There are many different car finance options in Ireland. Hands up all those who have a spare €20k knocking about, either in the bank or under a convenient mattress. Anyone? Anyone? Bueller? Thought not...
Buying a car is an expensive business (as ever, it behoves me to point out that it's the second most expensive thing you'll buy, after your house) and it's a moving target made harder by far to hit because of such things as depreciation and running costs. The bald fact of the matter is though that you're going to have to get some sort of finance to cover the initial purchase cost, unless of course you're just staggeringly wealthy and can actually pay for a new set of wheels out of petty cash. And if you are, good luck to you. For the rest of us...
What is a PCP, or Personal Contract Plan? Well, it's essentially like having a company car, only the company is you. It's a way of buying a car that was first pioneered on this side of the Atlantic by Ford and has now reached a point of success that pretty much everyone is now offering PCP packages. It is effectively a lease - you never really own the car as such, but you pay a deposit (usually but not always covered by your trade-in) and then pay a monthly fee for usually 36 months before there's a final 'bubble' payment.
The clever thing about a PCP is that it allows car makers to take into account the likely depreciation of the vehicle and most companies guarantee the minimum value of the car at the end of the lease. That value effectively covers the final bubble payment, meaning you can, if you like, hand back the car and the keys at the end of the term and walk away debt free. Or you can, if you've been diligent and saved up over the three years, make that final payment (they're generally in the region of about €5,000 for an average family car) and keep and own the car. Or, more likely, you can use the value left in the car over and above that bubble payment figure to become the deposit on your next car and simply roll the plan over into your new vehicle. It's a neat way to keep your costs down as far as possible and it's also a neat trick by the car makers to help encourage customer loyalty.
The things to watch with a PCP are the terms and conditions. Make sure, as with any contract, that you read all the fine print very carefully - there may be stipulations as to maintenance and vehicle condition, or that final guaranteed value may become null and void. You may also be compelled to have the car serviced at a main agent, so watch for that too.
HP is still a good way to buy a car, even with the advent of the PCP, and it's an option that essentially gives you more freedom. Most car makers and dealers will have pre-agreed HP packages with major banks (or in the case of Volkswagen, BMW, Renault and some others, their own internal finance companies) so the deal can be just as easily done and signed on the day as a PCP. The downside is that your monthly payments will be higher as you won't be able to leave a bubble payment dangling at the end, and it may mean that there is a requirement for a higher deposit, depending on the plan.
A good, old-fashioned bank loan (or credit union loan) is of course still a smart option and the major upside is that you will actually own the car from day one (unless of course you've put the car up as collateral against the loan - loan packages have different requirements in this area). Rates are very competitive at the moment, but it's worth pointing out that many banks still have low acceptance rates in the wake of the financial crash. In some cases, it's still easier to get finance from a dealer or car maker simply because they're more motivated to give it to you - banks can still be rather more gimlet-eyed when it comes to handing out money. A private loan like this is probably the best way to finance a second hand car as well, as you can potentially have the money in your hand ahead of time (giving you greater bargaining power) and you do not have to finance the initial hit of depreciation.
The conventional wisdom has it that buying a second hand car is the best way to get maximum value. The old rule of thumb was to buy at two years old and sell at five, thus escaping the worst of the depreciation curve. That's not necessarily the case any more though. Buying a second hand car is still a sensible move of course, and the growth of long-term warranties on new cars (some car makers offer as long as an eight-year warranty) means that you can now often buy an older car that still has manufacturer backing. Many, in fact most, car makers now offer approved second hand packages, which, for a slightly higher entry cost, give you a warranty (as much as two years in some cases), a full mechanical check and service and roadside recovery packages if it all goes wrong. In that case, buying second hand can actually be rather like buying new, but cheaper.
Buying new as a way of saving money still should not be discounted though. Newer cars tend to be more fuel and tax-efficient, saving you money on your daily running costs, while most car makers are now also offering integrated servicing and maintenance plans, which for a relatively small initial outlay covers all your regular service costs for the first three to five years. Heck, even Ferrari now offers a seven-year inclusive maintenance and parts guarantee. That can save a lot of both money and hassle.
I know, I know; the M word. Look at it this way though - you will never get money at a cheaper rate than you will with a mortgage and rolling the cost of a new car in with the cost of a house can be a canny way to get the cash you need at a rock-bottom rate. There are dangers of course though, as anyone currently suffering negative equity will tell you and it's pretty much a once-off deal, unless you want to sell up and move house - and mortgage provider - every time you fancy a new car. Still, for those lucky enough to have a house that's worth more than they paid for it, or for those looking to move from a tracker mortgage to a more conventional package, it could be an option worth looking at.
Tread carefully. Finance is a tricky business at times and while, in fairness, banks, brokers and regulators have tried over the years to make things simpler and more robust, you can still get caught out by the fine print. You can equally get caught out by your own life, so make sure before you commit to a multi-year plan of repayments that you can keep affording them if a job changes or is lost or if you have to move house or relocate for some reason. Make sure too that the car you're buying is within your means not just in terms of the repayments, but also in terms of the running and maintenance costs and, as ever, if an offer looks too good to be true, it almost certainly is just that - the pain of unexpected depreciation is always there, waiting to sting you. Good luck everyone...
If you still don't know which option suits you and you want to discuss it with us in more depth - or you have any questions at all - get in touch via our Ask us Anything page.