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Finance options post order

K

KiggyCliffy

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7
Location
Hampshire
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Looking to buy
Hi everyone

We ordered our Ocean back in Jan 2021, with intention to purchase outright on delivery. Now we are looking at a (hopeful) Nov 2021 delivery our circumstances have changed and I am exploring financing options to spread the cost over 3-4 years. Can anyone advise:

- can you change the method of finance from dealer purchase to finance (eg. PCP) before delivery?
- what are the options and cheapest ways to finance currently?
- anyone got good experience of a car finance broker? Or even what VW finance offer?

many thanks
 
K

KiggyCliffy

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7
Location
Hampshire
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Looking to buy
I would have thought the the best place to start was to talk to the dealer. Explain the situation and I imaging they will help, especially as they get a better return if finance is used. In general dealers are not keen on outright purchases.
Yes i agree thank you :) i wanted to have an open market view so i can go into that dealer discussion prepared.
 
M

Mehdime

Lifetime VIP Member
Messages
32
Location
Ireland
Vehicle
T6.1 Ocean 204
The VW financing options are on their website. E.g. in the UK: https://www.volkswagen-vans.co.uk/en/buy-a-van/offers/california-offers.html - 4.9% PCP at the moment

As the California is a high-value, high-demand vehicle, don’t expect great offers there. The interest-free or low-interest offers tend to be for entry level cars or models they want to shift. 4.9% is still better than any bank loan I’ve seen though - short of being able to extract money from your home by remortgaging. No experience of brokers though so maybe they have access to better deals.
 
66tim99

66tim99

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I should be taking delivery in 3 weeks, so thanks @KiggyCliffy for raising this now.
Drive the Deal said when I ordered:

"The balance of the funds are payable by bank transfer, to the dealer, 48 hours before delivery of your new car.
As discussed, to achieve this price you will need to fund the purchase of the vehicle using the manufacturer's finance company as the £1,000 Volkswagen Finance Deposit Allowance has already been deducted from the price.
"

So I must finance it to get the £1000 discount. And I wanted to since I don't have £64,432.28 to contribute. This is the first new vehicle I've ever bought, and I didn't fully understand PCP. This Money Saving Expert article is helpful. The dealer is pushing PCP, though I don't have a deal from him yet. It will be interesting to see what the dealer thinks it will be worth in 5 years time, to calculate the balloon payment!

Question: I presume its not worth paying a higher than 10% deposit, as you're only saving the 4.9% interest you would be paying if you borrowed it. I can make 8% safely in investments and its better to keep hold of my cash.

Alternatively I could put 50% down (no more I'm told) and finance the rest with VW (or borrow from my bank at about 3.5% and pay VW off straight away) and own the California from day one.

Given I am likely to want to change the California in a few years time to an electric or other low emissions version, I don't think I want to own it outright in 5 years time. The option to pay a balloon payment and own it if it makes sense seems sensible. If prices continue to rise, you might be quids in to buy it outright and sell it at that point? Nice to have the option to hand it back - but how much has THAT cost you per year? I can't do the maths til I see the deal.

I'm in a bit of a quandary here, and would appreciate your view on my best way forward.
 
Elmo3

Elmo3

VIP Member
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762
Location
Wales
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T5 Beach
I should be taking delivery in 3 weeks, so thanks @KiggyCliffy for raising this now.
Drive the Deal said when I ordered:

"The balance of the funds are payable by bank transfer, to the dealer, 48 hours before delivery of your new car.
As discussed, to achieve this price you will need to fund the purchase of the vehicle using the manufacturer's finance company as the £1,000 Volkswagen Finance Deposit Allowance has already been deducted from the price.
"

So I must finance it to get the £1000 discount. And I wanted to since I don't have £64,432.28 to contribute. This is the first new vehicle I've ever bought, and I didn't fully understand PCP. This Money Saving Expert article is helpful. The dealer is pushing PCP, though I don't have a deal from him yet. It will be interesting to see what the dealer thinks it will be worth in 5 years time, to calculate the balloon payment!

