PCP: Paying for your Caravan and Towcar

Caravan and Towcar Finance Guide

There are lots of ways to pay for a caravan or towcar and each has its benefits and drawbacks.
Here are the main ones

FOR TOWCARS AND CARAVANS

CASH

If you’ve got it, this is the easiest, quickest and, in the long term, cheapest way to buy a caravan. However, cash sales are no longer the preference for salesmen as they may receive commission payments on any finance deals they arrange, so don’t expect discounts for paying with folding money anymore. It’s wise to only take a deposit with you on the initial viewing. Sort the rest later.

Benefits

• Flexible, speedy and cheap, with no interest charges or fees to pay
• Once the caravan’s paid for, it’s all yours
• Private sellers love the stuff

Drawbacks

• Cash is no longer king when buying from dealers. You used to get discounts for cash, now salesmen are keen to push finance
• You’ll feel strangely vulnerable with five grand in your pocket

DEALER FINANCE

Buying a caravan with dealer finance gives you a lot of bargaining power. Make the most of it. Again, compare the APR % interest rates before committing. Be sure to check deposit and final payments too.

Benefits

• Flexible
• Use it as a bargaining tool on the caravan price
  Extend the repayment period for pricier caravans
• Use it as another excuse to blag a few extras

Drawbacks

• Default and ‘the boys’ may be round to collect their caravan back
• The temptation to impulse buy
• If the interest rate’s low, you’re probably paying top-dollar for the caravan or getting a poor part-ex rate

BANK LOAN

The media would have you believe that banks aren’t lending right now, but for the right customer (with a good credit and banking history) decent loan rates are available. Compare what other banks and caravan dealerships are offering before committing, and consider getting your loan agreed before going caravan hunting. That way, you know a realistic price limit once you start viewing tourers to purchase.

Benefits

No deposit needed
Easy to arrange
Flexibility for long-term bank customers
Aggressive caravan repossession for defaulters less likely

Drawbacks

• Interest can be high
• on sub-£5000 loans
• Less bargaining power with dealers

SETTING A BUDGET

Be realistic about what you can afford, and work out an affordable budget before you head off to choose your caravan on the forecourt.

If you need a loan, work out how much you can afford to spend each month and stick to it; the joy of caravanning can soon be spoilt by the anxiety of struggling to pay for your caravan.

If part-exchanging, go online or make a few phone calls to see what your current caravan is worth on the market.

Remember, you’ll get charged interest on any loan (unless the interest rate is 0%), so take the time to find out what interest rate you are paying and, again, do some research beforehand to make sure it’s competitive. Work with the APR % rate for any quote, as you’ll know you are comparing like for like.

CANCELLING FINANCE

Terminating a finance agreement early can be expensive, so ensure you are entirely satisfied with all aspects of the deal before you sign. If your financial circumstances are likely to change for the worse soon, think carefully before signing a finance agreement.

Most finance does include a cooling-off period of 14 days, during which time you can get out of the agreement without incurring penalties.

FOR TOWCARS ONLY

PERSONAL CONTRACT PLAN (PCP)

Pay a deposit, followed by affordable monthly payments, then either hand the towcar back, use it as a deposit on your next PCP or pay a final fee to keep it.

Benefits

• Affordable monthly payments can make owning an expensive towcar a reality for many people

Drawbacks

• High-interest rates
• Big deposit needed
• Big final payment to own the car at the end of contract
• Must be main-dealer serviced
• Mileage limit and hefty penalties for exceeding it

HIRE PURCHASE (HP)

Pay a deposit and a regular monthly payment. You don’t own the car until it’s completely paid off. Offers protection under the Consumer Credit Act.

Benefits

• Easy to obtain
• Good for those with poor credit histories

Drawbacks

• Interest likely to be high
• It’ll cost you to get out of the deal early
• The towcar belongs to the dealer until you make the final payment

CREDIT CHECKS

Any company you enter into a finance deal with is likely to carry out a credit check on you. Finance companies base your acceptability for a loan on a scoring system, so if you have ever defaulted on a loan or have never had credit in the past, they might refuse your application.

Occasionally, finance businesses refuse applicants with perfect credit records. The refusal may be because they have moved house recently, or there is an existing County Court Judgement (CCJ) against the property they live in.

To clarify this situation, send a £2 cheque to a credit-rating agency such as Experian and they will send you a full print out of your credit history to help you identify the issue.

QUESTION THOSE HIDDEN COSTS

Admin fees and delivery charges are just some of the costs you may find hidden away in the small print. Make sure you specifically ask the salesman about any extra charge and get confirmation that the spec level you’re viewing is what you’ll receive exactly.

DAMAGED GOODS

Just because your caravan is new doesn’t mean it won’t have suffered any damage. Inspect it carefully before signing for it. If there is any damage, negotiate a discount or make the dealership repair it.

AFFORDING THE UNAFFORDABLE!

If that dream caravan is just out of reach, there are some ways to seal the deal.

• Negotiate a lower interest rate with the dealer or look for a bank loan with a lower rate
• Extend the loan period from three to four or even five years
• Buy the same caravan second-hand and save a bundle
• Down-spec. Do you need that microwave and TV aerial? You’ll save a packet by selecting a similar layout from a cheaper range

TOP TIPS 

Don't Get Carried Away

A shiny new caravan and a silver-tongued salesman make a potent combination. Don’t get carried away. Know your price limits and stick to them.

Avoid Carrying Cash

• Avoid carrying cash by using electronic bank transfer to pay the seller.
• BACS is free but may take several days to clear.
• CHAPS offers same-day payments if arranged before 2 pm, but costs £25. Recalls and amendments cost £20 at Barclays.
• Some banks, like Barclays, offer faster payments systems too.
• BACS and CHAPS can be arranged over the phone or via online banking, but you’ll need passwords and usernames with you, which you should memorise or store securely and separately for future use.