cash or finance? how did you finance yours?

[pmcgsmurf]

Almost everyone I know simply finances their "new" motors.

I did learn from a friend the other that they had a PCP deal on >3 year old car, no warranty and needs them to MOT it, couldn't quite work out the attraction to that one myself, paying for sometihng you will never own and also the headache of maintaining it.

 

[ALFAitalia]

When I sell on PCP next to no one cares about the interest rate or the price of the unit.....its all about that monthly payment.....if they can afford that its a sale. Looking at the number of 23 plate high spec cars being driven by younger drivers its the same with cars.

 

[ALFAitalia]

I came across a stat at the weekend that 90% of new cars are bought on finance. Knew it was bad, didn’t know it was that bad.

Is that bad? Normal financial wisdom is to pay cash for stuff that appreciates and finance stuff that depreciates.

The advise above to negotiate the residual is bogus.....the dealer has no say in it.....a certain car and a certain spec and a certain mileage dictate the residual....you can make it lower (and your monthly payments higher)...but you cant make it higher....and the dealer has no power to make it higher.

 

[MikeInWimbledon]

Is that bad? Normal financial wisdom is to pay cash for stuff that appreciates and finance stuff that depreciates..

Pay cash for houses but borrow money for clothes, food and cars?

That sounds like the wisdom of someone who sells cars, clothing and lobsters.

Servicing debt for something that bit newer and expensive when you could have bought something simpler and invested your earnings instead sounds like a recipe for long term trouble.

 

[rich1068]

Haven't financed a car for years. But I only buy cheap stuff. Something that's dropped as far as it's going to go. Something that 20 years ago I used to see around and think was a bit tasty. And then I sell for what I paid or quite often slightly more. Doesn't always work though. For example, the CLK. I won't get my money back on that because it has been a bit spendy but I don't care because I like it. And regardless, what I've spent is way below the deposit and payments I'd be making on a new vehicle.

There are so many cars out there that I've never experienced. That's my approach. Life's too short to be sat in the same thing for years. I change as often as I like and sometimes the box tick might only last 6 months, sometimes it's longer.

 

[ALFAitalia]

Pay cash for houses but borrow money for clothes, food and cars?

That sounds like the wisdom of someone who sells cars, clothing and lobsters.

Servicing debt for something that bit newer and expensive when you could have bought something simpler and invested your earnings instead sounds like a recipe for long term trouble.

Paul Getty famously said, "if it depreciates, lease it, if it appreciates, buy it".​

I knew Id heard it somewhere before!! I obviously mean rent/lease/PCP.....rather than HP which would not be a wise choice....and HP is almost a thing of the past on new cars.

 

[MikeInWimbledon]

Paul Getty famously said, "if it depreciates, lease it, if it appreciates, buy it".​

I knew Id heard it somewhere before!! I obviously mean rent/lease/PCP.....rather than HP which would not be a wise choice....and HP is almost a thing of the past on new cars.

Aye, but that's only where one "needs" something, like an oil licence oil refining equipment, or a delivery network, and that cheaper alternatives, by spec or used, aren't around.

Where you're "outsourcing" the cost of finance and the risk of higher than planned depreciation. Where the bank can raise money more easily than you. (See Elon Musk, who happily admits that all his spending is based on just borrowing more money.)

So you could argue that I should lease whatever vehicle I want to free up capital which I can then invest at 10%. Which would be a valid argument, in my case.

The problem for the car industry that their clients don't do that.

The 28 year old couple on a combined income of £140k a year who lease a new Land Rover and a new Audi aren't wisely freeing up capital to invest it.

They're spending / borrowing money to "fake it before they make it" or "to look the part." And forgoing the opportunity to pay down that £120k of student loans that costs them 9% pa. and put together the deposit on a home for their married life. (She's a doctor, he's a professional)

When the car industry was given "free capital" by Governments and its bond holders, car finance was an easy sell. Now that European car companies are faced with Bond yields of 4.15%, the cost of those PCP's and leases has shot through the roof and shows no sign of returning to earth any time soon.

