Car and watch finance

[Flasher]

Interesting article on BBC regarding the extent to which the Car buyers are using finance to purchase, with over £47 billion taken out last year in finance and over 92% of vehicles are now bought on finance.

Did make me wonder on what kind of percentage of the current watch buying public are financing their purchases rather than straight cash deals and how much cheap finance is propping up the luxury watch market at this moment. Used to be a period were cash was king in both car and watch markets, with the ability to secure a sizeable good deal if handing over the cash but this seems to have waned over time with finance seemingly the go to place now for buyers.

Hear a lot of how “My money is better in a watch than in the bank doing nothing” but with the prevalence of finance credit maybe the money is not in the bank in the first place and problems lie ahead for both car and watch dealers if the economic outlook turned for the worst.

[LorneG]

Don't want to be a gloom munger, but if the economy goes down too far and interest rates start moving from their historical low, financing watches, cars, holidays etc will be the least of peoples problems. I bought my first flat when interest rates had just dropped below 10% and I thought that was unbelivably cheap

[tixntox]

I remember my mortgage interest rate going up by 250% when I "were a lad"! I never got caught out with borrowing again after that. If I can't afford something, it stays on the shelf! Something that the buying public need to consider as an option before we all drown in credit!

[Irish boy]

I remember my mortgage interest rate going up by 250% when I "were a lad"! I never got caught out with borrowing again after that. If I can't afford something, it stays on the shelf! Something that the buying public need to consider as an option before we all drown in credit!

Thats nuts. If something like that happened today the country would literally fall flat on its face.

[Suds]

Thats nuts. If something like that happened today the country would literally fall flat on its face.

The 20 year average MIR was 8.5% when I bought my first home. It rose above 14.5% 12 months later. I do worry for people with mortgages at present - good times are always followed by bad.

[LorneG]

Thats nuts. If something like that happened today the country would literally fall flat on its face.

I seem to remember that's what happened then as well. 'Black Wednesday'

[Omegamanic]

I see nothing wrong with financing anything you like - it’s just a personal choice to make.

[MarkJS]

Don't want to be a gloom munger, but if the economy goes down too far and interest rates start moving from their historical low, financing watches, cars, holidays etc will be the least of peoples problems. I bought my first flat when interest rates had just dropped below 10% and I thought that was unbelivably cheap

I don't disagree with you, but many people have been saying this for the last 10 years and nothing has really changed.

[Mick P]

I don't disagree with you, but many people have been saying this for the last 10 years and nothing has really changed.

To be fair, I can remember this being said in the 1960s when the "never never" credit boom started. But here we are today, all relatively affluent in comparison to those days.

The main point is asking whether buying luxury goods on credit is wise or not.

[CatalystGuy]

It suites the retailers/manufacturers as they make more money off the customer if it’s financed I.e. profit in the product and also on the cost of money.

Just buy what you can easily afford and all should be ok.



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[mtagrant]

Car finance has been this way for a long time. With kick backs to dealers for selling credit, the best deals on new cars are generally with finance attached

- - - Updated - - -

Car finance has been this way for a long time. With kick backs to dealers for selling credit, the best deals on new cars are generally with finance attached

[Gareth-W]

Car finance has been this way for a long time. With kick backs to dealers for selling credit, the best deals on new cars are generally with finance attached

- - - Updated - - -

Car finance has been this way for a long time. With kick backs to dealers for selling credit, the best deals on new cars are generally with finance attached

You forgot to add that only heavily depreciating car brands offer subsidised finance deals to be able to sell new cars in the first place Marcel. Most Brands with decent to minimal depreciation (cars/watches) don’t need to subsidise the new sales.

[mtagrant]

You forgot to add that only heavily depreciating car brands offer subsidised finance deals to be able to sell new cars in the first place Marcel. Most Brands with decent to minimal depreciation (cars/watches) don’t need to subsidise the new sales.

Very true of course Gareth. Do you find that this is the majority of the market though? When I bought a new BMW 5 series a few years back, the deal available on a PCP was far better than it I had purchased for cash.

[Seamaster73]

Paying interest on a loan to buy a depreciating asset?

