This is intended to show some of the options for finance. It is not financial advice, just some musings. There is no right or wrong answer, it depends upon individual preference and circumstances.
It may help some with the sort of sums they need to do to work out the actual cost of ownership over varying periods.
BMW FS PCP.
A very common PCP arrangement is provided by BMW at 5.9% (10.9% on used cars). This is commonly over 4 years and the GFV is set by
BMW. The only relevance or potential advantage of the GFV is if the agreement runs to term. If it is terminated early then the settlement figure will be calculated in accordance with consumer legislation. The difference between that and the actual vehicles disposal price will be returned or paid by the owner as appropriate.
Often however a dealer will "take care of any negative equity". There is no magic alchemy. They don't make it go away. All that happens is the price of the trade in is inflated, as is the price of the replacement vehicle.
In effect there are 2 loans with a PCP. One for the GFV which is interest bearing and paid off at the end of the agreement and one which is the difference between the GFV and the purchase price which is paid off over the agreement period.
There is also a view that putting a bigger deposit in will somehow be "lost" if settling early. This is not the case. It just means any negative equity will be that amount lower (or any returned equity that amount higher).
I will use the following example as a start point.
is useful here to do "what if" scenarios. It will come out with slightly different numbers,
but not significant. The reason for this will be that it calculates interest in a slightly different way.
With a car @ 26200 and a GFV @ 13300 and a deposit of 3000 this gives a monthly of 297.44.
Total cost to buy = (297.44 * 47) + 3000 + 13300 = 30279 (4079 interest)
If the deposit were reduced to 300 the monthly goes up to 360.73 and the total cost to 30554 (275 extra interest over the term).
SETTLING EARLY.
This calculator can help with a schedule. It will produce a reasonable estimate of what is owing in total at any given point.
For the example above enter: value 26,200. Rate 5.9. Months 47. Deposit 3000. Balloon 13300. This calculates a payment of 301.82.
12 m: 21,083
24 m: 18,639
36 m: 16,048
48 m: 13,300
HALIFAX PCP.
Halifax will offer PCP finance @ 4.2% (if you meet the criteria). However in this case the GFV is lower. When I got a quote it was approximately 10% lower than the BMW GFV; so in this example I will estimate 12000.
This makes the monthly slightly lower @ 295.89. However total cost to purchase would be 28906. A saving of 1372 over the BMW PCP.
12 m: 20,741
24 m: 17,948
36 m: 15,036
48 m: 12,000
TRADITIONAL LOAN.
Currently finance can be obtained at 3.3% from sainsburys. However over 20,000 it goes up to 3.9%. Other providers are similar.
On a 5 year basis the payment would be £425. So quite a lot more is being paid monthly. Total cost to buy 28,530
Settlement would be approximately:-
12 m: 19,204
24 m: 14,680
36 m: 9,975
48 m: 5,085
To show relative costs of ownership I will assume the vehicle is sold/traded after 2 years for 20,000
BMW PCP: 20,000 - 18,639 = 1361 equity returned, less 7243 payments, less 3000 deposit = 8882 cost
HALIFAX PCP: 20,000 - 17,948 = 2052 - 7101 - 3000 = 8050 cost
LOAN: 20,000 - 14,680 = 5320 - 10,200 - 3000 = 7880 cost
None of these are massively different, but reducing costs over a 2 year period of potentially £1,000 is a handy saving. Or potentially approx 2,000 over full term to total ownership.
OFFSET MORTGAGE.
If you are fortunate enough to have a very low rate offset mortgage this can be a very cost effective way of raising finance - if you are disciplined. I am fortunate enough to have an offset mortgage at 1.15% and one at 2.75%.
So, I take 3,000 from savings, 23,200 of the offset (@ 1.15) and make an additional mortgage payment of 300 per month (to keep everything broadly similar).
In this case, over 48 months this would give a total cost to buy of 26,956. (Approx 3,250 cheaper than BMW PCP).
This would be:
deposit: 3,000
47 x 296.94 = 13,956.25
balloon 10,000
Settlement: 12m 20,163, 24m 16,814, 36m 13,426, 48m 10,000
2 year change out: 20,000 - 16,814 - 7,126 payments - 3,000 deposit = 6,940 cost for 2 years
Using the offset of 2.75 total cost to buy would be 28,067
deposit: 3,000
47 x 299.31 = 14,067
balloon 11,000
Settlement: 12m 20,461, 24m 17,393, 36m 14,240, 48m 11,000
2 year change out: 20,000 - 17,393 - 7,183 payments - 3,000 deposit = 7576 cost for 2 years.
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I hope this is of some use to those considering their finance options.
N.B. Please don't forget if you are Leasing / Hiring / PCP'ing a car, you are the NOT the owner. You most will most probably only be the Registered Keeper, which can mean increased insurance premiums.
This also means legally you can't usually modify the banks' vehicle without
prior permission being granted in writing. It's not normally hard to obtain permission from BMW FS to fit genuine BMW Performance parts (wheels, MP Exhaust, MP Bodykit, etc), however non-BMW parts and pink spray-jobs are usually declined!