Should I Buy New or Am I Being Seduced By Scrappage?

AdrianHi

Inactive wrote: »

That presumes that all funds are kept in an instant access savings account, in reality most people keep their everyday funds in a current account that attracts no, or miniscule interest, anyway, on this occasion I think that you are splitting hairs.


Anybody financing a new, or newish car will be paying a relatively high interest on a rapidly depreciating asset, which in my book is a " mugs game ".

OK £1000 is a bad example, realistically people are paying interest on the financing of cars in the £10K to £20K+ range and they may be keeping there cash not sunk into a car purchase in places that could give more or less than of a return than the rate on the car loan.
The point I'm trying to make is there are combinations of circumstances that can make borrowing from a financial institution be the better option, though it is more often not the case. It's not a black and white situation.

A real example is borrowing £11,500 over 19 months from the car manufacturers finance house at 2.2% flat rate. The £11,500 was then put into a flexible offset mortgage which was charging 5.5% flat rate at the time. In this scenario to borrower is winning a 2.3% on return on arrangement.
Why not have a £1500 car instead on not borrow the money at all?
Answer: the £1500 car needs many more visits to the garage a year than the younger one (hugely significant when your doing 18-20K miles a year), I have to take time out of work unpaid (because I'm self employed) to do it which looses me far more earnings that the finance charges and for that matter the higher depreciation costs me on the new/nearly new car. Not borrowing and not getting into the newer car (all be it a depreciating one) was costing me a small fortune in lost earnings.

There are lots of ways the new car can offset it's depreciation and finance costs depending on circumstances, even if I agree the opposite is more often the case. The above is just my situation.

chambta

AdrianHi wrote: »

OK £1000 is a bad example, realistically people are paying interest on the financing of cars in the £10K to £20K+ range and they may be keeping there cash not sunk into a car purchase in places that could give more or less than of a return than the rate on the car loan.
The point I'm trying to make is there are combinations of circumstances that can make borrowing from a financial institution be the better option, though it is more often not the case. It's not a black and white situation.

A real example is borrowing £11,500 over 19 months from the car manufacturers finance house at 2.2% flat rate. The £11,500 was then put into a flexible offset mortgage which was charging 5.5% flat rate at the time. In this scenario to borrower is winning a 2.3% on return on arrangement.
Why not have a £1500 car instead on not borrow the money at all?
Answer: the £1500 car needs many more visits to the garage a year than the younger one (hugely significant when your doing 18-20K miles a year), I have to take time out of work unpaid (because I'm self employed) to do it which looses me far more earnings that the finance charges and for that matter the higher depreciation costs me on the new/nearly new car. Not borrowing and not getting into the newer car (all be it a depreciating one) was costing me a small fortune in lost earnings.

There are lots of ways the new car can offset it's depreciation and finance costs depending on circumstances, even if I agree the opposite is more often the case. The above is just my situation.

In other words it's not a case of good versus bad.

Inactive

AdrianHi wrote: »

There are lots of ways the new car can offset it's depreciation and finance costs depending on circumstances, even if I agree the opposite is more often the case. The above is just my situation.

Horses for courses, as they say Adrian, it is all very much down to personal circumstances, however I will never accept that generally it is overall cheaper to buy a new car on finance, than to buy a good quality, well cared for used car for cash.

AdrianHi

Inactive wrote: »

Horses for courses, as they say Adrian, it is all very much down to personal circumstances, however I will never accept that generally it is overall cheaper to buy a new car on finance, than to buy a good quality, well cared for used car for cash.

I think we do agree here.
"Finance not always bad" was my debating point and it's fun to have a bit of banter and debate on a forum

Inactive

AdrianHi wrote: »

I think we do agree here.
"Finance not always bad" was my debating point and it's fun to have a bit of banter and debate on a forum

Indeed...;)

ACID

ACID wrote: »

how much is an Alfa Gt on a scrappge scheme?

anyone????

Inactive

Type Alfa Romeo in to Google.;)

th1982

you need to consider the depreication of the car you're looking at if you're going along the lines of resale value, yes low mileage can be a good selling point BUT as a point my mum had a peugeot 306 cabriolet with all the trimmings from brand new, only did £3000 miles per year and when she came to trade it in for a new car still only got a pittance for it.

If you're looking for a car you'll have for many years it might be worth taking advantage of the scrappage scheme, but consider if a 1.6 seat is what you need for such a small amount of driving as it'll cost a lot in fuel, tax etc , plus potentially cost more on insurance (thought you'll have the benefits of 3 years or so warranty). if you're looking at something you'll want to change ina couple of years you'd be better looking for second hand as you could lose a lot on depreciation - alternatively look at other cars too and find one with a slow depreication rate.

hethmar

I think sometimes you have to broker in the pleasure value of something though

TwoEnigmas

Agreed. If I was down to 4000 a year I'd get something nice because the petrol cost wouldn't matter.

BMW330i or 535i, Merc E320 or go sporty and get an MR2 or RX7!