Question: I presume its not worth paying a higher than 10% deposit, as you're only saving the 4.9% interest you would be paying if you borrowed it. I can make 8% safely in investments and its better to keep hold of my cash.

Alternatively I could put 50% down (no more I'm told) and finance the rest with VW (or borrow from my bank at about 3.5% and pay VW off straight away) and own the California from day one.

Given I am likely to want to change the California in a few years time to an electric or other low emissions version, I don't think I want to own it outright in 5 years time. The option to pay a balloon payment and own it if it makes sense seems sensible. If prices continue to rise, you might be quids in to buy it outright and sell it at that point? Nice to have the option to hand it back - but how much has THAT cost you per year? I can't do the maths til I see the deal.

I'm in a bit of a quandary here, and would appreciate your view on my best way forward.

If you can make ‘8% safely in investments’ and borrow at 3.5% surely you wouldn’t use your own money to buy anything at all?
 
66tim99

66tim99

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If you can make ‘8% safely in investments’ and borrow at 3.5% surely you wouldn’t use your own money to buy anything at all?
True, its a funny state of affairs atm where you can borrow at such low rates. I still have an aversion to borrowing though, and it wouldn't cross my mind to borrow to invest, but perhaps that's how its done?!
As I say, I do have to borrow to finance this, and as you imply, perhaps I should just borrow the lot from the bank who seem desperate to lend...
...but is PCP a goer if you don't want to own?
 
andyinluton

andyinluton

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T6.1 Ocean 199
Hi everyone

We ordered our Ocean back in Jan 2021, with intention to purchase outright on delivery. Now we are looking at a (hopeful) Nov 2021 delivery our circumstances have changed and I am exploring financing options to spread the cost over 3-4 years.
If you are using VW for a PCP it’s worth checking what the costs are for doing straight HP over the same or even longer period with an early settlement figure.
If the two schemes have the same % interest you could pay less overall on HP as the balance that the interest is applied to diminishes quicker.
If you can make 8.5% on cash, take the ten year HP with 5% deposit and invest your money. I presume however your 8.5% is before tax?
 
Elmo3

Elmo3

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762
Location
Wales
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T5 Beach
True, its a funny state of affairs atm where you can borrow at such low rates. I still have an aversion to borrowing though, and it wouldn't cross my mind to borrow to invest, but perhaps that's how its done?!
As I say, I do have to borrow to finance this, and as you imply, perhaps I should just borrow the lot from the bank who seem desperate to lend...
...but is PCP a goer if you don't want to own?

At the end of the day, you are financing the debt. It doesn’t matter how you do it, so go for the lowest interest rate option. PCP doesn’t really work on a Cali because (generally) the actual residual value is much higher than the GFV, so you are paying an interest rate premium for no benefit. It appeals to low monthly payment buyers who‘ll pay a higher overall cost. I’d take the VW finance to get the deposit contribution, then settle immediately and fund with a cheap bank loan.
 
66tim99

66tim99

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T6.1 Ocean 150
At the end of the day, you are financing the debt. It doesn’t matter how you do it, so go for the lowest interest rate option. PCP doesn’t really work on a Cali because (generally) the actual residual value is much higher than the GFV, so you are paying an interest rate premium for no benefit. It appeals to low monthly payment buyers who‘ll pay a higher overall cost. I’d take the VW finance to get the deposit contribution, then settle immediately and fund with a cheap bank loan.
Might it be that VW finance apply a standard GFV calculation?
If the unusually high values seen recently continue, you might find your final balloon payment is significantly below the true value?
 
