Astra v Focus.

Hintza

Lemonade_Pockets wrote: »

Finance is still there and the rates haven't changed a huge amount from what they were 2yrs ago, its a little harder to get so the chucky duffers won't be able to go out and buy £20k cars anymore but Joe bloggs should be ok.

Aye but that's my point the rates are still the same but if you relate them to savings rates then the rise is huge. Borrowing money has relatively speaking become very very expensive (ie opportunity cost). But most folk have not figured this out yet and possibly never will.

In the last few years you were almost getting as much in interest on your savings as the finance cost you to buy your new car.

Excessive borrowing has brought us to this current position and the governments answer is to get the banks to free up cash for even more borrowing.

I have some savings and what is annoying me is the the poor rate the bank now pays me versus what they are then lending it out at. There is the temptation to say stuff you and take it away from the bank and stick it under the mattress (of course I won't do it, YET but that's what they are counting on)

Inactive

AdrianHi wrote: »

If you feel the need to "own" the car to be happy about it, fair enough. It's a lot of money which ever way you do it, no point in spending it in a way that your not happy with.
Yes a finance charge is usually higher than the "finance charge" that comes from lost interest on savings tied up in a car, but what if paying that finance charge gave you access to a car which all round had a lower total cost of ownership, even with the finance charge.... you would do it then wouldn't you?

Personally I look at the cars as and average monthly expense over the period

With one exception, I never buy new or even newish cars, I always seek out geniune, cared for, used Japanese branded cars with sensible mileage, I never pay more than £2000 for any of them, often a lot less. I have never had any mechanical defects amongst any of them, so the most money that I can possibly lose is £2000, hardly expensive.;)

AdrianHi

Lemonade_Pockets wrote: »

E.g. The cost of plowing £20k into a car, is whatever you could've saved by reducing your morgatage, adding to your pension, investing it elsewhere. This might not always outweight the cost of finance but in a lot of cases it will.

Yes, this is one of the things I measure went I want to know what a car will really cost me. For me it's £20K not paying off a mortgage since payments into pensions etc. continue anyway.
When I bought my car the dealer offered me an interest rate so low it was a cheaper loan than my mortgage, so I took his loan, reduced the mortgage by that amount and saved myself about £500 over 19 months. Sometimes a loan or lease can make sense.

Savings and mortgage rates being near zero and unsecured loan rates being up around 5-8% now is the time to be spending cash for most people or pulling cash from a flexible tracker mortage if you *have* to replace a car.

Lemonade_Pockets

Hintza

I don't disagree.
But I would suggest that there are more ways of making your money work for you than putting it in a savings account! Especially if we are talking about the sort of sums required to buy a new car.

Lemonade_Pockets

AdrianHi wrote: »

or pulling cash from a flexible tracker mortage if you *have* to replace a car.

:eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek:

AdrianHi

It is a bit of a balancing act and there is a risk attached which ever way you go.
One of the people I discussed this sort of topic with elsewhere went onto a PCP deal for his £37,000 car because he wanted to leave most of that cash in his business for a new venture. His risk was that paying the PCP finance charges was the better option.
For a while it was, by a wide margin, then the credit crunch came and the sums show he would have been better off paying cash for the car. But then look at the situation 2 to 3 years from now and you might find that £37K invested back then pays out big time once you've waited out the recession.
Ultimately it's impossible to work out exactly what a car has really cost you, you never really know what the depreciation is going to be, you never really now what profit you've missed out on else where because money went into a car instead. You just have to decide how your going to make your measurement and run with it.
In my case I decided I would reduce the mortgage with whatever I don't put into the car, so I'll use the mortgage rate to calculate the cost of "lost opportunity".

Hintza

Lemonade_Pockets wrote: »

Hintza

I don't disagree.
But I would suggest that there are more ways of making your money work for you than putting it in a savings account! Especially if we are talking about the sort of sums required to buy a new car.

That is the problem, I'm currenty sitting on money that would normally be invested in the business but have basically pulled up the drawbridge for the last month or so. What I have to pay for stock is more than the big retailers are selling it for. Also February is normally the worst month so I have just decided not to chase it just now. Keeping my powder dry.

AdrianHi

Lemonade_Pockets wrote: »

:eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek:

I just don't understand why people are so shocked by this. It's not going to work for everyone, but here's something similar to my situation.
Lets say I have a line of credit £100,000 on my mortgage, my house is probably worth £400,000. I've managed to put £50,000 into the savings pot of my mortgage so I only really have £50,000 outstanding on my mortage. I earn enough money to be able to save £50,000 in 3 years. So I borrow £30,000 out of the £50,000 savings pot which costs me 1.59% mortgage rate interest and I pay back that £30,000 within 3 years.
It's an incredibly cheap loan, almost as cheap as using cash if I had no mortgage at all.
I see no problem with this.
Putting the cost of a car on a mortgage and then taking 25 years to pay it back is mental, wouldn't dream of it.

Not all mortgages are pay fixed amounts each month, most people can make capital repayments on their mortage if they are able. There may be rules like minimum capital repayment £500 a time, you can only pay back 10% of your borrowing each year and such. A flexible mortgage is even better because you can shift money back and forth as it suits you.

Lemonade_Pockets

Hahaha powder dry havent heard that for a while.

Fair enough you guys are obviously already converts. I'm not saying PCP's or finance are right for everyone, but some people only think in a straight line when cash vs finance is concerned!

n.b. I think there will be a lot of people who took out PCP's 2-3yrs ago singing their praises over the next 12months !

Lemonade_Pockets

AidranHi

Ok sounds a little less scary with a back story. But you are still banking on that rate staying the same or low. Would you of been making the same analysis 6 months ago?