Large finance deal agreed and then subsequently refused!!!!

Hintza

Strider let us assume I have a portfolio of assets worth £2m which pays out 5% per annum in dividends and also has some capital appreciation.

After tax I have £60k to live on and I fancy a nice car (a depreciating asset) then it would probably be rather foolish to to sell appreciating assets when I can finance the car over 3 years at £6k/annum.

Herzlos

motorguy wrote: »

90% of mercs, audis and BMWs are bought on some sort of finance deal. Few people - even the truly rich - will lay out 50 or 60K of their own money into a depreciating asset.

But it's going to depreciate whether you own it or lease it, you're just taking the hit at a different time.

PCP/lease deals mean you're paying the depreciation monthy, generally on the first 3 years in a loop, with a middleman making a profit. Buying it outright means you're taking the hit on depreciation when you sell it, with no middleman.

Finance can make sense in a few cases; if it's a business expense, the fixed cost is easier to account for. Or if you're getting a low enough rate on the finance that you'll make more elsewhere (say you can get the car at 4% apr but are making 8% apr with the money invested) then you're better off paying the interest.

But otherwise I can't see how finance is going to be cheaper. Am I missing something?

motorguy

anotherbaldrick wrote: »

So, what would the deposit + finance over 3 years + final payment to own car + arrangement and other costs be on a OTR car value K60 be ?

Clearly that will vary from car to car, as the finance rate will vary, as will the residual value as will the amount the manufacturer is willing to pump into the deal.

Do it right and you *should* be able to run a £60K car for three years for what a cash buyer will suffer in depreciation anyway.

I looked at a GL-class Mercedes some years ago with a list price of £60,000. Mercedes were putting something like £12,000 into the finance deal so it was always going to make a PCP deal better than an outright cash purchase. It worked for the customer because they could get a £60K car for decent monthly payments, and it worked for Mercedes because they didnt have to be seen as having to discount the GL heavily to sell them, AND they got to control the used market because the cars were likely to come back to them after three years anyway.

motorguy

Herzlos wrote: »

But it's going to depreciate whether you own it or lease it, you're just taking the hit at a different time.

Exactly.

So with a PCP deal you know up front what the depreciation is going to be. Theres no risk of market fluctuation and no risk to your capital as its not tied up in a depreciating asset.

Herzlos wrote: »

PCP/lease deals mean you're paying the depreciation monthy, generally on the first 3 years in a loop, with a middleman making a profit. Buying it outright means you're taking the hit on depreciation when you sell it, with no middleman.

Not necessarily. The purpose of BMW finance, Mercedes Finance, etc, etc, (ie, the finance companies set up by the manufacturers) is not necessarily to make money, its to assist in the selling of cars. Often the manufacturers are happy to break even / take a loss on the finance if they know its allowing them to shift units.

Herzlos wrote: »

I can't see how finance is going to be cheaper. Am I missing something?

What you're missing is that finance deals on new cars are often subsidised by the manufacturer. This is done by a cash 'contribution', preferential finance rate or a high residual value.

For the likes of BMW, its better to inject £10,000 on a car they're making £20,000 on into a finance deal through subsidised rates and cash contributions than to knock £10,000 off the list price. They can preserve used car prices and control the amount of used cars getting out of the dealer network. Any that do come back after the three years will be sold off at main dealer only auctions.

I'll give you a quick example. Wifes car - Z4, list price £36,000. BMW were offering a mere 5% discount to cash buyers, however they were offering a 'complimentary' upgrade from SE to M Sport (worth £3,000) and a £2,000 finance contribution, so all in all she got the equivalent of £6,500 off the car, a good percentage of which wouldnt have been available had you bought 'cash', so offset the (already low) interest rate she paid.

jerrynbbt

Investing hard earned CASH into a car is like putting £60k into the boot coming back in a couple of years and finding there's only £20k of it left, especially if the market has changed like it did back in 2008. At least on a finance agreement (particularly a PCP) you have a bit of security about the market, if in a 2 yr PCP agreement you owed £45k and the car was only worth £20 you could walk away ! - Couldn't do that if it was your own cash! You could do other things with the cash that actually earn you money!

Just my look on things

BlueC

jobdone1 wrote: »

That will not help running another credit check within six months this can cause the negative score because it looks like he is asking for more credit. They should have no reason to re-run the credit check as the sale is agreed with a deposit in my view.

What a load of crap.

Weird_Nev

What if someone has just worked really hard, and wants to enjoy the rewards of that in buying a new car? Cash or finance, it's THEIR money. If they see the value in it, who are you to tell them they are wrong?

If no-one buys new cars, we'll run out of second hand cars to run as bangers and feel all smug about it.

(I have never financed a car, BTW, but I could see why people would)

neilmcl

BlueC wrote: »

What a load of crap.

What is exactly?

motorguy

Weird_Nev wrote: »

What if someone has just worked really hard, and wants to enjoy the rewards of that in buying a new car? Cash or finance, it's THEIR money. If they see the value in it, who are you to tell them they are wrong?

If no-one buys new cars, we'll run out of second hand cars to run as bangers and feel all smug about it.

Well thats my take on it too.

However there are some people who seem to only be able to reconcile their own lives against that by believing that the person who has just overtaken in them in that £60K merc 'cant afford it' and is 'stupid'. I think thats more of a poor reflection on them than on the guy in the merc.

Weird_Nev

Example: I have a mate who is a Copper. Normal wage, paid off mortgage some time ago, PROPER petrol head. It is his love, his passion.

He's financed his cars and built a relationship with a particular dealer. in the ten years I've known him, he's owned:
Aston V8 Vantage.
Honda NSX Type-R
Nissan GT-R
Porsche 997 Turbo
Ferrari 430
Plus some pocket money cars as inbetweeners: BMW E39 M5, Lotus Carlton, Dodge viper, that sort of thing.

Some might say he's wasted all that money. Personally, I'd say he's been very financially astute, bought and sold at the right time, in order to fulfill his dreams and own some outstanding metal.
He has had an absolute riot. And he is LIVING his life, as he wants to.

Moneysaving expert: Saving you money on things you have to buy, so you have more to spend on the things you want to buy.