Curryzz

Curryzz

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64
Location
Eastleigh
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Looking to buy
I was shocked at how much the balloon payment was at the end of the PCP (Deposit & monthly payments over 60 months included ) it worked out I’d have paid £8,000 in interest over the 60 months plus adding what they valued the van at for the ballon payment, it was allot, if you ad that onto the cost of the van itself you get a true cost of how much long term the vehicle costs, and then you have to probably finance / bank loan the ballon payment at the end so more interest.
 
andyinluton

andyinluton

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T6.1 Ocean 199
I was shocked at how much the balloon payment was at the end of the PCP (Deposit & monthly payments over 60 months included ) it worked out I’d have paid £8,000 in interest over the 60 months plus adding what they valued the van at for the ballon payment, it was allot, if you ad that onto the cost of the van itself you get a true cost of how much long term the vehicle costs, and then you have to probably finance / bank loan the ballon payment at the end so more interest.
If you have to borrow to pay the balloon HP may be better, I have an irregular income & couldn’t be sure of being able to get a loan in 3 years time.
If the balloon is a Guaranteed value it does give some security if the market bombs & you are prepared to walk away from whatever you have already paid.
 
Curryzz

Curryzz

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64
Location
Eastleigh
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Looking to buy
Yes, fortunately I’m in a position I don’t need to take any finance on my California, but I’m still interested to see how people will finance there vehicles. I spent along time working towards purchasing one but got there in the end without using PCP.
 
Elmo3

Elmo3

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762
Location
Wales
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T5 Beach
Might it be that VW finance apply a standard GFV calculation?
If the unusually high values seen recently continue, you might find your final balloon payment is significantly below the true value?

VWFS will set the GFV individually per model. They’ll err on the side of caution to protect themselves. Even with a market correction, I’d be surprised if actual values fell below the GFV level (seeing 45% after 5 years). Don’t forget, a Cali is generally easy to sell privately so you’re not reliant on low ball trade bids when the market turns.
 
M

Mehdime

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Messages
32
Location
Ireland
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T6.1 Ocean 204
FWIW I had a PCP simulation done by VW Ireland back in April when I placed my order. They had put the GFV at 35% of the value of the new van after 3 years. So that provides you with zero protection. Even if second hand prices collapse in the next 3 years, a 3 year old Cali will still be worth well over 35%. So you’ll have to have a way to pay for the balloon payment or you’ll be looking at a massive loss.
 
I

itsSteve

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20
Location
South Wales
Vehicle
Grand California 600
Obvs only you know your personal circs, so any advice from the community is going to be broad brush stuff .......... but I'm financing through a VW five year deal at 4.9% with a guaranteed trade in value at the end. Given that inflation is expected to be running at above 4% the end of the year, and no-one can be sure how combustion engined cars will be trading as we approach their withdrawal from the new market in 2030, there are positives in going with a PCP type deal.
 
Algor

Algor

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331
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Stoke on Trent
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T6.1 Coast 150
FWIW I had a PCP simulation done by VW Ireland back in April when I placed my order. They had put the GFV at 35% of the value of the new van after 3 years. So that provides you with zero protection. Even if second hand prices collapse in the next 3 years, a 3 year old Cali will still be worth well over 35%. So you’ll have to have a way to pay for the balloon payment or you’ll be looking at a massive loss.
In a circumstance such as that you would simply sell it to We Buy Any Car or other such company who would settle the finance and pay you the difference. This gives you the funds to start a new PCP or buy something different.
 
66tim99

66tim99

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London
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T6.1 Ocean 150
Obvs only you know your personal circs, so any advice from the community is going to be broad brush stuff .......... but I'm financing through a VW five year deal at 4.9% with a guaranteed trade in value at the end. Given that inflation is expected to be running at above 4% the end of the year, and no-one can be sure how combustion engined cars will be trading as we approach their withdrawal from the new market in 2030, there are positives in going with a PCP type deal.
Thanks - how does the trade-in value work? Don’t you just have to decide whether to pay the balloon and own it, or hand it back? Otherwise what do you have to trade?
 

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