New car & finance advice

[Bazthemod]

Hello folks, recently i have had the itch for a new car after driving an Audi A3 and seeing the A1 which is due to be released next year. However i am still interested in a new R56 Cooper.

Basically i don't know what to do and i know opinion on here will be biased towards mini and take that factor into account. im hearing mixed signals about whether or not this is a good time to buy a new car... any thoughts?

Also has anyone got any advice about Mini Finance options such as Select where you pay a final balloon fee or hand the car back for guaranteed trade in value? Seems bit too good to be true as i would ideally change cars after 3 years anyway ;)

Decisions decisions...:argh:

[AndyP & Lenore]

My first port-of-call would be to speak to Mark Dryden of Site sponsor Saltire Vehicles.

He is a car salesman like no car salesman you've ever met. In that he will give you honest, impartial advice that is best for YOU, not him.

A.:thumbs up:

[rpn]

For the type of car, that would be down to personal decisions and what suits you best really. As you said if you asked opinion in a Mini forum you know what the answers would be.

As for the funding question, I think you already answer you own question. Since you like a new car every three years the Select option seems the way to go. Just make sure you’re happy with the final trade-in value thought. However, the car would never be yours until you pay, if that’s the option you take, the final lump sum. If, for example you need money urgently say two years into the deal you can’t sell the car to fund it.

I personally don’t mind keeping the car for longer as long as I still enjoy driving the car. http://i177.photobucket.com/albums/w214/rpn48/car-1.gif My current Mini (second-hand) will be six years old in December and my other car will be 8 years old in March next year! http://i177.photobucket.com/albums/w214/rpn48/car-1.gif

[Craig]

Baz,

I would echo what Andy says about Mark D. He saved my mum and dad thousands and did it all via the phone and email, very relaxing and nae hard sell. :smilewinkgrin:

I use MINI Select for all my cars. Keeps your payments down a wee bit and when you get to 3 years, you can just hand it back if it is worth less than the finance outstanding, or if it is worth more, you can use it as a deposit. The protection you have is you will never have negative equity if you keep within the mileage (this only applies if you hand it back) :cool:

Oh and even though I had a bad experience, I would still say buy the R56 Cooper :yes nod::yes nod::yes nod:

[Crombers]

Go for the MINI cos if you opt for an Audi you'll only end up coming back to MINI later on :thumbs up:

Or keep your current MINI & buy a wee cheap 'puddle jumper' hatch for daily chores.

[euan]

Baz,

I would echo what Andy says about Mark D. He saved my mum and dad thousands and did it all via the phone and email, very relaxing and nae hard sell. :smilewinkgrin:

I use MINI Select for all my cars. Keeps your payments down a wee bit and when you get to 3 years, you can just hand it back if it is worth less than the finance outstanding, or if it is worth more, you can use it as a deposit. The protection you have is you will never have negative equity if you keep within the mileage (this only applies if you hand it back) :cool:

Oh and even though I had a bad experience, I would still say buy the R56 Cooper :yes nod::yes nod::yes nod:

In the current climate, most people will find the car is worth less than the GFV.

Just bear in mind, that if you go this route, it's pretty likely that you are going to be stuck with the car for three years so make sure you know it's going to do what you need it/want it to do.

One option if your current mini isn't causing you any issues and isn't costing you much would be to keep it and save what you would be thinking of spending on the next car for a few months. That way you can see what is happening with car values etc and also have money available to go and get what you want when you feel the time is right.

Personally, I'm sitting tight until the new year, but then my car is worth peanuts compared to the GFV at the moment so I'm kind of stuck with it!

[Scottie]

I would say now is a good time to buy a car but to trade is maybe not so good.

Looking forward if you buy now the car industry will have recovered by the time you want to change so I think you will have no worries about GFV on the car if you choose a Mini.

[gauldrymini]

Baz

Our R56 JCW is on the "buffoon":laugh: payment type. We do a monthy payment for 36 months and then we can:

1.Keep the car and pay the final payment ie thousands... this could be done through HP or other means...

2.Hand the car back and hold our breath to find out if it is worth more than what final payment is:thumbs up: but no car then (obviously)

3."Trade" car in for a new one, using balance between final payment and car's value as a deposit

I would go into see JC Dundee to see what they say... It is the first car we have done this way and as we tend not to keep cars past 3 years it seems OK.

