Buying a Jaguar Car
Wilf asked me if I could put something together on certain pitfalls in buying a car or looking at the financing options when buying a car. I have certainly not bought many cars, and not had many experiences in doing so, so I suspect on both points, there are more qualified people to write up a topic on this. However, since I have bought a Jaguar XF-S recently, I could relay some of my findings and my personal experience in this whole episode. FYI – numbers I used for myself in the examples are made up numbers but could stand up in a real life scenario.
I will try and break it up so each area is well defined, and some of the notes I do write up are common sense and probably done by most people. This write up is focused on someone buying a car from a dealership, either used or new and require financing in some shape or form. If you have the cash to buy outright, stop reading! ?
There are 3 things I feel you need to focus on when buying a car. 2 of which are under your control, and 1 which isn’t but can impact on.
• The selling of your old car - be it part exchange or selling privately. This is within your control.
• The Financing in purchasing your new car – this is within your control. If this is not within your control, suggestion is the car you are thinking of buying might be too expensive.
• The cost of the new car – This is not within your control, but can be negotiated.
If you take away the factors you can control before going to the dealership, the deal can become clearer and you are only focusing on the negotiation of the car you want. If you go into the dealership needing to resolve all 3 points, you are pretty much at the mercy of the dealer. I believe (and I would) they WILL find a way to make a margin on ALL 3 factors, meaning you are worst off overall.
The Selling of your old car
Without me saying so, you are all aware the selling of your car is best done privately. You will always get more money, and if the condition of the car is good, they will sell quick. I sold my car within 1 week and got £3k more than offered from the dealer. Dealers (especially big dealers) from experience will sell the car at auction houses, so additional modifications or add ons that have value in a private sale is meaningless to them. They will sell based on the condition, mileage and history of the car with values on similar databases to Glass etc.
I had offers of £4k to £5k from 5 different dealerships (for convenience), but once I put my car on Pistonheads, the car was sold in 1 week for over £7k.
Pistonheads is better for modified cars, and Autotrader for normal in my opinion.
The Financing of the car
Know your credit rating! That helps if you want to negotiate in the dealership. Also go to Moneysupermarket.com (or similar) to see which Companies or Banks are offering the best rates on personal loans. If you want to borrow £15 or £20k. Do some research and see how much that will set you back on a monthly basis over your payment term (number of years to pay back). You can get that information on those compare sites like Moneysupermarket.com. You will find the likes of Tesco and Sainsbury offer 6% (smaller loans) to 8% on bigger loans between 1-6 years. Those rates are very good and on the most probably better than most dealerships can offer. Once you are armed with that information and you know what your monthly payment will be on £X loan, you know where your ceiling is when walking into the dealership.
From my experience, there are 2 types of personal finance on offer –
• Hire Purchase – Like a personal loan, you borrow £X amount and pay it back over a number of months (your term). The difference is, if you can’t pay back the monthly payments the levarage is only the car. If you can’t pay back a personal loan, they can come and take value in your house up to the worth of the loan amount outstanding (I think).
• PCP Contract – You borrow £X amount, you make monthly payments for a number of months, usually between 2-4 years and at the end of the term, you either A) Pay a final payment and keep the car, B) Hand the keys back and walk away, C) Exchange the car in for a new car and go through the whole routine again. The car is never yours until you finish the PCP plan.
Hire Purchase is great. It is simple, and there should be no hidden numbers. They offer an interest rate for the loan, tell you the fixed monthly payments and you can decide if you want it or not. If you have done your homework, and know what interest rates you can get for personal loans it is very easy to compare the deals on the table. Jaguar offered me a PCP contract initially which was not favourable (explain later) in which I specifically asked for a HP deal. I told the dealer I can go and get a personal loan for £20k over 5 years and have monthly fixed payments of £380. In reality it was more like £400 a month but there is no harm trying! He came back with £390 a month which was better than any deal I could get outside. Needless to say – I took it.
There could be a small admin charge for the 1st payment and the final payment – this is normal in some cases, and I feel acceptable.
PCP is a bit harder to work out, there are spreadsheets which you can use to calculate a PCP contract. I have one done for myself so if you need one, send me a message with your email and I can forward it across.
This may not be the case with all dealership, probably in the minority as they should not do it – but SOME will adjust the final payment to a higher amount so it makes like you end up with lower monthly payments.
For Example (rough)
If the car is £28k, they may say monthly payments of £400 a month for 3 years with a final payment of £15k. If the car’s market value is £17k, then you will have £2k to use as a deposit on your next car or you can pay £15k to buy the car.
They might (and I say might as they shouldn’t but I have seen it offered to me in one dealership) say monthly payments of £350 a month for 3 years. That’s great, £50 less a month but a final payment for £17.5k. The cost of the car is less than the market value in 3 years, might as well hand the keys back as you end up in negative equity. If that is what you want anyway, then that’s no bad thing.
