When is it financially acceptable to buy a dream car?

kteara

Whiner wrote: »

Your way of thinking tells me you are still a child.

Or maybe you can't comprehend a different way of thinking? I might actually be a child compared to your age. I am 20. I am guessing you are 40?

BillJones

kteara wrote: »

Can u please give me some advice. I'm 20 and all the cars you named are goals I want to achieve but I don't want to sacrifice home ownership for one.

Well...

The RS4 was bought brand new from Audi for £48,000 cash, run for 5 years, and sold for £24,000 cash to a dealer, which comes out at under £5,000 per year to own.

My SLK55 was not too old, but had 80k miles on it, and I paid £18,000, ran it for two years, and I got £14,000 part-ex, so it cost £2,00 a year. It looked the same as a brand new one, and I spent zero on service and maintenance over the time I had it.

Yes, a 458 is vastly more, but en route you can still have nice cars, and not necessarily break the bank.

For me, as with many people, an absolutely key point to being able to have my choice of cars, motorbikes, and home, is putting in the planning, training, and effort to move to a job that pays well. It's rarely the right decision to assume that income is fixed, and to look at only savings to get your dream life.

At 20, the world is your oyster. I went back to university in my early 20s, got a good doctorate, and moved from being a civil servant on 12k to earning investment banking wages. YOu can do simmilar, if you really want.

Then, you can do what the guy behind me did. He could not choose whether to get a 458 or a MP4-12C, so bought both...

BillJones

InsideInsurance wrote: »

Why worry about it? Surely thats what insurance is for?

Insuranc eon a 6-figure sports car tends to be quite pricy even without any claims. Keep claiming for minor door dents, and it'll go through expensive, to stratospheric, to declined in reasonably short order.

N1AK

bugslet wrote: »

That's such a sensible answer. Trouble is you never buy anythiing based on that:D

It certainly can have that effect, but I tend towards the view that it is true whether I accept it or stick my head in the sand and ignore it!

One of the reasons why I put considerable time into researching and building a 'lifetime' plan for our finances is so that I can make decisions on luxury/optional purchases based on knowing what impact that has on my finances over my lifetime not just next week.

So for example we're currently getting a new bathroom. I'd love to spend £15k to hire a designer, get a new boiler and move it to the loft, have a wetroom, hire tradesmen for everything, premium glass tiles etc. However I know that if I saved that money instead we would have enough to retire 3-4 years earlier than we would otherwise be able to!

So instead I'll be doing the plaster-boarding and tiling, we're keeping the boiler and just replacing the shower. The job including moving the boiler will be less than £2,000 (and lots of my time) but we'll still get the vast majority of the benefit and pleasure of the more expensive option.

On the other hand, we've made the conscious decision to allow ourselves to spend more money on holidays because we think the enjoyment we're getting for that extra money is worth more than the benefit of having it when we're older.

jimjames

kteara wrote: »

Or maybe you can't comprehend a different way of thinking? I might actually be a child compared to your age. I am 20. I am guessing you are 40?

I'm over 40 and always wanted a sports car. Now I've had my mid life crisis I bought one when I had an unexpected windfall last year.

I think it is good to have dreams and aspirations and to strive to be able to put them into reality.

sabretoothtigger

jimjames wrote: »

12 year old diesel I have no worries where I leave it.

They took a bmw 330 diesel on the gumball supercar rally. It kept up because they remapped the car to produce 500 torque, didnt have the power but it had instant acceleration and on the road that is mostly it

I'd say upgrade the diesel a bit, LPG (in a diesel this adds power) and remap the turbo maybe you have the torque of a 911 anyhow. Not sure most people can push the handling of a porsche anyway.
Some owner clubs know some tricks of performance diesel


Years ago in my 340 Volvo with 70bhp, on a dual carriageway I have a BMW M5 overtake me at 80mph. It was on the straight but we approaching a roundabout so he has to drop back as we both turn left.

Then the road is fast A road with a S bend, I travel that road everyday. The old volvo will do 60 through the S bend, its NSL so legal and good visibility, no problem. The M5 driver doesnt know the road or his own car's limits and cuts back to 30 which is ridiculous but that is 9 times out of 10 how people drive fast cars, a total waste really.

But I dont mind, someone has to buy nice new cars so I can buy them cheap at 10 years old

InsideInsurance

BillJones wrote: »

Insuranc eon a 6-figure sports car tends to be quite pricy even without any claims. Keep claiming for minor door dents, and it'll go through expensive, to stratospheric, to declined in reasonably short order.

Mine is just below six figures but I dont think c700 is a lot for car insurance, was paying 550 for my 25k previous car.

Stupidly it was only an extra 100 quid to add the wife either as a learner or as a newly qualified driver.

Evidently making a lot of claims is going to push anyones premiums stratospheric but if you can afford a 6 figure priced car you should be able to afford the low 3 figure repair bill for a dent without the need for insurance.