Crackers.

[MCFastybloke]

Paying interest on a loan to buy a depreciating asset?

Crackers.

Its relative to how your own money is performing

[Andyg]

Who in their right mind buys a luxury depreciating asset on credit, even if its 0% finance.

As for those who believe they can actually buy something cheaper on credit rather than by cash then you are not trying hard enough.

[Ivan Drago]

Who in their right mind buys a luxury depreciating asset on credit, even if its 0% finance.

As for those who believe they can actually buy something cheaper on credit rather than by cash then you are not trying hard enough.

You're talking nonsense. Cash was king back in the day, now you struggle to get discount paying cash. The finance deal on cars and watches is nearly always cheaper.

[mtagrant]

This. The current family motor - Audi S4 - was markedly cheaper via finance using any metric. Equally guilty of short term thinking as it’s on a three year deal so when the options were “pay this per month for 36 months” or pony up for the whole thing and take the thumping on depreciation I went for the former. It’s a pittance next to the mortgage and childcare costs (London living innit).


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In my comparison on costs, it was significantly cheaper over the life of the car ownership (in my case rarely more than two years). Up front, plus payments and balloon at the end all added together was cheaper than the best cash price available for the car

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As for those who believe they can actually buy something cheaper on credit rather than by cash then you are not trying hard enough.

See above - I think you are behind the times...and that is not taking into account the interest on the money you could invest during that period

[DarkHarlequin]

Very true of course Gareth. Do you find that this is the majority of the market though? When I bought a new BMW 5 series a few years back, the deal available on a PCP was far better than it I had purchased for cash.

This. The current family motor - Audi S4 - was markedly cheaper via finance using any metric. Equally guilty of short term thinking as it’s on a three year deal so when the options were “pay this per month for 36 months” or pony up for the whole thing and take the thumping on depreciation I went for the former. It’s a pittance next to the mortgage and childcare costs (London living innit).


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[D4RW1N]

There's very clearly two schools of thought here with one extreme being that any form of credit is the spawn of the devil.

Personally I like to think I have a balanced view and think there is nothing wrong with sensible, intelligent use of credit.

I've used both interest free credit to buy watches and finance deals for cars. I currently lease and if you want/ need to change cars every 3 or 4 years, there are some great deals around, which are also low risk (in terms of depreciation, major mechanical costs etc) options of owning/ running a car.

I can also see though that if you want to run a car for say 10 years and do fairly low mileage, buying outright at a discount/ nearly new also makes sense.

Also, if you have a healthy secure income, but not loads of spare capital laying around, sensible low/ no interest credit is a great option. On the other hand, if you are capital rich/ income poor, paying cash makes absolute sense.

In summary, it all depends on someone's financial position, outlook and appropriate use of financial resources, but nothing wrong with using low cost credit in an overall well managed budget.

[Rodder]

The article talked about a 23 yo student buying an A1. Not one mention of the irresponsibility of her for buying something she couldn’t afford. 23! Surely she’s able to make an informed decision.

[David_D]

The article talked about a 23 yo student buying an A1. Not one mention of the irresponsibility of her for buying something she couldn’t afford. 23! Surely she’s able to make an informed decision.

I heard her mother talking about it on the radio. As you say, a 23 year old university student who signed for something it appears she didn't understand. Not sure what that says about her educational attainment.

[LondonNeil]

I've also heard the best deals on cars aren't for cash, the are on PCP/financed purchases. if you have the cash and want to buy with it, get the finance deal to get the best price then cancel the finance and pay off immediately, iirc you have a cooling off period with no penalty for early settlement.

I've also heard misselling of PCP could be the next PPI. I feel peeved....I feel like I'm missing out and almost being punished for sensibly avoiding PPI and PCP

[theoriginaldigger]

I've also heard the best deals on cars aren't for cash, the are on PCP/financed purchases. if you have the cash and want to buy with it, get the finance deal to get the best price then cancel the finance and pay off immediately, iirc you have a cooling off period with no penalty for early settlement

We just did this on my wife's new car; extra £1,000 off if she took the PCP and it genuinely was extra. Payed it off immediately under the cooling-off facility in the Consumer Credit act. Used the Tesco Clubcard to pay it off to get the points then paid that off in full in the usual way. I'm happy to play that game all day long.

