Because I don't use Excel enough at work I've put together a spreadsheet that determines the break even point between HPI car finance and buying a car outright or with a standard repayment loan. I won't go into mathmatics, but based on figures given to me by Performance Car Finance http://www.performancecarfinance.co.uk/ the total cost over three years for a £40k car (Audi S4) with a £5k deposit at 8.5% APR with a balloon of £14k (staggering but there you go) is an eye watering £27,066.
Alternatively you can take a loan for 50% of it and put your own £20k in, which assuming a loan rate of 6.9% (Sainsbury's) gives a total cost of over three years of £22,198. This assumes that your £15k that you have had to find to do this compared to the HPI model (£20k - £5k) is missing out on being invested in a tax free ISA at 4%.
For this particular set of circumstances then you'd need to invest at 7.28% taxfree for HPI to give you a better position after three years.
Obviously if your APR on the HPI is lower than 8.5% then this figure drops, but then if you can't invest your £15k in a tax free savings scheme and you are a higher rate tax payer then it goes back up the other way.
Alas 8.5% was absolutely the best rate I found when looking for a new 335i/S4 and the usual tricks of heading north, to Audi Inverness no less, still didn't help. To be fair if somebody had offered me 3.5% APR then I'd have traded the Z4M there and then.
Alternatively you can take a loan for 50% of it and put your own £20k in, which assuming a loan rate of 6.9% (Sainsbury's) gives a total cost of over three years of £22,198. This assumes that your £15k that you have had to find to do this compared to the HPI model (£20k - £5k) is missing out on being invested in a tax free ISA at 4%.
For this particular set of circumstances then you'd need to invest at 7.28% taxfree for HPI to give you a better position after three years.
Obviously if your APR on the HPI is lower than 8.5% then this figure drops, but then if you can't invest your £15k in a tax free savings scheme and you are a higher rate tax payer then it goes back up the other way.
Alas 8.5% was absolutely the best rate I found when looking for a new 335i/S4 and the usual tricks of heading north, to Audi Inverness no less, still didn't help. To be fair if somebody had offered me 3.5% APR then I'd have traded the Z4M there and then.
so true!