Hi folks,
As per previous post about a Macan purchase I've set an approx budget and was planning to purchase the car using a part ex of approx 50%, savings approx 25% and bank loan of approx 25%.
I could pull out more savings to pay the 50% if necessary but I like having a rainy day fund and with bank loans so cheap the cost of financing that 25% seems like a reasonable cost for the benefit of keeping my savings at the higher level.
However, I keep getting calls from well established finance company I originally spoke to last year who is clearly trying to steer me towards a finance deal.
To be fair them there is no hard sell but I'm just trying to establish if i'm missing a trick?
Essentially if I'm comfortable with the cash being tied up in a slowly depreciating asset then financing doesn't seem to make sense in terms of the cost of the deal?
I can't see the Macan depreciating over 4 years anywhere near the cost of the 4 year finance deal so seems like a no brainer to me.........
Anyone see it differently?
Cheers.
Chris
Im looking to buy a car early next year and bank loans at 2.8% are far more sensible for me than alternative finance (pcp) at 6.8%. Ill actually be saving 4.5k of interest and fees by going down the bank loan route. Also, I like to own my cars at the end of loan periods and use that as my starting point for my next car. Taking out PCP means giving it back or paying a wedge at the back end of the deal, neither of which I would want to do.
All depends on how you like to run them I guess.
I'd go bank loan, getting in before we see interest rate rises.
There seems to be many ways to tackle this, this whole area is filled with ways in which car dealerships and banks can get people in to vehicles with money they don't have.
I have always had a vehicle on finance and when they are close to being paid off I part ex for another one and start the process all over again. I always choose HP over PCP though as I dont like the idea of being presented with a balloon payment in case I want the vehicle and the end of my term, also I want to have more equity in the vehicle for the part exchange.
It really boils down to your financial situation, I agree you are better off having money in the bank for a rainy day, they always seem to come when you least expect it and when you have sunk your cash into a big expense.
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The residuals on Porsche are generally very good so leasing can be poor value if the deal doesn't take full account of that
Best to do the math and see what it costs you both ways.
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Sorry I may have missed this but is it new purchase.Originally Posted by smokey99
Ive been weighing up purchasing of cars for years and Im more and more convinced now that leasing is the best way......my opinion of course and happy to be put right mathematically. A new car will deprecate like hell so youre going to lose XXXXX anyway. Why not bank the cash and p/ex money and lease it?
One thing to consider is that with a bank loan, you own the car - it is your name on the V5.
With finance companies this isn't always the case.
Obviously pcp will result in a lower monthly payment because you are only covering depreciation, not full repayment of the amount borrowed and pcp is only widely available through dealers (albeit with much higher aprs - not always, but most of the time especially with used cars.
First step for me would be to compare the interest rates and products the dealer has to offer vs the banks (via online aggregator)
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Call me old-fashioned, but when you have to borrow/loan money for a car, it's simply too expensive. Especially when borrowing money leads to the fact that your name is not on the title. If I understand it correctly: you're not the owner and you never will be; still, you have to pay for it.
The only time I borrowed money was for my first house in 1985 - and that was fully repaid when I left it in 1997 to start a life with my wife.
Not quite.
It is only with a Leased car (via a Contract Hire agreement) that you are not the named owner on the V5 but just the registered keeper only. As such you never have sight of the V5C as it is held by the finance company that you hand your car back to at the end of the agreement.
That is the opposite of a car funded via PCP/LP or HP where you are on the V5 as both owner and registered keeper. Also with these types of agreements they are all secured on the asset itself (the car) and not your house as "some" personal/bank loans are. It is not just about the finance rate (flat or APR) as there are other considerations to take into account and specific to the asset itself.
Not quite; the V5C only has the registered keepers name on it.
The DVLA dont actually care who owns it, merely who to send the NOIPs to.
How you choose to finance your car depends on so many different circumstances that theres no right or wrong answer.
Last edited by Dave+63; 1st September 2021 at 18:45.
I used to think the same way. I used to HP in my younger, more impatient years but nowadays I just save or chop in a watch and get the car I want.
PCP or HP can suit more people. Especially with PCP. Its a known quantity. They know theyre getting a brand new car with a full 3 year warranty with (hopefully) no headaches associated with the MOT or breakdowns for a fixed monthly sum. At the end of the term, they wont own the car but the circle starts again.
Savings returns are peanuts, use your own money and repay your self back into the savings account over a set period, its like finance at 0.5% or similar.
I sold a TZUK favourite MX5 NC sport six years ago & since then I have been leasing some fun cars at crazy prices.
Peugeot 208 GTI BY Peugeotsport - 3 X 23 133 per month
Abarth 124 Spyder - 3 X 23 205 per month
Renaultsport Megane RS - 3 X 23 221 per month
Unless the finance companies can get a significant value off the original starting price, theres really no logic to going with them.
If your savings return is lower than the finance / loan cost (which it usually is), one could easily argue that getting into a finance agreement now to keep a savings pot going is silly. Just spend the savings, and get a loan if you need the cash on the rainy day. Otherwise youre just paying interest on money that youre not using.