[Mick P]

We just did this on my wife's new car; extra £1,000 off if she took the PCP and it genuinely was extra. Payed it off immediately under the cooling-off facility in the Consumer Credit act. Used the Tesco Clubcard to pay it off to get the points then paid that off in full in the usual way. I'm happy to play that game all day long.

I am 70 and have never had a loan in my life as I have always only bought something after I have saved for it. I had a mortgage for arounf 30 years and still use a credit card which is paid off in full each month.

I quite like your buy it on PCP and clear it off immediately afterwards but I suspect that my credit rating is zero due to having no history.

[Templogin]

A car dealership (politely) described me as the worst sort of customer - cash buyer with no part exchange buying a car that was a few months old. That tells you all you need to know.

PCP causes some people angst. On another forum that I am on, one of the forumites described 'them' being able to buy new as "unfair, as these people didn't have a pot to p*ss in".

I have financed cars, motorbikes and a house in the past, when interest rates were much higher, but now nothing goes on credit unless it is 0%, but then it has to be something out of the ordinary. I don't have much, but I owe nothing, and I sleep better at night because of it. Each to their own though, if you can live with credit then fill your boots, but waiting for something gives me a greater sense of value of the item.

[mtagrant]

I am 70 and have never had a loan in my life as I have always only bought something after I have saved for it. I had a mortgage for arounf 30 years and still use a credit card which is paid off in full each month.

I quite like your buy it on PCP and clear it off immediately afterwards but I suspect that my credit rating is zero due to having no history.

Pretty sure a mortgage is a loan...
A credit card is pretty close too

[Mick P]

Pretty sure a mortgage is a loan...
A credit card is pretty close too

Correct but the mortgage was cleared in 2004 and although I have used credit cards since 1971, I have always cleared them monthly and have never paid a penny in interest.

[Skyman]

I am 70 and have never had a loan in my life as I have always only bought something after I have saved for it. I had a mortgage for arounf 30 years and still use a credit card which is paid off in full each month.

I quite like your buy it on PCP and clear it off immediately afterwards but I suspect that my credit rating is zero due to having no history.

Wow, what a dull life you have endured. Always waiting, never enjoying. After a certain age (50-55) cash is king, prior to that, provided you work and spend within your means, then properly managed credit (just like a mortgage) can work very effectively.

[watchstudent]

Wow, what a dull life you have endured. Always waiting, never enjoying. After a certain age (50-55) cash is king, prior to that, provided you work and spend within your means, then properly managed credit (just like a mortgage) can work very effectively.

Silly statement. If one can enjoy life without chasing materialistic goods one can’t afford then that life is rich not dull.


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[Mick P]

Wow, what a dull life you have endured. Always waiting, never enjoying. After a certain age (50-55) cash is king, prior to that, provided you work and spend within your means, then properly managed credit (just like a mortgage) can work very effectively.

Well if you call buying over a dozen Jaguars, over a dozen classic motorcycles, upto 4 houses at the same time as well as a very expensive English shotgun and a load of foreign holidays dull, then yes I led a dull existence.

The "waiting" as you referred to it, ceased from my late twenties, from there on, if I wanted it, I bought it and before you ask, I did not have a rich relative drop dead on me, it was simple financial prudence and once you have saved up for the first purchase, you could easily start saving for the second and so on.

I will admit, for my age group, you made a small fortune by extending your mortgage and buying the most expensive house you could afford in the knowledge that most of the time it was increasing in value at a higher rate than what you were charged for your mortgage.

During my lifetime, interest rates were considerably higher than of today and you saved a lot of money by paying cash.

The ethos of paying cash has just stuck because it has served me well.

However I can now see the advantage of taking out and then cancelling a PCP but I don't know if my credit rating is good enough because I have never had a credit agreement.

