MY97_Toy

Take the G string off and put your "Trousers" back on then climb from beneath her thumb.

Brendan Hughes

Thanks to everyone for this thread, even if I haven't understood much of it! I'm someone who believes/d that cash is better. I'm hoping to get a BMW for about 32k, which I'd do by selling my current car for 28k and adding some savings. After reading this, I rounded it up to 35k for interest/profit's sake and divided it by 60 (five years), and work out I'd be paying just under 600pcm, assuming no deposit. Within my disposable income, that's quite bearable. It also gives me all the cash from the sale of the old car for rainy days (or mortgage, or toys and holidays!).

I'm not sure I understand why you're all so interested in the retained value though; is that so you are able to sell before time is up if you feel like a change? (It's almost guaranteed that I won't be doing that, so perhaps irrelevant for me.)

Yours brainlessly
Brendan

dexter

Excellent thread this, and very informative !

Keep up the good work, all.

wilftwo

Surprise surprise cash is cheaper than finance but only by the finance costs!

Finance enables you to work the cash you would have spent elsewhere e.g. as a deposit for that croatian holiday home, keg of single malt whisky or other get rich quick scheme.

For most people I would imagine the best way go to would be to get a 0% finance deal - finance the car then use the cash to pay off your mortgage (which should have been taken out on a flexible repayment basis). The saving on your mortgage payments will almost certainly be greater the interest you could expect to earn on any deposit account esp when you take tax into account.

dtriggs

Very interesting thread as I want a 911. I have enough savings to buy one (not a new one I have to say - thinking 3 years old), but couldnt imagine using all my money to do so. I have an offset mortgage, so my savings are offsetting 6 pct mortage interest, which considering the tax, means I am getting 10 pct on my money.

So, if I go into either a HP or PCP deal I keep my savings getting 10pct, and have the cash for use if need be. I will have lower repayments with PCP, but worry about the balloon or GFV. For me the decision comes down to what type of car and how long you want to own it for. For a 911, the depreciation is so low a PCP is worth considering. But that much financing is scary so it's gonna take me months of deliberation to persuade myself.

645

Interesting you say "financing is scary" for that amount of finance, but not scary if you purchased it with cash! Assuming you're sensible (which I'm sure you are, after all you're posting on here and putting some thought into it!) the question simply boils down to can you do something better with your cash. I mentioned before about putting the cash into a deposit account, but someone else rightly pointed out that most of us have mortgages, so that would be the best place to put it, as effectively it's like tax free savings. The decision is then:

1) take the hit and pay for PCP out of monthly earnings;
2) drip feed the PCP from your mortgage (if you have a flexible one).

How about I do a spreadsheet and post it somewhere - we can then all work on it/improve it - It should be useful for all of us!

Diablo

Retained value is important on the PCP's Brendan, because you are only financing the depreciation, not the whole cost. High rv = less to finance (assuming you are going to hand it back at the end of the finance period for a new one)

Diablo

APR takes account of all the hidden costs Mark, the calculator I used was based on a simple no added costs example. may well be out - blame the WWW

Having said that 25K over three years with £6k of fnance charges seems high for 5.6%

645

Hi there

Well, I've knocked up an Excel worksheet for those of you that are interested. It allows you compare buying a car outright with cash vs financing via PCP.

Suggestions for improvements welcome!

Instructions for use
1. Dead simple to use (I've locked all cells except those that require data entry, which are in BOLD RED).

2. Enter the price of the car, term, PCP amount, etc. - all very obvious when you open it up.

3. It assumes any cash you keep back is ploughed into a flexible mortgage - you give it the rate and it will work out the interest saved per month. It also drip feeds the PCP payments from here, so it's a reducing balance, with less interest saved each month.

4. I've populated it with 1 example - an Audi A4 3.2 S-Line. The PCP price came from LEX, which didn't seem very competitive at 9.5% apr....bet someone can beat that.

5. I've also listed some assumptions in there to help.

Here's the link to the sheet:

http://www.sendspace.com/file/e1ufa2

Have a play and let me know what you think.

Cheers

645.

Brendan Hughes

Thanks D. I'm that inexperienced that I don't even know what a PCP is - sounds like a lease, where you never really own the car, you just rent it for that period, so the cost is purchase price minus retained value, plus a bit of profit for the finance company. In which case, yes, I understand why RV is so important.

No idea if they're available over here or if I qualify for one (or if I want one). I've never really thought about constantly changing cars, it doesn't/ didn't fit in with my job or lifestyle.

I'll have to have a look at 645's spreadsheet