In my case the 3 minor incidents, one of which happened in the dealership so not my responsibility, were below the excess and so couldnt be claimed for even if I wanted to

kteara

I've recently grown to like the idea of Financing a car but only due to the opportunity of upgrading to newer models every couple years. I've noticed cars get updated quite quickly by manufacturers and I somehow think finance would be a cheaper option compared to constantly purchasing outright and then selling when the newer model comes out.

In reference to the question, I would have the money to outright buy the car so would it be cheaper to fully buy the car and sell with cash and sell every new release or financing and then upgrading?

thanks

RichardMiller

I think it depends upon you and your condition that when you will be able to buy a car, As you said a car is your motivation in life. It is very costly to buy as well as to keep. First of all, become financially free, it is all about your choices in life when you want these sports car. For me these cars can be comfortable over setup of my family and when it suits to my financial position.

bowlhead99

If you want to always have the new model there's no real way around the instant depreciation hit that you get when you take a new car off the forecourt. Financing packages may look attractive, and dealers might appear to give you an extra discount if they are earning commission on selling a finance package, but that comes from the fact that profit is made on the finance package.

Fundamentally, the car is worth X at the beginning and Y at the end on the open market, and you need to pay for that value loss. The value loss is the same regardless of ownership; whether you've put your own cash into owning it and take the loss, or you're using the bank or dealer finance to give you the cash to own it and then you suffer the loss in value and pay interest/ profit margin on the finance, or you're renting it off a manufacturer who suffers the loss in value and wants a profit on top.

Using your own cash is the only one of those 3 ways that means you aren't paying profits to someone ; but it means you are forgoing profits on your own investment opportunities (alternate use for the cash you tie up in the car) or you are working with a smaller 'emergency fund' for your own day-to-day life if all your free cash has gone into the car.

The problem with going on a dealer finance package of one sort or another and upgrading to their new models is that you are tied into them from beginning to end. Each time you finish with a car the dealer takes it off you at a trade-in price that's likely below what you could make in a private trade by shopping around for the best buyer, and sells it on to the next customer at a price that's likely above what the customer could pay in a private trade by shopping around for the best seller.

So by using the dealers, that depreciation you're paying for one way or another, is more than if you were just doing private deals to buy cars from individuals who were not paying the dealerships' profits.

I think this is less of an issue if you're buying cars at 30k-130k than if you're buying cars at 3k-5k. At the top end, everyone wants a warranty and everyone is nervous about handing over tens of thousands of pounds to a private seller.

So on more expensive cars, while there's clearly some value in being able to shop around (when both buying and selling) between independent dealers vs the main franchised dealers, less people are practically going to be shopping around on private sales. So, compared to buying and selling old bangers between private individuals: with premium newish cars the dealers are making relatively more (as a percentage of car price) anyway and therefore the extra premium for finance charges is perhaps less of a big deal in terms of total cost.

You could construct your own finance package by separately getting loan or mortgage finance and simply buying cash. Then you're not tied in to buying the finance from the company that makes your car, and you can shop around between Tesco, Nationwide, Lloyds etc for rates. And then you can be a cash buyer and seller with a wider choice of buying and selling markets.

An unsecured personal loan may be more expensive than one secured on the car (because it's riskier) although may not be because you can shop around between many more options - and a cheap way is likely to be your mortgage because it's secured on your house.

These days all the dealers want to sell finance packages as your dealership gets paid referral fees or equivalent by the finance arm of the manufacturer for the introduction even if the interest rate is low. And the dealership may be on a target to make a certain number of sales on credit for the month or quarter or year. So with targets to sell finance as well as cars, there is perhaps not the same 'discount for paying cash' that there used to be.

But make no mistake, going into a situation to haggle for a car while needing dealer finance to be able to strike a deal - or actually wanting to get locked into their dealer finance scheme for the perceived benefits - can't possibly be a positive if you think about it from a negotiating point of view ; it's a position of weakness.

If you do actually have the ability to pay cash but are willing to look at finance options, you will be in the best position possible for whatever deal can be struck at a point in time. You'd have to look at each opportunity on its own merit, considering whether you need a brand new car or a pre-owned car, how long you are likely to keep it etc.

As a generalisation, if you value convenience over cost, then a lease or dealer finance or bank/ building society finance is the way to go. You never have to save up, you just go and get what you want when you want it and pay as you go.

But thinking about it logically, whether your goal is to drive the best cars in the world, or the largest number of good cars you can, the goal is to keep cost down so you can get more bang for your buck. Therefore arguably, in your priorities you should really put cost ahead of convenience.

As the absolute most expensive way of driving cars is to drive brand new cars off the forecourt, you should avoid doing that. And if you're already planning (or hoping for) one day to spend 50k on a dream car, you are just going to delay that if you spend a lot of money on finance and depreciation on a 20k hot hatch in your formative years.

If you use finance now to push the envelope of what you can afford to drive, no doubt you could be driving a nice car pretty early in life and be the envy of some of your mates. I was doing that via a salary-sacrifice company car scheme in my early 20s. However, in hindsight, if I had just accepted that a 23 year old doesn't need to be driving around in a car with a list price of something around his annual gross salary, I'd have had a much better start towards getting a car that was full on 'impressive' rather than just 'impressive for someone in their early 20s'.