helart said:
...I was advised by a salesman to go for 4 years and NOT put in any money then use the money when we changed in future..the inference was a lot of his customers go for the 4 as its cheaper per month then change after 2...
Rule #675 of car buying - never take financial advice off a car salesman! Part of his bonus is structured around how much interest he can extract from each sale.
The smaller the deposit the higher the monthly payments and, more importantly, overall payment because the interest is loaded into both the GMFV (Guarenteed Minimal Future Value, which is the lump sum) and monthly repayments - a bit like the mortgage the first payment is more interest than the last (much, much more....); paying a larger deposit offsets this so for example, putting £6,000 down on a car then paying £120pcm for 4 years (then putting £100pcm into a future car fund) will cost less than putting £1,200 down and paying about £240 (depending on the interest rate offered) - also, if you want to trade-in at 2 years you'll have some value in the car from the payments already made and the cash deposit - paying a lower deposit leaves you with a significant negative equity risk in the first half of the deal.
If you must go PCP then pay the biggest deposit possible, if you want to keep with that manufacturer then agree the highest mileage possible (to reduce the size of the GMFV as a 90K 3 year old car will be worth less than a 30K 3 year old ) as this will load-up the payments but continually improve your equity - essentially, stack as much cash up-front as possible. A friend of ours agreed a 90K/ 3 year deal on her Fiat 500 1.2 Lounge but due to a job change she ended up doing only 50K in 3 years (it was 34K in the first year...) - her GMFV was £3,200 which she paid a few months back but the car will easily sell for £5,500-6,000 privately...
