Buying a car is probably parents’ second most expensive purchase of their life. I am making the assumption that your family home being number 1. Interesting enough the landscape on how we buy cars has dramatically changed over the last number of years.
Previously most parents would purchase the car outright and own it from day one. To finances this they might have the cash or have to take out a car loan from the Bank or the Credit Union. There is no hidden charges or fees.
Any time I now pass a car garage I consistently see “Per Week or Monthly” figures in the windscreen as previously I would have always seen the cost of the car.
Personal Contract Plan (PCP) is the new kid on the block and is not going away anytime soon. This is a leasing model where you do not owe the car but instead, rent it off the dealership finance company.
Your first step is to pay a deposit which is generally small in comparison to other types of car financing. You then need to choose a term, generally around 3-5 years which will dictate your regular payments. Your final decision is what to do when the term is over, you can purchase the car outright, give the car back or trade it in for an upgrade and continue to pay a new weekly or monthly figure.
There is a lot of terms and conditions attached to these PCP deals. Parents should be very caution before proceeding into one of these deals.
I can see the attraction to PCP, it feels like adding just another direct debit to your current outgoings similar to a utility bill. No big upfront costs or pain. The problem lies in over your lifetime as a car driver how much are you going to pay for this privilege. There can also be a sting in the tail if the car you wish to trade in isn’t the project value due to mileage, the condition of your car or market value for second-hand cars.
The other great difficult parents will have is that it will be incredibly difficult to leave the leasing model to go back to owning your own car.