Most Efficient Way of Financially Buying/Using a Car

NSE123

DrEskimo said:

NSE123 said:

Deleted_User said:

NSE123 said:

surely if I buy used and sell every 2/3 years my cars going to plummet in price so when I go to sell I have something which isn’t worth anywhere near what I have to pay off in order to clear it?

Used cars don't usually plummet in price, as the original owner kindly took the hit for you. They depreciate much more slowly.

You'd need to be paying very slowly or over a very long period for you not to get more than the outstanding balance.

And if you keep the car for more than a couple of years, you're going to do even better. Run something for 10 years or more and your bank account is going to be healthier than you could ever imagine.

Thanks for the quick reply, yes I see where your coming from although I can understand that with someone who does a standard amount of miles however if I’m clocking an extra 60k on top of what it has already that’s where I’d be concerned about selling up for a decent price

Why would that change on a new car?

PCP is just a form of secured finance. You are buying a brand new car, clocking 60k miles on it, then trading it in (either to the dealership or to the finance company for the agreed price). The deposit + monthly payments reflect the depreciation and interest over that period.

Buying a used car will very likely be much cheaper as newer cars depreciate more than used cars. Plus the interest may be much lower (depending on the deal).

Leasing is where things are different, as you don't know the purchase or selling price, or the cost of any interest. You can only determine based on the deposit + monthlies. But this will still be on a new car, so likely much higher than buying and selling a used car. The increased mileage will be reflected in the increased cost on the lease.

Sorry I’m talking about buying a used car not a new car, then adding 60k miles on top of it and trying to sell would still be difficult to get the amount of money to clear off what is owed to bank/whoever.

I get what you’re saying about how a new car would drop much more substantially than used so I would obviously avoid in this case but I mean if say I bought a 20k car using bank loan decided after three years I want rid then tried to clear off what is still owed although car now has 60-70k miles on it - it’s trying to figure if the car will still be worth what is owed at that point

DrEskimo

NSE123 said:

DrEskimo said:

NSE123 said:

Deleted_User said:

NSE123 said:

surely if I buy used and sell every 2/3 years my cars going to plummet in price so when I go to sell I have something which isn’t worth anywhere near what I have to pay off in order to clear it?

Used cars don't usually plummet in price, as the original owner kindly took the hit for you. They depreciate much more slowly.

You'd need to be paying very slowly or over a very long period for you not to get more than the outstanding balance.

And if you keep the car for more than a couple of years, you're going to do even better. Run something for 10 years or more and your bank account is going to be healthier than you could ever imagine.

Thanks for the quick reply, yes I see where your coming from although I can understand that with someone who does a standard amount of miles however if I’m clocking an extra 60k on top of what it has already that’s where I’d be concerned about selling up for a decent price

Why would that change on a new car?

PCP is just a form of secured finance. You are buying a brand new car, clocking 60k miles on it, then trading it in (either to the dealership or to the finance company for the agreed price). The deposit + monthly payments reflect the depreciation and interest over that period.

Buying a used car will very likely be much cheaper as newer cars depreciate more than used cars. Plus the interest may be much lower (depending on the deal).

Leasing is where things are different, as you don't know the purchase or selling price, or the cost of any interest. You can only determine based on the deposit + monthlies. But this will still be on a new car, so likely much higher than buying and selling a used car. The increased mileage will be reflected in the increased cost on the lease.

Sorry I’m talking about buying a used car not a new car, then adding 60k miles on top of it and trying to sell would still be difficult to get the amount of money to clear off what is owed to bank/whoever.

I get what you’re saying about how a new car would drop much more substantially than used so I would obviously avoid in this case but I mean if say I bought a 20k car using bank loan decided after three years I want rid then tried to clear off what is still owed although car now has 60-70k miles on it - it’s trying to figure if the car will still be worth what is owed at that point

Either don't borrow at all, save and buy outright, or borrow for as short of period as you possibly can. Overpay and get rid as soon as possible to reduce interest costs.

Failing that, only borrow for a term that you think you will own the car for, so over 3yrs.

My general rule of thumb is not using finance at all. However if you do, don't borrow more than 50% of the cars worth, and not over a longer period than 3yrs. Then the cars value will always be higher than the finance owing.

Albermarle

NSE123 said:

DrEskimo said:

NSE123 said:

Deleted_User said:

NSE123 said:

surely if I buy used and sell every 2/3 years my cars going to plummet in price so when I go to sell I have something which isn’t worth anywhere near what I have to pay off in order to clear it?

Used cars don't usually plummet in price, as the original owner kindly took the hit for you. They depreciate much more slowly.

You'd need to be paying very slowly or over a very long period for you not to get more than the outstanding balance.

And if you keep the car for more than a couple of years, you're going to do even better. Run something for 10 years or more and your bank account is going to be healthier than you could ever imagine.

Thanks for the quick reply, yes I see where your coming from although I can understand that with someone who does a standard amount of miles however if I’m clocking an extra 60k on top of what it has already that’s where I’d be concerned about selling up for a decent price

Why would that change on a new car?

PCP is just a form of secured finance. You are buying a brand new car, clocking 60k miles on it, then trading it in (either to the dealership or to the finance company for the agreed price). The deposit + monthly payments reflect the depreciation and interest over that period.

Buying a used car will very likely be much cheaper as newer cars depreciate more than used cars. Plus the interest may be much lower (depending on the deal).

Leasing is where things are different, as you don't know the purchase or selling price, or the cost of any interest. You can only determine based on the deposit + monthlies. But this will still be on a new car, so likely much higher than buying and selling a used car. The increased mileage will be reflected in the increased cost on the lease.

Sorry I’m talking about buying a used car not a new car, then adding 60k miles on top of it and trying to sell would still be difficult to get the amount of money to clear off what is owed to bank/whoever.

I get what you’re saying about how a new car would drop much more substantially than used so I would obviously avoid in this case but I mean if say I bought a 20k car using bank loan decided after three years I want rid then tried to clear off what is still owed although car now has 60-70k miles on it - it’s trying to figure if the car will still be worth what is owed at that point

I think most cars have lost between 40 and 60% of their value after three years and then the depreciation slows down .
This calculator shows that a 3 year old £20K car doing 20K miles pa for three more years , would be worth around £12K .
Car Depreciation Calculator (themoneycalculator.com)

NSE123

Albermarle said:

NSE123 said:

DrEskimo said:

NSE123 said:

Deleted_User said:

NSE123 said:

surely if I buy used and sell every 2/3 years my cars going to plummet in price so when I go to sell I have something which isn’t worth anywhere near what I have to pay off in order to clear it?

Used cars don't usually plummet in price, as the original owner kindly took the hit for you. They depreciate much more slowly.

You'd need to be paying very slowly or over a very long period for you not to get more than the outstanding balance.

And if you keep the car for more than a couple of years, you're going to do even better. Run something for 10 years or more and your bank account is going to be healthier than you could ever imagine.

Thanks for the quick reply, yes I see where your coming from although I can understand that with someone who does a standard amount of miles however if I’m clocking an extra 60k on top of what it has already that’s where I’d be concerned about selling up for a decent price

Why would that change on a new car?

PCP is just a form of secured finance. You are buying a brand new car, clocking 60k miles on it, then trading it in (either to the dealership or to the finance company for the agreed price). The deposit + monthly payments reflect the depreciation and interest over that period.

Buying a used car will very likely be much cheaper as newer cars depreciate more than used cars. Plus the interest may be much lower (depending on the deal).

Leasing is where things are different, as you don't know the purchase or selling price, or the cost of any interest. You can only determine based on the deposit + monthlies. But this will still be on a new car, so likely much higher than buying and selling a used car. The increased mileage will be reflected in the increased cost on the lease.

Sorry I’m talking about buying a used car not a new car, then adding 60k miles on top of it and trying to sell would still be difficult to get the amount of money to clear off what is owed to bank/whoever.

I get what you’re saying about how a new car would drop much more substantially than used so I would obviously avoid in this case but I mean if say I bought a 20k car using bank loan decided after three years I want rid then tried to clear off what is still owed although car now has 60-70k miles on it - it’s trying to figure if the car will still be worth what is owed at that point

I think most cars have lost between 40 and 60% of their value after three years and then the depreciation slows down .
This calculator shows that a 3 year old £20K car doing 20K miles pa for three more years , would be worth around £12K .
Car Depreciation Calculator (themoneycalculator.com)

Yeah but can imagine trying to get that off a dealership wpuld be difficult and selling privately would be

DrEskimo

NSE123 said:

Albermarle said:

NSE123 said:

DrEskimo said:

NSE123 said:

Deleted_User said:

NSE123 said:

surely if I buy used and sell every 2/3 years my cars going to plummet in price so when I go to sell I have something which isn’t worth anywhere near what I have to pay off in order to clear it?

Used cars don't usually plummet in price, as the original owner kindly took the hit for you. They depreciate much more slowly.

You'd need to be paying very slowly or over a very long period for you not to get more than the outstanding balance.

And if you keep the car for more than a couple of years, you're going to do even better. Run something for 10 years or more and your bank account is going to be healthier than you could ever imagine.

Thanks for the quick reply, yes I see where your coming from although I can understand that with someone who does a standard amount of miles however if I’m clocking an extra 60k on top of what it has already that’s where I’d be concerned about selling up for a decent price

Why would that change on a new car?

PCP is just a form of secured finance. You are buying a brand new car, clocking 60k miles on it, then trading it in (either to the dealership or to the finance company for the agreed price). The deposit + monthly payments reflect the depreciation and interest over that period.

Buying a used car will very likely be much cheaper as newer cars depreciate more than used cars. Plus the interest may be much lower (depending on the deal).

Leasing is where things are different, as you don't know the purchase or selling price, or the cost of any interest. You can only determine based on the deposit + monthlies. But this will still be on a new car, so likely much higher than buying and selling a used car. The increased mileage will be reflected in the increased cost on the lease.

Sorry I’m talking about buying a used car not a new car, then adding 60k miles on top of it and trying to sell would still be difficult to get the amount of money to clear off what is owed to bank/whoever.

I get what you’re saying about how a new car would drop much more substantially than used so I would obviously avoid in this case but I mean if say I bought a 20k car using bank loan decided after three years I want rid then tried to clear off what is still owed although car now has 60-70k miles on it - it’s trying to figure if the car will still be worth what is owed at that point

I think most cars have lost between 40 and 60% of their value after three years and then the depreciation slows down .
This calculator shows that a 3 year old £20K car doing 20K miles pa for three more years , would be worth around £12K .
Car Depreciation Calculator (themoneycalculator.com)

Yeah but can imagine trying to get that off a dealership wpuld be difficult and selling privately would be

Right, so go on the expectation that whatever used car you buy at £20k is going to be worth £10k trade in. So that's £10k depreciation. Next add on whatever the loan over 3yrs will cost you in interest. If at around 3% APR, about £800?

Compare that with a PCP or lease of an equivalent spec/trim/model over the same term and mileage and see what that works out at. I'm guessing brand new it will be around £35-40k if it's £20k used after a few years. So it's around £15-20k in depreciation before you've even factored in the interest cost, which on PCP of a car that value will be around £3k.

Have a look at leases to see if you can get any better, but probably be something around 12+35 at £300 per month, so again looking at around the £15k mark. Still £5k more expensive that used depreciation.

But maybe you can get a good deal on the precise car you are looking for?

I think concrete examples will help with your decision making here, but the above illustrates the general cost differences.

maxsteam

Ebe_Scrooge said:

The first one being, buy a cheaper car for cash :-)

It's the obvious option. Avoid the complicated schemes and silly acronyms.