Chris Harris on... car finance

[nyssa7]

I think some people overlook that HP / PCP restricts what you can do with the car as it is not legally yours.

An unsecured loan gives you more freedom to trade it in early, modify etc; a bank loan is currently far cheaper than the c10% APR quoted for a used car...

Interested to know what restrictions you think there are on HP / PCP? V5 in my name, private plate on it, have sold all previous PCP cars before the end of the term and just paid off what was owed
only difficulty I can think of is that it’s a lot easier to sell the PCP car through a dealer before private buyer would be nervous it still has outstanding finance

it‘s all well and good if you can afford actual cash to buy your new car, but most people don’t have that much floating around, and many of those that do would have little left for rainy day or other spending.

I've driven all sorts Depending on my needs. A couple of years back I took on a job that would have me touring the SW for a year. Spent £800 on a diesel Vauxhall Tigra that did 60mpg, was slow, nothing special to drive but reasonably comfortable, had heated seats for winter and air-con/top-down for summer. I have an Elise (owned) for fun weekends and track days. And I’ll finance the family car so I can have at least one car I don’t have to worry about maintenance costs if it goes wrong

 

[nyssa7]

So at List price of £47k, £25k is 47% depreciation.
At discounted price of £41k, it's 39%
And at 4 yrs £16k again discounted £41k it's 60% depreciation

Depreciation usually calculated on value after 3/4 years as proportion of the original cost. So even on list price of £47k, I got back more than 50% of its cost. Be lucky to get back 35% on the AMG!

 

[Deleted member 149005]

Interested to know what restrictions you think there are on HP / PCP? V5 in my name, private plate on it, have sold all previous PCP cars before the end of the term and just paid off what was owed
only difficulty I can think of is that it’s a lot easier to sell the PCP car through a dealer before private buyer would be nervous it still has outstanding finance

it‘s all well and good if you can afford actual cash to buy your new car, but most people don’t have that much floating around, and many of those that do would have little left for rainy day or other spending.

I've driven all sorts Depending on my needs. A couple of years back I took on a job that would have me touring the SW for a year. Spent £800 on a diesel Vauxhall Tigra that did 60mpg, was slow, nothing special to drive but reasonably comfortable, had heated seats for winter and air-con/top-down for summer. I have an Elise (owned) for fun weekends and track days. And I’ll finance the family car so I can have at least one car I don’t have to worry about maintenance costs if it goes wrong

Just because your name is on the V5 doesn't mean you are the legal owner...

I wouldn't buy a car that has outstanding finance on it with a promise the vendor will pay it off once I have paid them...hence the limitation on changing the car. Some dealers will "buy it off you" and then clear the finance but typically they will offer you a lower price to cover the risk

 

[Bobby Dazzler]

It's nothing of the sort.
It is not a criticism at all, rather It is a general observation that many in Society are in debt to a degree that a small change in circumstances could have a dramatic effect on the it ability to pay their debtors.
This is largely a result of the house prices rapidly outt pacing earnings, but also increaced societal pressure to keep up with the Jones', a have now rather than save up mentality and cheap finance.

The difference between owning and financing, is that if the possession is on finance (and that includes a mortgaged house) if you don't pay the creditor, you risk ending up in court and losing the asset.
If you own it, you at least can't lose it, (except if in the case of a car, it was siezed as collateral against other defaulted debts) but might not be able afford to use it. In that case one could always sell the asset

My comments weren't based upon your comments.

I agree that there is a shift in society, I disagree that a small change in circumstances could have a dramatic effect on the ability to pay their creditors. A global pandemic is not a small change. Outside of the current context, losing a job or business is not a small change. Other life changing effects which affect someones ability to afford a car (whether owned or financed) are not small changes.

 

[Bobby Dazzler]

Just because your name is on the V5 doesn't mean you are the legal owner...

I wouldn't buy a car that has outstanding finance on it with a promise the vendor will pay it off once I have paid them...hence the limitation on changing the car. Some dealers will "buy it off you" and then clear the finance but typically they will offer you a lower price to cover the risk

You might not, but many do. It's normal now. Most cars are financed, either secured on the car or unsecured borrowing. In the case of new cars, most are financed and secured on the car.

 

[nyssa7]

Just because your name is on the V5 doesn't mean you are the legal owner...

I wouldn't buy a car that has outstanding finance on it with a promise the vendor will pay it off once I have paid them...hence the limitation on changing the car. Some dealers will "buy it off you" and then clear the finance but typically they will offer you a lower price to cover the risk

That’s what I said

 

[Bobby Dazzler]

One of the things not mentioned in any debate on the sbject - but which is a key driver behind the shift towards financing new cars - is the move away from many businesses providing company cars.

For someone paid an allowance in lieu of a company car - especially where the employer has specific requirements for vehicles which can be used on company business - then financing a brand new car is a sensible way of providing a car.

I dare say that a not-insignificant proportion of the membership of MBClub who are actively working fit into this category, whether as an employee, major shareholder or business owner/co-owner.

 

[Deleted member 149005]

You might not, but many do. It's normal now. Most cars are financed, either secured on the car or unsecured borrowing. In the case of new cars, most are financed and secured on the car.

Such purchasers probably don't realise the risk of losing the car if the vendor doesn't clear the finance that is secured on it...

 

[Deleted member 149005]

One of the things not mentioned in any debate on the sbject - but which is a key driver behind the shift towards financing new cars - is the move away from many businesses providing company cars.