Andrew

[Ivano]

MINI Select is fine if you run it on the full term but you try and come out of the agreement early it can hit you hard... Ie trying to change car after 18 months etc.

[Bazthemod]

Mini Select seems fine for me as i dont want to own the car for more than 3 years as by this time insurance will allow me to move to a more powerful car.

So from what i work out the Guaranteed Final Valuation should cover the final balloon payment?

I have spec'ed a car on Mini website but i don't know how much i can afford.... i know how much i can afford a month but not what that equates to in regards to price of a new motor.

I also understand that more deposit i put down the lower the mini select payments will be?

Think i will take a trip to JC's at the weekend and see what they can do ... also see what they will offer me as a trade in but i think i will be offended lol

Will have a word with Mark too... have posted in his thread about his search for black mini one :D

[KenL]

I am not a fan of finance deals provided by car manufacturers.

I would say shop around for a personal loan. You own the car, not the other way around. No hidden extras like set up fees, final payments etc.

At the end of the 3 years, any equity in the car will be your's. You can also sell at any time without recourse to anyone.

[AndyP & Lenore]

I'm no financial advisor, but I would advise extreme caution going down KenL's suggested route of personal loan financing. Especially if you are buying new. If this works for Ken, good for him, however, you should be aware of the following.....

With personal loans there is absolutely NO protection under the consumer credit act if the car is faulty and you get into "rejection" territory. No-one wants to go there, but it DOES happen. Happened to us with our £20k Honda and if we didn't have Honda finance batting our corner against Honda manufacturing, it would have been a bigger battle. With a car financed, the finance company is jointly responsible for the quality of the goods.

You also do not have any protection under the halves and thirds rules on the consumer credit act. The halves being the most important rule in Scotland. Under this rule, once you have paid half the total amount payable under the agreement, regardless of whether it is a MINI Select or a straight finance deal, you are legally entitled to hand the car back and owe nothing more. With a personal loan you do not have this protection.

Balanced against this, as Ken says with a personal loan you owe the vehicle outright. But in my own humble opinion, this advantage does not outweigh any of the advantages of have the vehicle financed.

Lenore and I have bought and sold a good few cars the past few years, always financed, and we have NEVER been able to find a personal loan that beats the interest rates and monthly payment amount of a vehicle finance package.

All the above is my personal opinion, and from our personal experience. i am not in any way an accredited financial advisor. If you want this sort of advice, again I would suggest you speak to Mark Dryden. Top bloke.:thumbs up:

A.

[KenL]

You make some good points Andy, but if IMO if someone needs the protection of the halves thing that you talk about they should perhaps consider that they are spending too much on a car.

I am not keen on "buying" a car with more than 50% on the cost as finance, whatever the source.

Handing a car to get out of a credit agreement leaves you with nothing. Something I would not be happy with.

On "Select" type hire agreements, these are perfect for manufacturers as they can really tie you in to their brand. If you decide to change to another make of car, you won't have any capital to take with you, that would not be the case if you owned the car.

As to the backing of the finance company, that may be a worthwhile thing to consider. One small point however, is that any purchase is between you and the supplying dealer, not the manufacturer. I know this as I have rejected a VW, without too much difficulty, thankfully, in the past.

One final thing is that credit agreements often charge a set up cost and a final charge to release documents. This could be enough to make the overall cost more than using some other form of finance.

[mini saltire]

Ahh my sort of debate!!

First off, thank you to Andrew and to Craig for their kind words.

The PCP route (Hire Purchase with a Guaranteed Balloon) or Contract Hire is IMO the only way to finance a NEW CAR at the moment. Depreciation is running so high that it is pointless trying to own an asset that is in financial free-fall. With a PCP you do pay a higher APR than usual because you are asking the finance company to underwrite the risk of their product against the Future Value but you do have the safety net if the car is worth less than the Future Value. You can just hand your car back and start again. There are mileage clauses but as long as you are realistic then you should be fine. Contract Hire is the same but mainly used by businesses as they can claim back 50% of the VAT per month on the rental but they can never own the vehicle.

Put it this way, the only people changing their cars at the moment are the ones that are on PCP schemes or companies that have reached the end of their agreement or lease. Everyone else who has bought their cars can't afford to change as their asset is worth a lot less than they thought it would be. I have some very happy 4x4 customers who I persuaded to go this route and they are now protected from this ridiculous situation that the Motor trade is in at the moment.

Hope this helps.

