Dealer 'finance review' - options?

[SeventhLevel]

Hi guys,

I'm halfway through my hire purchase agreement on an auris hybrid touring sports and my dealer wants me to come in for a 'finance review' now that I'm halfway through the payments. I'm guessing this is a sales pitch to keep me paying rather than giving them the balance for the car in 18 months and buying it outright. Does that sound right?

I'm not against hearing what they could offer me, but I'm not sure what my options are. I paid a ~4k deposit, been paying 197 a month and owe ~8k at the end of the plan if i want to keep it. Say, for example, they offered me the facelift auris TS (mine is the older one), how would that work? Does the 4k deposit i paid go towards it an i start a new plan? I'd lose the monthly payments I'd made to Toyota wouldn't i?

I'm relatively happy with the car but I'm curious as to what I'd be offered. The only other car, besides the facelift update auris TS, that I'd consider is a hybrid Rav 4 but they're quite a bit extra and i understand the mpg is nowhere near as good. I have a dog and I'm about to be a dad so space is good. 

Any thoughts or opinions? Cheers!

[FROSTYBALLS]

From what you described, you're not on hire purchase, you have a personal contract plan (PCP). With hire purchase, you have the deposit, the instalments are more or less equal, and the car is yours with the final payment. With a PCP, you have the deposit, monthly instalments (lower than hire purchase), and the balloon payment at the end if you decide to keep the car.

The review is an opportunity for the dealer to sell you a newer car on a new PCP. 

See the following Auto Express article - http://www.autoexpress.co.uk/car-news/90794/pcp-personal-contract-purchase-car-deals-explained

[alan333]

You'll roughly break even if you give your car back now.  You've paid (18 x £200) £3600 plus £4000 deposit, total £7600.  New cars depreciate around 25% every year, plus dealer profit.  So, hypothetically, if you bought new at £20k, the first year loss is about £5k, and the next half year another £2k, plus the dealer's grand or so profit.  You'll score if your particular car is sought after and in showroom condition with low miles etc but you get my drift.

Calculate it to the end of your 3 years and the figures don't really get any better.  You'll lose the same £5k on year one, another £3.75k on year 2, and another £2.75k on year 3.  Your car will be worth about £8 - 9k less dealer profit, so around the same £8k it would cost you to buy it at that point.  Either way you break even and start again with a new agreement (or buy the car at 3 years old).

As I understand it, dealers can often shuffle figures around to make a new car affordable, but IMHO the above calculations are the only true way to decide whether to change cars or not.  It's too easy to get sucked into the newer car for the same monthly payments cycle.

[Auris2010]

I have been on the cycle for PCP for at least 4 times now and get sucked on the process and seems its hard to get away . For me, its a matter of how you feel and how you love your car and its affordability, Its always tempting to get a new model, with a new kit and new tech.   The dealer will always give you a good deal and you have to come prepared as well on how much you are willing to  pay monthly and also be ready to walk away as well if the deal you want is not you were expecting.  I love my 3rd car ( the one i traded) and should have not traded it for another. Because im a *****, and should have said no and refused the deal. Now im back on the never ending process of paying. 

[mickburkesnr]

I wouldn't get a car on finance again. I've had two of them, and at the end of both of them I always ended up feeling used/cheated.

If you're happy with the car you got then keep it. You've got £8,000 to go, and at the end of it the car is yours. It would be worth something between £5,000/£8,000, but it's an asset. When you go to buy another car, you can either sell that one for the figure I just said or P/X it for the other car. So you could "upgrade" your vehicle in a cheaper fashion that way.

Right now, and it's something I found out the hard way, with a finance car you have to keep it on the road. If the clutch goes you fix it, if there's a scrape you fix it, otherwise you get shafted by the finance company. Plus you don't really own the car. The way I see it it's a glorified rental car, and if the clutch went on the rental car you wouldn't get it fixed!

If you walk out on the agreement early, you leave with nothing. So you start again at the bottom of the ladder, and it's not a fun place to be.

[SeventhLevel]

Thanks guys, really insightful. My plan was to run this car into the ground when I bought it, keep it at least ten years. I suppose the temptation of a new car has me thinking about that - which is the reason the dealer offers this 'chat' of course. 

When I got the car I worked out how much I'd need to put away per month to buy it after three years and did that from the first month. So with that and the monthly payment the car is mine in 18 months if I want it. To be honest, with a kid on the way I'm leaning towards buying it outright and following my original plan - that way I have a car that's mine and £400 a month freed up to spend on things that are probably more important. Still, waving shiny things in my face will always make me hesitate for a second.

[SeventhLevel]

Another, much smaller, consideration is that by getting a new car I'd be paying £130 a year in road tax with the new rules whereas I'll pay £0 for the life of this car.