[richard plumb]

I currently have BMW finance on my car, with just over 18 months left to go. I'm paying £400 per month, and have a £15k balloon waiting for me at the end.

Now, I had a look at a new Z4 and the dealer offered me £18k trade in for my car now (E92 330i), so I'm not super hopeful that it'll be worth much more than the balloon in 18 months time. Which means I'll probably have to walk away, or find £15k to buy it outright.

So I'm thinking of paying off the finance (£19.5k right now) with a personal loan, keeping the same monthly payments (£400pm over 60 months). If I want to keep the car, the £15k will cost me nearly £500pm over three years, so it'll end up more expensive to keep on with the BMW finance.

Am I right in thinking this is the best route to take? Or if I plan to change the car soonish (eg next 12 months) am I better off keeping the payments going? I can hand the car back in about 10 months and walk away, or keep it until June 2011 and hope there is some money still left in it, but it doesn't look likely.


Also, I went for a finance deal with a guaranteed balloon thinking I don't mind keeping up the payments if it means a new car every few years, but that sounds like its not going to work - is it the current market, or do salesmen just use that line to get you to sign up?

[FZR400RRSP]

When you say 'balloon payment' at the end of the deal, is it PCP?
In other words, is the balloon payment at the end a 'Guaranteed future value'?

[richard plumb]

yes, its guaranteed.

[FZR400RRSP]

Around £18k is certainly fair for your age/model of car as a trade-in.
I don't think you're being ripped off there.
I think this is one of the problems of PCP, in that you can be tied into the deal and trying to get out of it early can cause problems.
Personally, I think you'd be daft to try and finance a car like this via other means.
I can only see it depreciating badly and you should welcome the opportunity to hand it back and walk away at the end of your deal.

[t72bogie]

thats the problem with PCP - it lets you hire a car, whilst you save up to try and pay what you owe on it ...which of course you never do as you always are tempted to max yourself out with the payment on what you can "afford"

...and you end up in the 3 year trap, that feeds the finance and new car industry - you have to go back, trade it in, maybe come up with a few grand, and start again if your are lucky ....or refinance the balloon, so essentially youve had a 6 year car loan with loads of interest.......

If you are happy to rent your car and change every 3 years, it can be a convenient way of hiring one.....

right now, Id ride it out and give it back, take any cash left in it (maybe try to sell private for a few more quid than the balloon) and put that cash towards another car....

If you want to "own" a car in the traditional sense, id stick to taking a personal loan, buy a 3 yr old low mileage car, pay it off and enjoy it for another few years

[FZR400RRSP]

Originally Posted by t72bogie

...and you end up in the 3 year trap

It's a "trap" I'm perfectly happy with.
I never want to 'own' a car again, especially an older one.
I want my cars to be new and under the manufacturer's warranty at all times.
I also never want to have to worry about selling one again, and dealing with scummy public.
I'm effectively treating my cars like a mobile phone.
Decide on a monthly budget, 'upgrade' every three years.
I'm paying £207 per month for the wife's top of the range Fiesta.
I couldn't hope to buy one for that.
One can end up just as "trapped" in a traditional purchase,.
Stuck with a car you cannot sell.

I should point out we're on PCH, not PCP.
I don't want the option of owning the car at the end.
Hand back, walk away, start again.

[richard plumb]

Originally Posted by t72bogie

right now, Id ride it out and give it back, take any cash left in it (maybe try to sell private for a few more quid than the balloon) and put that cash towards another car....

If you want to "own" a car in the traditional sense, id stick to taking a personal loan, buy a 3 yr old low mileage car, pay it off and enjoy it for another few years

ok, understood.

But lets say I'm happy to own a 3 year old, low mileage car - why not keep mine?

I've done the sums and it does seem a little cheaper to get a personal loan, pay off the car now and then keep it for as long as possible. But thats assuming I want to keep this car for several years. At some point I'll need something more practical for the kids as they get longer (more legroom). So maybe a 5 series.

so maybe ride this out, hand it back and get a decent used 5 series. Hmm. PCH is interesting, i'll look into it - but is it more expensive than PCP?

[FZR400RRSP]

Originally Posted by richard plumb

so maybe ride this out, hand it back and get a decent used 5 series. Hmm. PCH is interesting, i'll look into it - but is it more expensive than PCP?

Depends.
PCP offers a bit more flexibility with deposits, if you have dosh lying around.
But assuming the same deposit, I've found little/no difference in the monthly payments.
PCP also offers more flexibility at the end, if you think you'll be at all interested in keeping the car.
I'm not, I know I'm not, so the low deposit and low monthly payments of PCH suits me fine.