SPONSORED: St Canice’s Credit Union – buying a car? Don’t get blown away by tempting balloon offers

WHEN buying a car a sensible motorist will read about the make and model, take a test drive, get a second opinion – make sure it really is the one for you. You should take the same approach when looking for a loan to make the purchase.

In recent years, Personal Contract Plans (PCPs) have become popular. The package lets you pay off an agreed amount of the value of the car, leaving a ‘balloon’ payment at the end.

The monthly payments can be temptingly low but the ‘balloon’ system can be expensive in the long-run, as shown by figures from Ireland’s largest community-based credit union.

St Canice’s has pricked the balloon of PCP.

“It is a hire purchase agreement and you need to read the small print to see if it really is a deal for you,” says Róisín Gilroy, Head of Marketing and Business Development at St Canice’s.

At the end of a PCP agreement, you generally have three options:
*Hand back the keys and walk away, debt-free;
*Pay the final balloon payment and keep the car;
*Trade in the car against a new one, paying off the balloon as you do so.

However, St Canice’s makes some important cautionary points about PCPs that would-be buyers should consider:
*If you walk away debt free you will have no car and no deposit for the next car;
*To hold onto the car you must come up with a large balloon payment;
*Until the final payment is made the car is not yours and can be repossessed if payments are missed;
*There are restrictions on mileage and condition. You have to maintain the car, stick to a main-dealer servicing plan and to an annual mileage limit. If you exceed the mileage, there is a set fee; for example six cent per kilometre.

If you decide on the hand-the-car-back option, you don’t get to make anything out of the car’s equity. No matter how well you have kept it and maintained it, if you hand it back, the value above the bubble payment reverts to the dealer and you get nothing.

“You are given the impression that you have valuable equity at the end of the period again, but you don’t,” warns Róisín Gilroy.

“You do not really have equity for the next car, in that the value at the time equals the balloon payment – so you are starting again with nothing.”

St Canice’s points out that an average €20,000 car with 0% APR PCP finance, will mean that a balloon payment of about €7,000 is due at the end of three years.

To borrow €7,000 from St Canice’s Credit Union over three years at 8.2% (APR 8.5%) costs €220.02 per month, so the maximum cost of that loan is €917.64.

The credit union advises would-be borrowers: “Crunch the numbers, talk to us about a car loan before making your final purchase decision or if you need to borrow to pay off a PCP balloon payment.Give us a call on 056-7722042.”

A SmartOption Car Loan from St Canice’s is a straight forward loan with regular repayments over an agreed term. There are no administration fees or hidden charges. You own the car from the outset and there are no surprise balloon payments.

A PCP restricts what you do with the car. With a credit union loan, the car is yours to do with as you please.

St Canice’s serves more than 67,500 member-owners and their communities. Its official registered Credit Union name remains St Canice’s Kilkenny Credit Union Ltd. But following a series of member-driven mergers, it now serves people who live or work within the common-bond areas of Kilkenny, Carlow, Laois and Tipperary. It is a not-for-profit co-operative which works for the benefit of its members and the communities in which we all live.

There will always be a friendly face to meet and greet you at all St Canice’s branches. If you prefer to transact on-line; the latest technology is available.

“It is now easier than ever to save or borrow from St Canice’s Credit Union,” says Róisín Gilroy.

“A dedicated Member Service Centre means that we are there to answer your phonecalls within five seconds, so you are not kept waiting. With a strong social media presence, a dedicated website, online account facility as well as an App called CUanywhere; we are just a click away.

“Eleven branches in four counties means that when you’re a member of one you’re a member of all so you can choose to call, click or come in – we are set up for whatever way you choose to do your business.”

For more information, or to meet with St Canice’s Dedicated Member Service Team, call 056 772 2042 or log on to: https://stcanicescu.ie/car_loans/?utm_source=kilkennynow&utm_medium=display&utm_campaign=car_loan