 

[MikeInWimbledon]

Haven't financed a car for years. But I only buy cheap stuff. Something that's dropped as far as it's going to go. Something that 20 years ago I used to see around and think was a bit tasty. And then I sell for what I paid or quite often slightly more. Doesn't always work though. For example, the CLK. I won't get my money back on that because it has been a bit spendy but I don't care because I like it.

Ditto. Vehicles that were well made and drive well, that have been well-maintained by their wealthy owners, but that are are now a fraction of the original price because they don't have the latest infotainment system and look a bit grubby.

 

[AMGeed]

I've never had a brand new car and never will. Too much 1st year depreciation for my liking.
PCP doesn't interest me, and the monthly payments for the car I'd choose would be eye watering.

The last 5 cars I paid cash for them, and will continue to do so.

 

[ALFAitalia]

I've paid cash for all my cars too (somewhere between 30 and 40 of them). Mainly because I usually buy private but also usually only buy stuff I can afford. Bought a few new bikes on the strap over the years though.

 

[pmcgsmurf]

I don't even pay my Council Tax with cash, pay on a points earning Credit Card but then I'm a tight git and like sitting at the pointy end.

 

[sgregory124]

Almost everyone I know simply finances their "new" motors.

I did learn from a friend the other that they had a PCP deal on >3 year old car, no warranty and needs them to MOT it, couldn't quite work out the attraction to that one myself, paying for sometihng you will never own and also the headache of maintaining it.

What is so wrong with that? I’m approaching my final 6 months of a PCP and my car is 7 years old in January. No warranty either - I don’t see the problem with that if you can afford the repayments and you go in with your eyes open.

With the equity left in the car, even after chopping it in I’ll be able to afford something at least as desirable again, if not the next step up. It’s a win/win.

Too much snobbery around financing, without PCP I’d never be able to afford to have bought my last 3 cars and certainly not my current C63S.

 

[Bobby Dazzler]

I also don’t understand why there is sometimes an element of (perceived) snobbery associated with financing cars, and by that I mean the suggestion that someone can’t afford it if financed.

Whether someone saves and eventually pays outright, or whether they borrow and pay back the amount plus interest over time, the buyer could definitely afford it if the car ended up in their ownership.

Whilst I buy cars outright, I can completely understand why people finance cars, especially when interest rates were low as the annual list price increases offset some or all of the interest charges.

Now that interest rates have increased finance charges have also increased dramatically. However list prices have dramatically increase too, and still partially offsets albeit it to a lesser degree.

Life is is too short. Given the choice of driving what I want and can comfortably afford to buy on finance today, or waiting until I’m say 10 years older to be able to pay outright, then I know which I’d choose.

 

[pmcgsmurf]

What is so wrong with that? .........

Nothing if it works for you, it's just not for me.
Our EVs are on a lease, fixed amount per month that covers the car and all other servicing costs including tyres etc.
That works for us as the cost is less than we would have paid per month for fuel on the daily driver.

In the example I described the focus was on the car and the monthly, nothing else mattered, that is just not for me, I'm the same with a mobile phone, pay around £15pm for unlimited and buy my phone separate to get a better overall deal.

Nothing wrong with leasing, PCP etc. if it works for you, we used to always change our Mercs after slightly more than 3 years and did factory orders on the new ones, that was a bit crazy, we'd have been better off doing a PCP considering we were always changing, not bought new now though since 2010.

There is no perceived snobbery by me about PCP etc.
One of my kids loves a PCP as he is not into cars and likes having a new one every 3 years without any of the headaches of servicing etc.
He chases the deal though and not the car, chasing the car can lead to people not getting the best deal per mile.

 

[Dickster]

I also don’t understand why there is sometimes an element of (perceived) snobbery associated with financing cars, and by that I mean the suggestion that someone can’t afford it if financed.

Whether someone saves and eventually pays outright, or whether they borrow and pay back the amount plus interest over time, the buyer could definitely afford it if the car ended up in their ownership.

