Financial Considerations when buying a car

I too think you have to look at the market when you buy and pick what's best at the time...

I've bought my fair share of new cars - some with loans, some with pcp...

for instance our mazda 2 we had on a PCP 3 years ago with about 4.5% interest and a final payment of 4k which we have just settled. at the time a bank loan for the same amount was about 7% so would've been more expensive...

however bought the DS3 at the start of this year and PCP deal was more expensive than a bank loan.... no prizes for guessing which path we took for that!
 
In the past I've bought with cash or I have taken a loan usually over 3 years and to be honest I shudder when I think about the cash i've spurted up the swanny due to depreciation and repairs, servicing over the years. My thinking has recently changed because of this. To me the "if you don't have the cash then you can't afford it" saying is BS. I can afford it monthly so is that not the same thing in much the same way as buying a house?

Sars and G14RRV example of the PCP deals available just make sense to me now. The final payment always made me worry because I used to think that I would pay it. Now I think i'd just jump straight into another car at the end or probably before (BMW do not penalise for changing at anytime within the deal). Put a deposit down that is less than what you expect the equity to be left in the car at the end of the deal and the GFV won't hurt as long as that keeps the monthlies at an affordable level. Known monthly expense with absolutely no nasty surprises due to the car being fully warrantied and with servicing and a courtesy car while it's being serviced thrown in. The big bite for me with a used car is the cost SHOULD anything go wrong. I don't like driving around with that constant worry. I had a friend that worked for Mercedes and I remember discussing the SL with him several years ago and he said he pitied anyone that bough a Merc of that generation second hand as if anything went wrong it would probably be cheaper to scrap than fix. I can only imagine this situation is now worse.

On the flip side I think the car industry may well be shooting itself in the foot at the moment. I'm currently in the process of buying a new car and looked at a 125 last week. It was a pre registered car and looking at the finance it was cheaper for me to factory order a brand new car. That also rings true if I was to 50/50 loan/cash a 3 year old car that costs £16k then I'd have to warranty and service that car on top of that. With the number of people currently taking PCP deals used prices are going to be absolutely terrible in 3 to 4 years time when all these terms finish as the market will be flooded with used cars.
 
I dont know that used car prices will be bad in 3 years, as significantly less new cars have been sold in the last 5 years, there are less good used cars out there, and more people that otherwise would buy new, are buying used. I bet that is very model specific tho, sports cars do depreciate more, and small engined diesel german cars seem to be premium priced as used cars,
 
pvr said:
How can finance ever be cheaper as the finance company will be charging you a higher rate than what you can ever make in investments?
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Hopefully sars won't mind me using her numbers as an example, but a 3.0 sdrive was what £33k-ish new in 2010? (according to Parkers). As she says it's now worth ~£20k. Cash cost for the car ownership is £13k over the two years of ownership. (I'm assuming two years, since you're talking about a 2010 car and you're trading it now in 2012!).
The PCP deal sars had was £500pm so £12k + whatever the original deposit was over the same time period. I'm assuming the deposit was more than £1k so the net cost has been larger?

If it was kept over the full 3 years of the deal, that's £18k + deposit + £12800 = £30800 + the deposit to own the car that would've been £33k cash.

I don't want to pry into your finances sars and I'm not trying to encourage you to say what the deposit was, but in either situation looking at it as what costs the most in the long run, surely cash always wins? The 'right' way of buying your car then depends on whether you're happy to sacrifice and extra few £k's to have now instead of saving and having later.
 
I have a really good idea...

For eg my E89 is now worth £24K say....

If 6 people bought the car, for £4000 each, and you all had a 6th share, that's 2 months each. 60 days, which works out to £66 a day over a year.....8 weeks motoring, and maybe keeping it a second year.....what great value and no huge depreciation. Sell it in 2 years time for say £14K, and that's £2300 back, so the who 4 months over 2 years has only cost you £1700, and that's £15 a day rental for the period!!

Easy...but you get my drift. Maybe 2 people buy a decent car, like an Z4M.....over 3 years...and then sell it
 
Everyone has their perferences, but I'm a fan of low-risk in general hence aren't a fan or loans in any shape or form: leases, loans, credit card debit, etc - just not for me. I've only ever had one car loan as an indulgence (£6k towards my first "proper" car after getting my first proper job and shitloads of disposable income) and don't ever intend having one again. But that's just me. The only exception to debt is a mortgage but TBH there's no getting away from that when you're young.
 
We pcp our cars by using the trade in as deposit to bring the monthly's down as much as possible. My Z4 has nearly all the toys (idrive etc) and is £260 a month. I think the deposit was about £10k and final payment will be £12,600.

All I ask is that at the end of the term, there is enough equity to put towards another, without the monthlys rocketing. Nobody can actually foresee that, but it is in BMW's reality for that to be the case, so they then sell another new car. If it isn't the case, then I look at financing that baloon payment and keep it.

As the deposit was so big, the car should be in equity for the duration compared to what I owe, so if things go bad, I can sell it (privately or back to dealer) and get some money back. that would then clear the monthly payments and give enough to buy a cheap runaround. I've done this in the past.

To be frankly honest, I am living way beyond my means and this is the only way I will ever own such a car. Financially speaking, no, it isn't cheapest, but credit is always gonna cost.
 
I should add....I've never kept a car for the full term yet, so never been faced with the gfv. Always trade it in early.