[LorneG]

Wow, what a dull life you have endured. Always waiting, never enjoying. After a certain age (50-55) cash is king, prior to that, provided you work and spend within your means, then properly managed credit (just like a mortgage) can work very effectively.

i can fully understand both points of view and because I moved up the prperty scale in west london, a series millstone sized mortgages were necessary. All cleared asap and nice cars really do just wait a couple of years. Checked my credit rating on one of those free websies and its absolutely appauling. Made me laugh!

[Passenger]

Strong rational argument for not having kids, if you don’t yourself understand the basics of money and debt and preferably have a reasonably well established, fairly secure financial position. Though when did reason come into it.

[GOAT]

We just did this on my wife's new car; extra £1,000 off if she took the PCP and it genuinely was extra. Payed it off immediately under the cooling-off facility in the Consumer Credit act. Used the Tesco Clubcard to pay it off to get the points then paid that off in full in the usual way. I'm happy to play that game all day long.

Yep
Did this with Mrs Goats car
John Lewis card yielded some vouchers too

[RJM25R]

I've also heard the best deals on cars aren't for cash, the are on PCP/financed purchases. if you have the cash and want to buy with it, get the finance deal to get the best price then cancel the finance and pay off immediately, iirc you have a cooling off period with no penalty for early settlement.

I've also heard misselling of PCP could be the next PPI. I feel peeved....I feel like I'm missing out and almost being punished for sensibly avoiding PPI and PCP

Dunno how this will work as there’s no grey area.

Finance documentation showing price, mileage, interest rate and associated costs and conditions are signed by the purchaser.

Not like ppi where it was added without purchasers knowledge......

[LondonNeil]

excellent! good for you.

[Halitosis]

On the OP’s original point, I can appreciate financing a car as such is often necessary to work/live a convenient lifestyle, but finance for a luxury item such as a watch is bonkers.
Personally, I wouldn’t buy a new car either and imagine very few cash-buyers would when they can save thousands by going nearly-new instead.
Strange how we’re so often more savvy with “real” money that we’ve earned and saved rather than finance paperwork


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[browjam]

The finance bubble will burst, car repossession in the U.S. is real problem

[TKH]

So having been in the motor industry 32 long years (soon to be out) it was increasingly obvious back in 2006 that things were changing and not in a good way.

I was Vauxhall’s at the time and they launched daft schemes like £99 deposit 5 year finance with free insurance as you can imagine the youth rolled in for new Corsa SXI’s, 12 months later they could not afford the next years insurance and lots got repoed.

With PCP we were getting people in with offers on same product we could not get close too, then we saw why unscrupulous sales people at let’s say larger outlets were manipulating the residuals by pretending people were only going to do 5000 miles pa not 12000 this bumps the balloon up and reduces the monthly they do the deal 3 years down the line a 36000 mile hand back ain’t worth the same as a 15000 miler and big negative equity issue, the salesman or BM is long gone.

The FCA have just launched an investigation into Lookers for miss selling PCP their share price has tanked 25% this week
And check out Pendragon (Evans Halshaw and Stratstone) share price down 30% in a week after admitting 38% of their used car stock is pre reg from last year or 177 million worth.

Manufacturers are driving dealers to despair with ever higher targets making them do crazy stuff to survive, the whole business model is fatally flawed and ready for a errrr correction I think you call it.

The other thing that’s changed is the yoof, for years a 1st car was a 10 year old Corsa, Fiesta or Polo etc for £1000 that they could knock the corners off in their 1st year and learn the value of looking after something.

Not today oh no that’s not going to work out for the little prince and princesses, we had mums and dads bringing in their cherubs, trying to placate them with a Brand new Fiesta for £14000, but I want a Mini or an A1, Zoe’s got one Fiestas are rubbish (discuss), and they would strop until they made there parents walk apologising.

These are kids often have no income nor prospect of given their outlook and expectations and their parents are paying for 3 or 4 cars plus insurance it’s utterly mental, why can’t people just say NO, the best excuse is it’s so I know their safe in an A1, A Class or Mini and the kids play on this, I despair a10 year old Corsa, Polo or Fiesta is perfectly safe.


The other issue is brand desire Audi, BMW, Mercedes and VW are now the volume brands they are growing at a prodigious rate as buyers want premium brands to drive and be seen in and I get it the problem brewing is when they all collectively hand them back in the not too distant future oversupply will batter residuals and that is when the shit will hit the fan big time.