For someone paid an allowance in lieu of a company car - especially where the employer has specific requirements for vehicles which can be used on company business - then financing a brand new car is a sensible way of providing a car.

I dare say that a not-insignificant proportion of the membership of MBClub who are actively working fit into this category, whether as an employee, major shareholder or business owner/co-owner.

Good point - presumably if the employee leaves or is made redundant, they lose the car anyway? I suppose it depends on how the payments from te company to the employee are structured...part of basic salary, a loan, or paid direct by the company to the lease co?

 

[Bobby Dazzler]

Such purchasers probably don't realise the risk of losing the car if the vendor doesn't clear the finance that is secured on it...

Possibly. It requires trust on behalf of both parties, and in the event of a private sale it usually involves the vendor and buyer handing the handset to each other to clear the finance, before driving away with the car.

 

[Deleted member 126251]

..............Be lucky to get back 35% on the AMG!

......but worth to drive an AMG.

 

[Deleted member 126251]

Those most vocal on these types of threads are typically those who choose to buy "cash" rather than those who choose to "finance"............

Financing is the most expensive way to purchase anything which is why people who can, avoid it. These same people will probably also understand the compound interest referred to in that Einstein quotation in post #25.

Unfortunately we live in a society where finance is so easy to obtain that people go out and purchase goods that they probably don't really need and would go without if they didn't have the credit available.

 

[Deleted member 149005]

Returning to the opening, main, topic in this thread, didn't a certain Mr Chris Harris once re-mortgage his house to buy a supercar???
A Porsche 911 GT3 RS 4.0 iirc?

 

[Deleted member 113659]

Financing is the most expensive way to purchase anything which is why people who can, avoid it.

On the whole yes, but there are exceptions. There’s many a member here that have bought brand new MB’s and taken advantage of the dealer contribution. Then once the contract commences they pay the balance off in full.

 

[Deleted member 149005]

On the whole yes, but there are exceptions. There’s many a member here that have bought brand new MB’s and taken advantage of the dealer contribution. Then once the contract commences they pay the balance off in full.

I would argue that paying off the finance immediately is not really financing the purchase...

 

[Doodle]

I wouldn't buy a car that has outstanding finance on it with a promise the vendor will pay it off once I have paid them...hence the limitation on changing the car.

Nobody would do this, unless they are naive or stupid. As the purchaser you pay the finance company directly to settle, and then the balance of the agreed sum to the "vendor". They are well accustomed to this. Reputable finance companies will also not have cars on book that are stolen or subject to write off, as a rule.

It's not rocket science, although many seem to claim contrary.

 

[Deleted member 149005]

Nobody would do this, unless they are naive or stupid. As the purchaser you pay the finance company directly to settle, and then the balance of the agreed sum to the "vendor". Reputable finance companies will also not have cars on book that are stolen or subject to write off, as a rule.

It's not rocket science, although many seem to claim contrary.

That would be the sensible route but plenty don’t....

 

[Doodle]

That would be the sensible route but plenty don’t....

I refer you to the first statement

 

[Bobby Dazzler]

Financing is the most expensive way to purchase anything which is why people who can, avoid it. These same people will probably also understand the compound interest referred to in that Einstein quotation in post #25.

Unfortunately we live in a society where finance is so easy to obtain that people go out and purchase goods that they probably don't really need and would go without if they didn't have the credit available.

Sometimes - even oftentimes - it’s more expensive to finance, but not always.

I tend to buy my cars the old fashioned way but I keep my options open. In 2014 I leased a brand-new factory-order Audi A6 3.0 Bi TDi [313] Avant Quattro Black Edition or some other combination of similar words.

Including the initial payment and full maintenance package - which included scheduled servicing, tyres and tyre repairs - the cost was £11,700 for 24 months and 20,000 miles, all including including VAT.

I am sure that buying it as a cash buyer would have cost more, much more, and I would also have to accept the residual value risk and taken a hit on P/X as I didn’t fancy selling a high value car privately.

I’d also have to pay for servicing and tyres, which I doubt would have seen any change from £1,000. So the car cost less than £10,700 to lease, or £5,350 per annum on a brand-new factory-order car.

I forget the list price on that car but it was probably mid-fifties, and yes all I cared about was the monthly cost, because that’s what determines the total cost. The purchase price, depreciation, servicing cost are all irrelevant.

Everyone’s situation is different but I couldn’t see a more cost effective way of using a car for 2 years. I had no interest in owning, I only wanted to use it. I suspect the majority of UK car buyers also only want to user their car too.

Could I have leased a different brand-new car for less? Yes, I could have got a Citroen C1. Could I have bought a similar spec car for less? Yes I could have bought a 10 year old A6 Avant for less?

But had I done either it either would have been smaller, or much older, and definitely much slower - unless I bought an V10 S6 but that would cost much more to run and therefore the cost to user would be higher.

I’m a serial buyer, and have bought too many cars since then, so I write that lot as someone with a strong preference to buy. I buy cars I care about, I lease cars I don’t. I’m pretty sure my preference has cost me more over time.

 

[Deleted member 149005]

I think there is a difference between those who could afford to pay cash but choose to rent - depends on whether you prefer to give up a meagre loss making interest rate on your savings or pay additional interest on a depreciating asset.

And those who can't afford to buy it so rent the dream

I suspect it is partly a generational thing - those of us who have lived with double rate interest rates are probably more loath to borrow. I remember in the early 90s when my mortgage payments doubled in a matter of months.