Mark Dryden
Saltire Vehicles
01620 894040

[euan]

I'm with Mark on this one. To go into a PCP, I aim to put down as small an amount as possible as deposit, ideally what's coming from the car I'm trading in and I've done that on the last 3 cars as I bought the right car, with the right spec, at the right price (ie, cheap!) and have a realistic GFV. That way I had more of a chance of having some money in it when I trade in.

I usually change mine 18-24 months into the deal when I can get enough to clear the finance and pay the deposit, but as Mark points out, everyone is screwed with values at the moment so I'm keeping it for 3 years this time. I fully expect to have to just hand it back, though I might consider buying it outright when it's finished to use as a motorway car, will see nearer the time.

Finally, I've never been tied with dealers on PCP, dealt with VW, BMW, MINI with no issues and always come out with money on the deal, though I don't use dealer finance as a rule (though we did on the Polo as it was dirt cheap).

[AndyP & Lenore]

I think Scottiedoop said in another thread now is a good time to be buying a car, but not a good time to sell a car. I don't see that changing for some time.

Ken I understand what your saying about only ever wanting to finance 50% of a vehicle. That's you just showing your age.:moonie: The fact is, why do you want to take the risk on the value of your asset free-falling? Because 99.9% of marques are doing that right now. So no matter what you drive, hundreds are being wiped off the value on a monthly basis. If you've put 50% cash in on any vehicle, that's your hard earned deposit disappearing in front of you. If you've financed it at least that depreciation is partly shared with the finance company.

We PCP almost all our cars - occasionally we do a straight finance - and we never put more than £500 in as a deposit. Regardless of how flush we are at the time. That said, we paid the finance off on the red mini two weeks after we got it home. Just figured what's the point. But that was an exceptional circumstance.

A.

[Gismo]

I'm with Andy on this one, i PCP mostly to avoid seeing my hard earned disappearing, rather let the finance company take a hit as well ;)

[KenL]

Ahh my sort of debate!!

First off, thank you to Andrew and to Craig for their kind words.

The PCP route (Hire Purchase with a Guaranteed Balloon) or Contract Hire is IMO the only way to finance a NEW CAR at the moment. Depreciation is running so high that it is pointless trying to own an asset that is in financial free-fall. With a PCP you do pay a higher APR than usual because you are asking the finance company to underwrite the risk of their product against the Future Value but you do have the safety net if the car is worth less than the Future Value. You can just hand your car back and start again. There are mileage clauses but as long as you are realistic then you should be fine. Contract Hire is the same but mainly used by businesses as they can claim back 50% of the VAT per month on the rental but they can never own the vehicle.

Put it this way, the only people changing their cars at the moment are the ones that are on PCP schemes or companies that have reached the end of their agreement or lease. Everyone else who has bought their cars can't afford to change as their asset is worth a lot less than they thought it would be. I have some very happy 4x4 customers who I persuaded to go this route and they are now protected from this ridiculous situation that the Motor trade is in at the moment.

Hope this helps.

Mark Dryden
Saltire Vehicles
01620 894040

Mark,

Can I play devil's advocate here and ask how much commission there is in setting up these deals for dealers?

An old friend of mine used to run a wee independent. This was many years ago but he says he ALWAYS tried to get people to take cars on HP as that is what made him the most money, not the profit in cars!

Also, if depreciation is so high, are these deals not becoming more expensive as dealers predict lower GFV so you have to pay out more over the life of the deal?


Thanks :yes nod:

[mini saltire]

Hi Ken, transparency is the key to a lot of my repeat business so I have no problems at all telling you what can be made on a PCP. The dealers if they have business managers (finance manager) will try and maximize finance deals and bolt ons like GAP Insurance and Payment Protection. They will try and make as much as possible as they are employing someone to do just that.
When I set up a finance deal for a customer I don't need to take nearly as much as the dealer as my overheads are pretty much nil. My average profit on a finance deal is circa £100 vs a dealer that would be making £350 upwards. I also find it far easier to have a discussion when a customer is ready to change as they already know what they are due to the finance company.

You are right about GFVs getting smaller and a lot more conservative but if you go with a manufacture's finance company they can subsidise the GFV to sell new cars. BMW are doing a low rate plan just now on new cars of around 7% APR and the GFVs are still quite strong.

Hope this answers your questions,

Cheers

Mark

[KenL]

Much respect to you Mark :thumbs up:

Great post :yes nod: