Car deprecation and personal loan - is this how people do it?

MARKMAKAVELI

I was thinking about the benefits of leasing/owning. I appreciate they'll be many who say "don't buy what you can't afford etc etc" but I'm curious as to how people afford the more prestigious cars (aside from the people who live in rollover credit card debt). I leased my realistic dream car for a few years and whilst I loved it, I'm not sure if I'd do it again.
The calculations (I understand these are best case scenarios and that older cars can have huge problems)
If I buy a ten year old car for £13k, after 3 years it's worth £7k. If I sell it for £7k, then it's cost me £6k plus MOT/servicing and any repairs etc over those 3 years. 
Factor in that I put £7k down and take out a personal loan for the rest - £6k @ 3% which equals £175 per month repayment over 3 years.
I used this calculator which I appreciate is a very rough guide.

Does this make sense and is this how a lot of people do it?

AdrianC

They don't buy them.

They get them on PCP or lease. They look at the up-front as being the cost of getting in, and the monthlies as simply being a fact of life. They never work out the total cost to rent a car for three years, especially the cost per mile.

MARKMAKAVELI

Would you say the method I described is a plausible one, regardless of whether you'd personally do it?

forgotmyname

£13k for a 10 year old car???    Something exotic where a single service will cost 4 figures upwards? So the only way its

worth £7k in 3 yearswould be after spending another £3k on services?

Or spend sub £5k on a 5 year old car and keep it 5 years where it will owe you very little. The MSE option?

MEM62

My system, since giving up my company car because the tax was onerous, is simple.

I bought a 3-Series BMW for £7k cash with a view to it lasting three years
I save what I would be paying in tax each month into an account.
Net of running costs I am gaining around £250 per month
At the end of the three years my car would probably be worth £3 to £4K  (ie cost me £4k in depreciation) 
In three years time I have £9k plus any residual value in the current car to pay for the next one.
Rinse and repeat with each new car being better than the last one.

Avoid loans as this adds interest to depreciation and robs you of money to spend on the replacement cars going forward.   

born_again

AdrianC said:

They don't buy them.

They get them on PCP or lease. They look at the up-front as being the cost of getting in, and the monthlies as simply being a fact of life. They never work out the total cost to rent a car for three years, especially the cost per mile.

And are often the people that say. Yea, but buy a new car and you are looking at a £X loss straight away.

Totally missing the point that. that person still has a asset on their drive, compared to them that have just handed their loaned car back and lost £Y in their monthly payments..
And now can not afford another car due to lost job.

MARKMAKAVELI

forgotmyname - My current car is just £2k, so I'm doing it the 'moneysaving way' at the moment.
According to KwikFit it would be just under £200 for a full service and MOT. I would however need to do more research in the particular car and reliability etc. I haven't made a final decision yet.

mem62 - it only works out about £280 in total interest for the loan, so not too bad really.

DrEskimo

MARKMAKAVELI said:

forgotmyname - My current car is just £2k, so I'm doing it the 'moneysaving way' at the moment.
According to KwikFit it would be just under £200 for a full service and MOT. I would however need to do more research in the particular car and reliability etc. I haven't made a final decision yet.

mem62 - it only works out about £280 in total interest for the loan, so not too bad really.

If you are accepted at the 3% APR then yes, it doesn't add much.

But a loan is just borrowing from your future earnings. If you haven't had £175/month surplus for the last 3yrs to have £6,300 in your savings account to use towards a car, where is that coming from in the next 3yrs? Evidently that was needed for other spending, so what will you be forgoing over the next few years to pay for it?

MARKMAKAVELI

I have had 6.3k in savings to pay for half of it it's the 'second half' which I'd loan.

Agree though, ideally it would just be all savings. 

jimjames

MARKMAKAVELI said:

forgotmyname - My current car is just £2k, so I'm doing it the 'moneysaving way' at the moment.
According to KwikFit it would be just under £200 for a full service and MOT. I would however need to do more research in the particular car and reliability etc. I haven't made a final decision yet.

mem62 - it only works out about £280 in total interest for the loan, so not too bad really.

What's the reason for changing the car you currently have?

MARKMAKAVELI

jimjames - Just planning for the future. Firstly I just want a nicer car there's no getting around that, but also I could do with a larger car for work and the one I've got at the moment has over 115k on it.