Peter Vosper: Why it may be the best time ever to buy a new car
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Hold on, hasn't the coronavirus pandemic resulted in forecasts for the worst recession in recent history?
Shouldn't we be concerned about saving money and conserving cash?
Well, it may be you can contribute to solving these problems by buying a new car.
Firstly, I'm sure you've all heard of the PCP (personal contract purchase). Many of my contemporary friends have been wary of this way of acquiring a new car, but those who have taken the decision to finance their new car this way have thanked me for my advice.
So what are the advantages and disadvantages?
Firstly, the advantages:
1 You can get a new car for lower monthly payments than traditional hire purchase
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2 You do not need to worry about depreciation – the lender guarantees the amount your car will be worth at the end of the contract
3 You have choices at the end of the contract. (a) You can purchase another new car and the manufacturer will have calculated the guaranteed amount at less than they think the car will be worth, so you will have equity which will provide you with your next deposit to keep your monthly payments in line with inflation; (b) you can buy the car for the guaranteed future value or (c) You can simply hand the car back, if the market has collapsed or you no longer need a vehicle
4 You will often be offered a package including service and insurance so you know how much each month your car is going to cost you
5 You will normally be able to purchase a better car because higher specification cars and certain models are more in demand as used cars, and this is reflected in the guaranteed future value
6 Manufacturers and finance houses have been flexible with extension to payments and assistance with deposit allowances when times are tough and they wish to retain your business
7 You keep up-to-date with changes in the marketplace such as new technology, environmental changes, and government taxation.
So now to the disadvantages:
1 You don't own the car – but nor do you on traditional loan schemes
2 If the guaranteed future value is close to, or less than, the actual value at the end of the contract you may have to find additional money for the deposit for your next car
3 You need to forecast your mileage as excess charges between 7 and 10p per mile will have to be paid if you exceed this
4 You need to look after your car and keep it in good condition. You will have to pay to put right anything which is not normal wear and tear
5 The contract is for a fixed term.
Other things you need to consider include how much you can afford as a monthly payment, what period of contract best suits you, and if you own your current vehicle outright, whether any excess cash over your deposit would be an advantage.
You can choose a period for the contract normally 24, 36, or 48 months.
Personally, I would link this to most manufacturer's warranty which is three years but a longer period would mean a lower monthly payment.
Some manufacturers are offering a 12-month job loss protection contract.
In the current situation manufacturers need to get their factories flowing again so there are many excellent offers available.
Also the Prime Minister has made it clear he will take action to get the economy back on its feet so expect some additional incentives, no doubt allied to greener and more economical vehicles.
The best advice I can give you is to talk to your local franchise dealer, let him know what you require and see whether he can satisfy those requirements.
Good dealerships want your business not just for today but for the long term, and realise customer loyalty is vital.
Keep safe and please join me again next week.