Whilst I buy cars outright, I can completely understand why people finance cars, especially when interest rates were low as the annual list price increases offset some or all of the interest charges.

Now that interest rates have increased finance charges have also increased dramatically. However list prices have dramatically increase too, and still partially offsets albeit it to a lesser degree.

Life is is too short. Given the choice of driving what I want and can comfortably afford to buy on finance today, or waiting until I’m say 10 years older to be able to pay outright, then I know which I’d choose.

Spot on

 

[liamt]

What is so wrong with that? I’m approaching my final 6 months of a PCP and my car is 7 years old in January. No warranty either - I don’t see the problem with that if you can afford the repayments and you go in with your eyes open.

With the equity left in the car, even after chopping it in I’ll be able to afford something at least as desirable again, if not the next step up. It’s a win/win.

Too much snobbery around financing, without PCP I’d never be able to afford to have bought my last 3 cars and certainly not my current C63S.

Exactly this, the assumption that you are stretching yourself because you pay monthly for a vehicle is mind boggling. I used to buy outright on both new and used cars, but as I started changing cars every 2-3 years I didn't see the point of putting a huge chunk of cash into an asset that depreciates when I could put that cash into my savings, pension etc. As you say, if you go in with your eyes open and you can afford the payments whilst also being able to put aside money then great. Of course there will always be people out there who will stretch themselves and won't be have the additonal money to put aside as a result of overcomitting but such is life. Financing cars isn't necessarily financially irresponsible but it can be done irresponsibly if you're not careful.

 

[HappytalkAgain]

I also don’t understand why there is sometimes an element of (perceived) snobbery associated with financing cars, and by that I mean the suggestion that someone can’t afford it if financed.

Whether someone saves and eventually pays outright, or whether they borrow and pay back the amount plus interest over time, the buyer could definitely afford it if the car ended up in their ownership.

Whilst I buy cars outright, I can completely understand why people finance cars, especially when interest rates were low as the annual list price increases offset some or all of the interest charges.

Now that interest rates have increased finance charges have also increased dramatically. However list prices have dramatically increase too, and still partially offsets albeit it to a lesser degree.

Life is is too short. Given the choice of driving what I want and can comfortably afford to buy on finance today, or waiting until I’m say 10 years older to be able to pay outright, then I know which I’d choose.

I’ve said just this on many occasions. Basically Willy Waving and looking down on those who finance their cars.

 

[pmcgsmurf]

There is a thing though......

Quite a number of people I know refer to "buying their car" when they are on a PCP.
Thing is they can never afford the balloon payment at the end of the PCP so just enter into another PCP.

I never say anything to them but quite frankly unless they can afford to pay for "their car" then it is never theirs and they are simply renting a car.
Nothing wrong with that if it works for you but certainly should not be confused with actually "owning" the car.

 

[Fastcar155]

Hi , the world will suffer soon when the missed payments for the tin and tyres start to mount up , which will be the major car company who will require government support.

No one will agree with my comments but it going to happen.

 

[sgregory124]

There is a thing though......

Quite a number of people I know refer to "buying their car" when they are on a PCP.
Thing is they can never afford the balloon payment at the end of the PCP so just enter into another PCP.

I never say anything to them but quite frankly unless they can afford to pay for "their car" then it is never theirs and they are simply renting a car.
Nothing wrong with that if it works for you but certainly should not be confused with actually "owning" the car.

I dont always go into another PCP - quite often it’s nice to have the option of voluntarily terminating the agreement and walking away, something which I’ve done twice.

But who actually wants to own a piece of depreciating metal anyway? Any car actually worth owning as an asset is usually so expensive it never gets driven anyway for fear of it losing value. Largely pointless unless you’re starting a museum.

My C63 is outside right now, losing me money. In fact I got my end of agreement reminder through the post just today. So I’ve had a ball park valuation and before the end of January I’ll almost certainly be in something else….via PCP.

No brainer, am I bothered I never owned it? Nope!