PCP rates are always higher for 2nd hand cars, I am hearing 10-11% in the current market, so it is always better to do a hire purchase or personal loan on older cars. On new cars, if they want to get rid of stock like BMW 1series or 2011 3 series, I have seen PCP rates of under 5% and 6.4% which is pretty fantastic. On newer models like BMW F10 5 series – it is back up to 10% plus. Jaguar are doing 0% for 2 years PCP plan for the new XF – my comment on this if you can do it – go for it! After 2 years, you can refinance on a personal loan or sell.
Jaguar initially offered me a PCP contract of £370 for 4 years and a final payment of £8k on a £20k loan. Sounds great on the monthly payment which fits my budget nicely but it means after 4 years I still have a £8k lump sum or loan to finance. The PCP interest rate was less than 6% but the actual APR was over 10%. That was the number I focused on.
In the end I went for Hire Purchase of £20k over 5 years at £390 a month. After 4 years it means the outstanding amount is £4,680 (less if early settlement) and not £8k. Overall interest paid will be £3,400. On the PCP, overall interest paid will be £5,760 with £8k outstanding.
So always check what you can get on a personal loan, and ask for their best deals on a Hire purchase and PCP contract and work out which works better for YOU. You may want a lower monthly payment based on the PCP and pay more interest in the long term or a fixed amount over the life of the contract like a personal loan or HP.
The cost of the new car
Once you take away the decision of selling your old car privately, and made a decision on using personal loan or Hire purchase, the only negotiating point is the cost of the new car. This will be fairly black and white, and as you have done plenty of research comparing on websites for dealerships etc you already know whether that car is good value or not. Correct me if I am wrong but I find it very difficult to get a good discount on 2nd hand cars, the margins are smaller and therefore the key for them is just stock rotation. They won’t bend their backs to sell the car to you with a big discount.
For new cars, you can sometimes get a ‘dealership’ contribution (from the actual car manufacturer – see BMW 3 series website, and Mercedes C class) of up to 10% plus. On top of that, you can argue for additional discount from the dealers themselves ( the franchises). I got up to 15% on a new 3 series (2011 model) and over 10% in total on the C350D. Look around, use What car Target Price as a starting point and go from there! My friend got 10% off on a stock Jaguar (new but in showroom) as it was already made and sitting there.
The cost of the new car, the cost of your old car, and the finance cost are all separate factors. Remove them from one another in any negotiation otherwise you may seem like you are getting a good deal with an extra £500 on your old car but they kicked you in the teeth with less discount on the new car or kept a high interest rate on the PCP contract. Be careful, and agree each separately and don’t mix them up is the best advice I feel I can give.
I hope this was remotely useful, and all from personal experience. Feel free to correct or comment.
Post Thanks / Like - 0 Thanks, 1 Likes, 0 Dislikes
Re: Buying a Car
David - thank you very much, clear, concise, and will help to focus minds on the key elements. I have already requested the mods that this becomes a "sticky".
XF gone due to intransigence of Jaguar marketing. New Rangie Sport on the drive!
Re: Buying a Car
Excellent post, David, thanks for making the effort for us.
2010 Kyanite Blue/Caramel 5.0 XKR
Re: Buying a Car
No worries - hope it makes sense and helps...was drafting it together during work and now re-reading noticing plenty of grammatically silly errors. Anyway as long as people understand!
Re: Buying a Car
do your research poeple as i've just gone to tax my xk8 only to find out that it has VIC marker against & now i have to have it vic checked!!
& just incase your wondering, yes i did buy it from a dealer & not privately & yes the air was blue & the trader has very red ears.
Re: Buying a Car
Hope you got some money back off the dealer !!! unless it was REALLY cheap, as repaired cars are worth a lot less, think of the resale value...
Sometimes I wonder... "Why that Frisbee is getting bigger" ....and then it hits me!
Re: Buying a Car
great info thanks
Re: Buying a Car
A good analysis of car finance...
personal loans (from your bank) could be an option too... though not having had a personal loan in Britain I wouldn't know the pitfalls.
A lot of people in Australia started to pay off their homes early with a bank account know as a 'single line of credit.' All your pay goes into the same account as your mortgage... so anything left each month after your bills and expenses including your mortgage have gone out comes off the principal.
When you have a large equity in your home, or you've even paid it off, you can draw down large amounts of capital such as that needed for purchasing a car... you essentially make the loan to yourself... no (additional) paperwork. Not sure if this is an option in the UK?
"A Vodka Martini."
'Shaken or stirred?'
"Do I look like I give a damn?"
X-Type SE 3.0L Auto silver, SE 2500 Auto, Adriatic Blue, deceased
Mike its known as an offset account in the UK. Same deal with the benefits of minimal or no interest if you have a high enough balance in your linked business, savings and personal accounts.
2006 XJ TDVI in silver with black innards. nav etc, sounds like a bread van but at least I can now afford to run it every day and retain my other kidney.