My dealer loves me (apart from recently with my roof!).
 
Whatever works for all of us, it's just a matter of personal choices. Kevin, comparing you to me, I put £5000 down and my payment was £560. You doubled my deposit and pay half my monthly...makes sense!!!
 
When it comes to cars you will always loose money. Only way to win is to buy something exotic that is depreciation proof. My mate lost nothing on his F430 scuderia and has actually made money on a few cars in the past.

The trouble is that none of these cars could be considered daily drivers and the initial cost is way out of the majorities price bracket. Although i suppose you could follow the commonly shared view on pistonheads that borrowing on your mortgage is the cheapest way to finance a car. I do know people that have done this.
 
pvr said:
It is very much a UK thing, I had never heard of a car loan before I came to this country.

My norm is to buy the car with cash only. Don't want to be told by some unknown party that I can't change the tyres to non run flat or the car taken away because the lender made some financial mistake.
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I also buy it with cash, don't want to have the monthly payments for a loan or lease plus the fact that with a loan you'll end up paying more for the car, why would you do that?
 
I'm a 50/50 man. It helps me to trade up too.

I always get half the money for a car, finance the other half through the bank.

Finish paying the car off, then if I'm bored sell, add a bit more and buy a better car again using the same tactic. It's very unlikely (unless you buy new or pay off over a long time) that the car will lose 50% of it's value during your ownership, so it's a natural way for me to always get a better motor next time.
 
Well, I am from the same country as you so we would think that :D

It was the weirdest thing for me to find out in the late eighties when I came here that everyone was talking about how much the car costs per month and they had no idea what the total payment was.

They would also chop a car in as a different model was £10 a month cheaper. I was amazed.
 
In the US. Leasing is problematic for several reasons. First is the very limited mileage allowed. Normally 12,000 miles per year. Second, The US is a rather large country and it was never going to have a very good public transport system because of it's size. Which makes the mileage limit sting even more. I have known people that have resorted to parking a car while making lease payments to keep the mileage down.

I believe in buying a near new car. Say two years old. That is what I did with the wife's 2008 328i. New the car price in 2008 was $37,000USD. We bought it in 2010 with 12,000 miles on it for $25,000 with $6,000 deposit and a loan = $326 per month or 200 Quid. It's just not worth the cost just to brag to your mates that you have a NEW car.

Same sort of deal with my Zed. New in 2006 the MSRP in the US was $46,000/28,500 Quid. Which I think is very over priced. I bought it in 2010 with 16,000 miles on it for $23,000/14,200Quid cash no loan. I got a cracking deal due to the owner moving from the US to Australia within two weeks of me buying it. In fact the used market value of my Zed in the US is still $23,000 USD.

So buy late model used. And your far more likely to not take a big financial hit.
 
JVE89 said:
pvr said:
It is very much a UK thing, I had never heard of a car loan before I came to this country.

My norm is to buy the car with cash only. Don't want to be told by some unknown party that I can't change the tyres to non run flat or the car taken away because the lender made some financial mistake.
Click to expand...

I also buy it with cash, don't want to have the monthly payments for a loan or lease plus the fact that with a loan you'll end up paying more for the car, why would you do that?
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Well for me, the answer is I don't have over £30k cash to buy it outright, so it's finance or nothing, and as I've said on similar threads, I'm full of the have now, pay later breed. If I could be debt free I would, but as I said earlier, I live beyond my means, so that's not happening.

And a new car to me is not about bragging rights...I couldn't care less what others think. Most people that I would brag to know my life is on finance, so the bragging wouldn't work anyway!
 
My Z was the first car I have bought myself - escape from company car tax hell freed up some monthly £ to add to the cash allowance I get from my job, and a decent bonus allowed me to put a few grand towards the car. Topped up with a personal loan at a preferential rate from the bank... If I had to sell it for any reason then I am well ahead of the depreciation on loan payments, so it would provide cash, though of course the money I put in is now vapour :cry:
 
I've always bought cars using a trade in and a bank loan but these days bank rates are not competative enough for me. The last two 1 series I bought from a BMW dealer using their finance, they simply beat the banks lending rates so a dealer can be better in that respect. For the Z4 I decided on the BMW select or PCP plus they were giving 8K contribution, free M Sport spec and a low 4.9% APR. End of the day the dealer asked how much I wanted to pay each month so I went with £299 a month over 4 years, it was actually much cheaper buying the Z4 over a new 1 Series 1.6 M Sport. Baloon payment is £12400 but I will be saving 3K a year over the next 4 years in a high interest Cash ISA and will probably buy the Zed outright. I would rather pay as little as possible per month and put any other monies in high interest ISA accounts than wasting all my money at once in buying the car outright. Probably not the best way of doing things but the monthly cost is what I look at.

Afraid I'm one of the have it now pay later, as said life is literally too short so enjoy these things while you can,

Tim.
 
I've bought all my cars outright, but then I've been fortunate to be in a position where I can.

I looked at part financing a chunk of the zed to keep some of the cash in my pocket, but at the end of the day I'd be paying extra for it so I decided not to. Goes without saying the dealer tried to persuade me to... would be more money for them.
 
I just finance, i could save up 20k for a car and it would take me a few years...then on my way to the dealers i could get run over by a bus...
Lifes too short to wait
Even though in theory the car isnt mine....i NEVER get in it and think about it, i work hard to afford the payments, so i dont care..
:D
 
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