If you’re prepared to accept a small degree of risk you’ll see over 4% return in your money, that blows your logic completely out of the water.
No matter how you dress it up, if a car costs 80k there’s only one person paying the depreciation on an 80k car.........guess who!
Sit down with a pen and paper and calculator, plus a strong drink, and calculate the true costs of running an expensive car.......and the OPs choice isn’t even nice! Stupid looking car, regardless of the badge on the front it still looks bad. if you want a Porsche buy a proper one.
This
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I run a very expensive car, i know about vehicle costs, i drink a lot and own pens. The question asked at the top of the page does not relate to any of this.
If you havent got the cash buy something cheaper or save for a bit longer.
Never pay interest only earn it
Yes it does! The point Im making is to consider the true costs of ownership, whichever way you dress it up.
I could buy the car for cash ........but I wouldnt! Cars are a major waste of money whichever way you finance them. Let some other mug stand the depreciation, run one thats a few years old instead, OK, wont impress the neighbours or colleagues to the same extent, but eventually you realise that no- one really cares.
Trust me, returns in excess of 4% on investments with minimal risk are out there, so the no returns on savings comment doesnt stack up.
Do the maths on the car costs.......its scary!
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+1!
I am with you OP
Now i buy my own cars i do the same as you are suggesting.
50% part ex 25% savings and 25% bank loan at 2.8%
Yes my savings are only earning me around 1.5% but for some reason i like my rainy day fund and i also know i can pay the loan off anytime i want.
No logic but i sleep well at night.
I bought my golf R 2 1/2 years ago and paid cash
Was in 2 minds over whether to pay outright or go for 2000 plus vat and then 199/month for 3 years which was attractive , or so it seemed
Fast forward to last week, I was offered 650 more than I by paid for it by wbac
So
If Id taken finance Id be over 8k out today
Strange times
🐐
Evening all,
Ok so I meant to respond earlier but glad I left it until later to see the replies take on a life of their own.
Its amazing what a spread of replIes you get to a question like this especially when its a relatively clear financial question.
There was was some common sense amongst the daft comments but not sure anything has really changed my perspective.
I made it very clear I have the funds to purchase I was just curious whether the PCP finance option had some hidden nuance Id not factored in.
The option of paying myself back in instalments is technically the better option but I still like the comfort of the healthy savings account. And at less than 20 a month in interest its a small price to pay to maintain that.
Cheers.
P.S. To one sensible question it could either be a new car or an nearly new car. Appreciate there maybe some advantages with the new car deals due to lower APR or dealer contributions..but thats unlikely with a Macan sadly.
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And to the question of leasing (which Id never really thought of) I had assumed it doesnt really work financially with a Macan as despite the good residuals the spec is quite basic and it leaves me paying monthly for a lot of extras Id like.
But might be worth exploring to just be sure all with the benefit of a stiff drink.
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Lease/finance/buy outright, matters not
Work out the cost of ownership whilst in your possession.
Look at depreciation, interest paid, lost interest in having money tied up, warranty etc.
Last edited by demonloop; 1st September 2021 at 22:10.
Ooh, I like that a lot!
When the Macan first came out a colleague bought one on PCP specifically because it was cheaper than owenrship due to the residuals.
As with many cars adding the right extras helps residuals and thus your PCP/Lease deal.
Possibly changed now they're more easily avialable but yes, woirth checking the figures all ways.
Happiness Hoover..thats brilliant and 100% accurate.
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Difference in 2 scenarios would be the same whether car appreciated or not.
Nothing is more financially crackers than borrowing to buy a depreciating asset.
Agree entirely no point being fur coat and no knickers, if you have 60k spare drive a 60k car rather than pretending or dreaming you have.
RIAC
Not always. Some of the lease deals from 3/5 years ago were much cheaper, Golf Rs, Audi S8s for silly money etc (if buying new)
Its not financially crackers its just not financially efficient and around 80% of the market does it.
Clearly some are just dreamers who should temper their desires but Jesus H what a miserable viewpoint for life.
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If the interest is higher than you get on your savings then in theory its better to buy for cash. In other words if you get 1% on deposit but the car finance is 3% youre better using your savings. If you borrowed say 40k at 2% difference thats 800 in a year - obviously the loan is decreasing so it works out less than that. If you use the monthly payments for the loan to rebuild your savings youll bet better off after the term. If its say a 3 or 4 years loan that could mean 1,500 to 2,000 as a total guess. You may feel more comfortable keeping your cash readily available though. Either way though its a nice quandary to have as youre in a position to do both.
Could you not buy something nearly new with much of the deprecation taken out of it?
Call me old fashioned but no matter how good the rate is you wont be paid more in interest if you went down the finance route
Theres a reason they want to sell the finance
Ive only ever bought 1 new vehicle and that was a motorcycle (my 1st) paid cash- I like to own something outright - but thats just me
Isnt it just simple maths hard to think there is ever a case for not buying outright otherwise the leasing company isnt running a very sustainable business. Maybe there are a few odd cases where they get the maths wrong
Dont the leasing companies buy the cars cheaper than an individual?
Further, some of that saving might be passed to the end user making the deals look better value than they otherwise would be.
