posted by kzg1969

if it were me

1. check there are no early redemption fees
2. calculate extra interest you will pay compared to settling
3. work out if your money is better in a building society/ISA (very poor rates)

if rates are within 2-3% then I would let PCP run

Thanks a lot, will do that, cheers for your input.

[Tengocity]

Originally Posted by dmp2273

Hi there, thanks a lot for your reply, it makes a lot of sense and pretty much mirrors my thoughts as far as financing is concerned and the mental block of putting down a lower deposit against higher monthly. Personally speaking, I just would prefer to own the car outright in the shortest possible time, although this probably goes against the whole point of PCP. I guess if I can afford to make the balloon payment plus the remaining monthly installment payments (minus any interest saved), then I should probably just go for it. Ironically, I'll probably end up getting another 3 or 4 series late next year or early 2018 (but this time being ultra picky about spec etc) and end up with more finance anyway!!!

You can save a reasonable amount by paying outright and reducing interest, but all going to be more than wiped out by changing cars too often. And by a long way! The cost to change even a used car car owned outright (for another similarly valued used car) is going to be £1-3k when you look at the dealer margin/spread between a trade price and a retail price.

[Hugrov]

Originally Posted by Tengocity

You can save a reasonable amount by paying outright and reducing interest, but all going to be more than wiped out by changing cars too often. And by a long way! The cost to change even a used car car owned outright (for another similarly valued used car) is going to be £1-3k when you look at the dealer margin/spread between a trade price and a retail price.

Damn it Tengocity..........why do you have to confirm what I already know deep down but don't want to accept lol

Which leads me nicely onto my next point.........I'm generally very happy with my car and it's spec.........apart from the halogen lights (albeit the LCI ones with the built-in LED DRL's). I'd be more than happy to keep the car for maybe 4 or 5 years if I could swap the lights out for the Icon LED units. I have tentatively looked into this and could get them changed for around £2k (including fitting chassis level sensors, wiring, fitting and coding). Am I completely stupid for even thinking this way or would I be better off changing the car for the newer lights, auto box etc. I know £2k in anybody's book is a lot of money but it could get me the car I'd be really happy with instead of spending perhaps say £8k more for a similar result...........help!!!!

[Tengocity]

Not stupid, as I quite categorically would not buy any car (except a classic or track toy) that doesn't have xenons or led lights.

Could be worth it if it's the difference between changing the car early or not.

[Hugrov]

Originally Posted by Tengocity

Not stupid, as I quite categorically would not buy any car (except a classic or track toy) that doesn't have xenons or led lights.

Could be worth it if it's the difference between changing the car early or not.

Lol, I was seriously thinking I'd get laughed off the forum for even suggesting spending such an amount of money on lights. I was happy about everything else the car had spec wise when I bought it, that coupled with money off the screen price and what I regarded as a very good part-ex price sealed the deal. I genuinely think I would be happy to keep the car for a much longer period with something as simple as changing the lights. I typically cover 5-6K miles per year if I'm lucky so changing my car seems a bit daft really, especially if I've managed to pay it off and am no longer having to make monthly payments or worry about the final balloon payment

[DB118D]

Originally Posted by dmp2273

Lol, I was seriously thinking I'd get laughed off the forum for even suggesting spending such an amount of money on lights. I was happy about everything else the car had spec wise when I bought it, that coupled with money off the screen price and what I regarded as a very good part-ex price sealed the deal. I genuinely think I would be happy to keep the car for a much longer period with something as simple as changing the lights. I typically cover 5-6K miles per year if I'm lucky so changing my car seems a bit daft really, especially if I've managed to pay it off and am no longer having to make monthly payments or worry about the final balloon payment

Have a read here

http://f30.bimmerpost.com/forums/sho....php?t=1330598

[Tengocity]

Originally Posted by dmp2273

Lol, I was seriously thinking I'd get laughed off the forum for even suggesting spending such an amount of money on lights. I was happy about everything else the car had spec wise when I bought it, that coupled with money off the screen price and what I regarded as a very good part-ex price sealed the deal. I genuinely think I would be happy to keep the car for a much longer period with something as simple as changing the lights. I typically cover 5-6K miles per year if I'm lucky so changing my car seems a bit daft really, especially if I've managed to pay it off and am no longer having to make monthly payments or worry about the final balloon payment

If you bought the car used then it may not be such a big deal to change it early if you can get a good deal on the next one, as hopefully what you paid is minus that early heavy depreciation. In other words, it's not cut and dried, and worth looking in to properly. If there isn't much in it then I'd be inclined to change cars as it would be less hassle.