Since the crash 10 years ago interest rates have been kept low which is good and bad depending on your viewpoint or position, however what it has meant is the personal debt figure is significantly more than it was pre crash.

I read the other day a sob story that today kids can’t get on the property ladder because they can’t raise a deposit which was easy for us born in the sixties ,seventies and eighties.

If you live with your mum and dad your outgoings should be minimal, oh and you should pay keep.

But kids today have a car payment £200 mobile £50 gym £50 nails £50 and seem to eat out or have takeaways every other night and that’s before you start on fashion spend.....buy a 10 year old car outright do your own nails learn to cook get a sim only contract and buy an out of date phone.

Shit I’m old just turned 50 and do not understand anything anymore.

[blackal]

^^^^^^^^^^. Exactly that!

(What is BM in 3rd para? Business Manager?)

You forgot the Starbucks coffees etc.........

My local computer repair co (and retailer) is now doing PCP on MacBooks and IPads - so the youngsters can get their computer fix with a brand new machine too.

[seabiscuit]

This isn’t at all related to car or watch financing but bear with me. I work in the social housing sector and a large part of my role is working with tenants in rent arrears. Ten years ago a rent debt of £2000 would be exceptional. Nowadays £7000 to £10000 is commonplace.
For those of you who enjoy lambasting local authorities for allowing ne’er do wells to clock up such debts, bear in mind that we’re doing much more in the way of early intervention. Budgeting help, income maximisation and referrals to specialist advice agencies is there, alongside punitive measures. Yes, we take tenants to court when all other measures have failed. Once in court I know of cases that are effectively bounced for two to four years or more with the council or housing association seeking a repossession decree and advice agencies doing everything possible to keep the tenant in their home.
More often than not our Sheriffs (judges elsewhere in the United Kingdom) are loathe to grant decree, especially when a tenant or advice agency attends and offers up a tale of woe and promises to prioritise rent payments.
I recollect one case that was in court for more than four years before decree was granted. In this instance the advice agency then obtained a grant for £200 on behalf of the tenant to enable her to declare herself bankrupt before the eviction date was set. I’m seeing more tenants than ever declare themselves bankrupt to ensure that rent and council tax arrears owed up to the point of bankruptcy are written off. The debt that is written off could be used to improve our housing stock.
The biggest injustice is that our tenants who pay their rent even when they’re struggling to get by are effectively subsidising their neighbours who are clocking up substantial rent debt and then become bankrupt. But most galling of all, those who have been declared bankrupt rarely prioritise paying the rent and council tax they’re still liable for after the date they were declared bankrupt.

[draftsmann]

So having been in the motor industry 32 long years (soon to be out) it was increasingly obvious back in 2006 that things were changing and not in a good way.

I was Vauxhall’s at the time and they launched daft schemes like £99 deposit 5 year finance with free insurance as you can imagine the youth rolled in for new Corsa SXI’s, 12 months later they could not afford the next years insurance and lots got repoed.

With PCP we were getting people in with offers on same product we could not get close too, then we saw why unscrupulous sales people at let’s say larger outlets were manipulating the residuals by pretending people were only going to do 5000 miles pa not 12000 this bumps the balloon up and reduces the monthly they do the deal 3 years down the line a 36000 mile hand back ain’t worth the same as a 15000 miler and big negative equity issue, the salesman or BM is long gone.

The FCA have just launched an investigation into Lookers for miss selling PCP their share price has tanked 25% this week
And check out Pendragon (Evans Halshaw and Stratstone) share price down 30% in a week after admitting 38% of their used car stock is pre reg from last year or 177 million worth.

Manufacturers are driving dealers to despair with ever higher targets making them do crazy stuff to survive, the whole business model is fatally flawed and ready for a errrr correction I think you call it.

The other thing that’s changed is the yoof, for years a 1st car was a 10 year old Corsa, Fiesta or Polo etc for £1000 that they could knock the corners off in their 1st year and learn the value of looking after something.