Its was a bit of a short version of this
Compound interest is the eighth wonder of the world. He who understands it, earns it he who doesnt pays it.
― Albert Einstein
That was the original route but unfortunately used prices are so high a 12-18 Mos old car is almost the price of a new one.
Most of the 3 year old models have asking prices close to 80% of list price. Its bonkers.
Not bad for a car thats not a proper Porsche.
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Maybe, it all depends on the business model and where the profit pools are.
Leasing a car is an appealing option but every time I have looked at it the maths didnt favour the option and I have bought outright. Maybe there are good deals out there in specific models if you search hard enough but Ive never found one cheaper than buying.
Im not really into cars so now run them longer and that makes a big saving. Owning a new or nearly new car is a very expensive choice.
Ive just gone through the same questions, the garage wanted 9.9% on a 4 year pcp, nearly fell for it when they said ICE cars in 4 years will be worthless so I could just hand it back and walk away. So paid cash, the money in the bank wasnt making me anything so I might as well enjoy it.
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In my previous experience the following usually holds true (or at least used to before the chip shortage etc):
-Buying outright tends to be cheaper than financing, even when considering the lost interest on savings vs the interest paid
-Sometimes you can get a better deal by taking the finance option then paying it off the following month
-Buying nearly new can save a lot of money due to the initial depreciation
-Sometimes you can get great lease deals if you are flexible about the type of car you want
Having said all that, we often forget the human element which goes against logic. In my most recent purchase I want brand new because its nice feeling having a brand new car. I also went down the PCP route because I like having cash in the bank as it gives me a feeling of security. I put down a big deposit because I wanted the monthly payments to be low.
Keep what you have, keep your cash and wait a year ?That was the original route but unfortunately used prices are so high a 12-18 Mos old car is almost the price of a new one.
Most of the 3 year old models have asking prices close to 80% of list price. Its bonkers.
Not bad for a car thats not a proper Porsche.
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Yeah i heard they can get as much as 25-35% discounts buying in bulk.
My wifes first lease, a 16k Fiesta, was 400 up front and 125 a month, 3275 for the 2 years she had it. There's no way even without finance and paying 16k cash that we'd have lost less than that if we'd bought and sold, even more so as we'd have had to borrow the 16k.
My current car is a lease too, an Octavia estate, had it less than 2 years and it's already depreciated by more than the whole 3 year lease will cost me.
Conversely, wife wants a mini convertible next, lease prices are way too much, over 10k for 3 years. Used prices are almost the same as new. Got over an 11% discount buying a new one, prices seem to hold well on minis so in 3yrs we should be able to sell it and only lose about 5k. A few months wait for a factory order, but her current lease isn't due back until Dec with the option to extend it, so happy to wait.
Leasing can be cheaper, but not always, do the maths. I don't care whether I own the car or not, it's all down to total cost over the ownership period
Its irrelevant all the stories of what was 2-3 years ago the market today is a very different place as we all know 2nd hand car prices have risen considerably internet companies such as Cazoo Cinch etc etc etc have entered the market ...the lease/PCP deals that were availbale just last year which made sense for some have mainly disappeared.. nobody has a clue how the market will be in 2-3 years time ..its a personal decision do the maths and decide whats important for you and your needs..
I think the second hand market is going to collapse massively when the semi conductor issue is sorted out.
Each to their own. Buying a new car, in any guise is going to cost you money. Unless you're lucky enough to get your hands on a new car which everyone wants and can't get.
For me, as a car enthusiast, the ideal scenario if your situation allows is to buy a car, at least 4 years old and with cash. The vast majority of the depreciation will be taken care of (if you buy an interesting car at least) and you'll have no interest to pay. The last two cars I bought (one sold and one still in ownership) are both worth more now than I paid for them. Blob Eye Impreza STI (sold) and a B7 RS4 Avant (still own).
Leasing can work on mad deals, or with cooking spec cars it seems. I tried to navigate it for my mum once. She ended up with a 5 year old Golf GTI.
Paying 600/700 per month to borrow a cool car which you can't afford (not aimed at the OP) is mental.
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Thanks for that and thats exactly the plan I had for the new car when prices were a bit lower.
There is the odd car that fits the bill but they are thin on the ground.
It could be that I wait out the current cycle but Im a little impatient
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I remember a lease deal on a Mercedes E63 AMG which cost about 25k over three years. People slated it as a bad deal when depreciation alone on the car over that period was about 40k.
Its all a case of working out which is the best way for you; yes its cheaper to buy only a car that you can afford to buy outright, but if you want a new car and can afford the repayments then why not? Its your money, you cant take it with you and YOLO!
My mother in law was shocked I was paying 260/month to lease a golf R as she was very much one for buying her car cash. We did the maths on her 3 year old Q5 using the most expensive similar model on Autotrader and it had cost her 550/month.
That was a few years ago and things are a lot different at the moment but she could have leased one for around 350/month at the time.
For me if you are planning on keeping the car over 5 years then buying outright is the way forward. If you chop and change the decision is based purely on cost of finance vs depreciation.
Interestingly the lease company let slip they had bought the golf I was leasing for 22k, I think list was 30k ish.
Ross
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