Is this the best way to buy a car?
Car collected from Barnards Volkswagen.I would like to start off by stating that I no longer work for Volkswagen and though I made some good friends in my colleagues and wish them all the success, this article is all my own personal opinion as to why I think Volkswagen’s used car event is the best time to buy a car used VW on finance. Volkswagen’s used car event runs between 11th -30th of April and will return again in October. See my collection video here:
I have recently left my full time job as a Sales Executive at Volkswagen in Suffolk to launch my own social media management company. One of the huge benefits to car sales as many may know is the company car that gets provided. When I took this job last year I sold my personal car at the time as it was no longer necessary. However once I left my role, this left me in desperate need of a new car. There were some very important criteria’s that this car needed to meet:
- Cheap to run – launching my own company may require me to do a fair bit of traveling. I needed a car that was going to be economical and not burn a hole in my pocket.
- Affordable/Low monthly payments – whether this was car finance or a personal loan I needed to keep my payments as small as possible. I have savings but I am looking to invest them into a business and not particularly a car. I have budgeted about £100 a month.
- Cheap insurance – Again to keep over heads low, I wanted something that falls into a low insurance group.
- Reliability – This is a huge one for me. I know that cars are un-predictable but it is essential that I purchased from a reputable brand and came with a good warranty and after care package.
- Something that looks good – Don’t get me wrong, this is a purchase orchestrated by my head. However it does need to be something that I will enjoy driving.
It did cross my mind to get a ‘cheap run-around’ whilst I get the company off the ground. Something for around £500-£1000. Social media platforms make it incredibly easy to pick up a cheap car with a MOT; just a quick look on Facebook marketplace and I can find such cars as a 2008 Renault Clio, 2007 Ford KA, 2008 Peugeot 108. However, can you really trust these people’s word? Other than hoping that the person selling you the car is honest, you are never really sure what condition the car comes in. You also have no warranty; The vehicle could incur severe problems within the first few weeks, in the best possible situation the seller might be willing to help you out. However most often or not it leaves you to sort out the problem and can end up costing you hundreds.
Because of how competitive the current car market is, this dose also mean you can pick up some affordable deals from car garages. Browsing AutoTrader, there are similar cars available within that price range. However, these tend to be a little older but will include a minimum of 3 moths’ warranty. Again, after 3 months this does make me uneasy to think that I would be responsible for anything that went wrong. Going for a cheaper car also leaves you with a re-sale predicament. If I was to keep the car for say 12 months and then wanted to sell it on without a MOT it is likely to be worth next to nothing. You’re then faced with the decision to put it through a test, cross all your fingers and toes and hope to claw back as much money from the car as possible or to cut your losses and start the car buying process again from scratch.
So, what about the option of getting a loan? There are great deals on low interest loans on the market which make borrowing money to upgrade your car a great option. For example, if I was to take that target spend of £100 and repay it for around 4 years, I would be looking at a budget of around £4,500. There are some great little cars that fit my needs and budget within that. For example; something like a 2012 Toyota Yaris would set me back around £4,000 which is a good deal, however I might be looking at slightly more warranty, (something around 1 year from a main dealer) but this is still shorter than what I was looking for.
So what is Volkswagens used car event? Twice a year, historically the month after the new registration plate is released Volkswagen upgrade their used car package to encourage the sale of their slightly older cars and encourage customers to look into taking finance. So what does this upgraded package get you above and beyond the standard used car warranty?
Volkswagen’s standard Das Welt Auto package:
- 1 year’s warranty (or remainder of manufacture warranty of 3 years)
- 1 year’s breakdown cover
- 1 year’s MOT protection
During the ‘used car event’ if purchased on finance VW double those benefits, as well as a subsidised APR% rate and 2 free services!
2 years of not having to worry about mechanical failures, passing MOT’s, paying for services and paying for breakdown cover was exactly the type of package I was looking for. I estimate it will take around 2 years for my company to become stable, so having one steady payment on my car and little to no worries of issues was exactly what I was looking for.
So, what can you get for £100 a month? Using a basic finance calculator available on most used car sites, to achieve a monthly payment of around £100 a month I needed to be looking at cars around 6.5K. The main cars that fall into this price bracket is the Volkswagen Up! This great little hatchback is cheap to run, cheap to TAX (£0-£30 a year) and is also one of the 10 cheapest cars to insure according to confused.com https://www.confused.com/car-insurance/guides/top-cheap-cars-to-insure…. Ticking all the boxes!
The up is a practical purchase but does it ‘look good’? Being totally honest, it wouldn’t be my top choice, I would prefer something a bit bigger like the Polo or Golf, but both of these will set me back closer to the £150-£200 mark as well as using more fuel. Sometimes the Up! Can come off a bit basic but there is some more interesting variants out there. For example, the Club up, Groove up and Street up all come with upgraded interior and funky exterior graphics, making them stand out from the standard Move Up!. The one I went for was a street up in candy white, standard equipment includes; a Satnav system, Bluetooth, a boost of power (15 more HP,) rear tinted windows, upgraded alloy wheels and bonnet stripe graphics. This particular one also came with some nice additional extras such as; panoramic sunroof, leather interior, heated front seats, rear parking sensors and cruise control. Finding such a nice spec car put my payment up to £110 a month but I thought that these extras were well worth a stretch in budget.
So, how does the finance work? The finance plan that I purchased the car on is a 4-year PCP (personal contract purchase) which is the type of car finance with a balloon payment at the end. Total price of the car was just under £7K and the final payment (calculated by what they expect my car to be worth at the end of 4 years and completing 48K miles) was around 3K. I chose to have £0 deposit as I wanted as little outlay at the start as possible. APR rate is 8.9%. Although this is lower than such brands as BMW, it is still quite high compared to competitors such as KIA who offer a standard rate of 5.9% APR.
With PCP finance you have 3 main options during your plan:
- Run the full term of finance and pay the balloon payment to purchase the car. However, you can pay off the full balance and any time to fully own the car.
- Run the full term of finance and hand the car back at the end. As long as the car is in good condition and you have not exceeded the mileage.
- Upgrade the car towards the end of the plan. As long as you have stayed within the mileage and you can look to upgrade from the 2-year (half way) point.
So, what do I plan to do with my car? Well, as stated above the APR rate is quite high but there are ways around this. For example, whilst I am getting my company off the ground and need to keep over heads as low as possible, it is likely that I will continue to keep my car on Volkswagen finance, however as soon as I have a steadier income, I will likely up the monthly payments slightly and settle the full amount using a lower interest bank loan. By doing this I still get to keep all of the benefits such as the extended warranty but the interest I pay back is lower.
If you have any questions about finance, then feel free to drop me a comment below.