Not today oh no that’s not going to work out for the little prince and princesses, we had mums and dads bringing in their cherubs, trying to placate them with a Brand new Fiesta for £14000, but I want a Mini or an A1, Zoe’s got one Fiestas are rubbish (discuss), and they would strop until they made there parents walk apologising.

These are kids often have no income nor prospect of given their outlook and expectations and their parents are paying for 3 or 4 cars plus insurance it’s utterly mental, why can’t people just say NO, the best excuse is it’s so I know their safe in an A1, A Class or Mini and the kids play on this, I despair a10 year old Corsa, Polo or Fiesta is perfectly safe.


The other issue is brand desire Audi, BMW, Mercedes and VW are now the volume brands they are growing at a prodigious rate as buyers want premium brands to drive and be seen in and I get it the problem brewing is when they all collectively hand them back in the not too distant future oversupply will batter residuals and that is when the shit will hit the fan big time.

Since the crash 10 years ago interest rates have been kept low which is good and bad depending on your viewpoint or position, however what it has meant is the personal debt figure is significantly more than it was pre crash.

I read the other day a sob story that today kids can’t get on the property ladder because they can’t raise a deposit which was easy for us born in the sixties ,seventies and eighties.

If you live with your mum and dad your outgoings should be minimal, oh and you should pay keep.

But kids today have a car payment £200 mobile £50 gym £50 nails £50 and seem to eat out or have takeaways every other night and that’s before you start on fashion spend.....buy a 10 year old car outright do your own nails learn to cook get a sim only contract and buy an out of date phone.

Shit I’m old just turned 50 and do not understand anything anymore.

Sorry to quote this in full but I’d like to nominate this for post of the week.

[Suds]

Sorry to quote this in full but I’d like to nominate this for post of the week.

Plus 1

[gbn13]

Sorry to quote this in full but I’d like to nominate this for post of the week.

Agreed and very much on the money.

[StuS]

We have just purchased a car for the first time in years, It’s 14 months old and from the main dealer, it was almost like playing a game, we just wanted the best bottom line price, the minutia of trade in and discount doesn’t bother us, what we end up paying does and we got there finally but I honestly believe only because it was the 99th of 100 cars they needed to meet target by today.

They do sell on monthly cost/affordablility and not real cost which is just not how we operate but the majority of the country evidently does.

Picking it up today and I’ll be glad the process is over, the whole customer experience thing just to get more money from you is not my thing at all.

[simoscribbler]

The obvious flip side of QE/ultra loose credit is the rise in RRPs, both watches and cars. Bog standard family hatches well over £20k list now.

One advantage of paying cash for everything is that this registers, and I practice what I preach: no expensive watches and an excellent non prestige car bought 2 years old for £9k, about 40 percent of list.

[Mystery Scott]

The obvious flip side of QE/ultra loose credit is the rise in RRPs, both watches and cars. Bog standard family hatches well over £20k list now.

One advantage of paying cash for everything is that this registers, and I practice what I preach: no expensive watches and an excellent non prestige car bought 2 years old for £9k, about 40 percent of list.

Prestige non-4x4s are even better for the second hand buyer. I got an 18 month old, 30,000 mile mercedes cls for £27,000 (from mercedes dealer with full warranty etc) and the new list price has been £57,000. BMW 5 series and Mercedes E-Classes are even better. It’s all crazy.


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[julian2002]

I bought a watch on finance.
I saw a watch I wanted and could have bought it outright however there was a 0% deal running if you put a chunk of deposit down.
Better the money in my pocket earning whatever pittance of interest I can find than in their pocket doing the same.
I plan on clearing the payments in the next few months as we are looking to buy a new house.

[Mark020]

Interesting discussion. I've never bought a new car (and don't think I will ever do it) but I like the finance to get more discount and immediately pay off trick

[mtagrant]

To add further, we are straying into the principle of finance vs cash, and in the case of some of those on this forum, this is a financial choice of the cheapest, most effective way to buy a car.

The original post about a 23 year old student buying a brand new Audi doesn’t make any sense to me. When I was a student, I did not have a car, and bought my first after graduating and although it was on finance (HP), it was still a relatively old and cheap car which I would afford the repayments on