Advice on buying a 2-3 year old car Vs new car with varying financial options

Artistxman

I have a 8 year old BMW which has done 102,000 K and is needing something or other every 6 months which cost atleast £300 but goes upto £600 depending on the repair. I bought the car in 2004 for £9,800.

If I work out my repair costs so far (approx £4000 - £1000/yr including tax and MOT) and the depreciation around £6000 has cost me £10,000 so far. I have about £3500 to 4000 in exchange value if I were to sell my car now.

My question is if I go for a similar option which would mean I fork out another £6000 to buy a decent used car and let's us say I change it after 3-4 years...I would loose around 10 K in 4 years.

Should I be looking at financing options available in the approved BMW garages such as lease hire/ contract hire which might cost similar amount or slightly more( I haven't checked the exact amount yet)...but, atleast I will drive a newer car. And I won't own the car!

What do people think and any other suggestions much appreciated. Thanks.

Conor_3

Personally I'd not buy a BMW. The build quality isn't as good as it was but the parts and labour are as expensive as they ever were however now that they're more common than Ford Mondeos, the resale value has nosedived.

Pew_Pew_Pew_Lasers!

Where on earth are you getting it serviced to be paying so much in repairs?

Artistxman

Thanks for the replies...May be I was unlucky with the car. I service it in an independent BMW garage, who seem professional...though I am always wary of the cost as I am not good with car mechanicals.

I still would like to know what people think of various leasing/ contract hire options.

Thanks

Doozergirl

www.lingscars.com I thought had some really good deals. It depends on whether you want to drive a new car every couple of years or whether you are happier to drive something older or something newer for longer, in which case it's going to be better to buy.

I have no idea why I didn't lease. I think it was just the fact that on a PCP deal I might be lucky enough to have a bit of equity left at the end to put down on my next car, otheriwse I can still pay my monthly installment and if the worst comes tot he worst, I just hand it back. Ultimately I think I chose PCP just because I wanted so many extras that the contract hire was going through the roof and standard finance from the main dealer became competitive (and I could have the nearly new car straight away rather wait for the fac - you get totally spanked on extras with a contract deal. If you take a standard car it works out much better. I should think a 2-3 year old car would almost certainly be much cheaper on finance than a new car on lease.

Regarding selling your car, put it in the Autotrader for £500 more than you get offered part-ex. My old BMW which I sold last year at the same age as yours, higher mileage I was offered £4000. I put it on the Autotrader website and I was inundated with calls within hours. It was collected the next day!

Ling_Valentine

Doozergirl, thanks for the comments.

You are quite correct (of course). But the reason you get "spanked" on extras is because generally they are not worth the money. The car companies don't want you to know this, but the reason the residual value is a lower % when extras are added is that at auction in 2-years time when the new contract hire cars are being sold into the trade (or bought by private buyers), the bidders don't care about things like parking bleepers and electric mirrors - they just don't add too much value to the basic car.

Do they really make your life that much easier? A standard car is always going to have a higher resale as a proportion of its original value, and the finance companies know this. Also, a standard car will be easier (usually) to source and faster to deliver.

Some extras ARE worth money, and these include leather (on higher models) and air con, but so many cars have these as standard anyway. As with anything you pay your money... etc.

The main issue with my business is ripping out costs, minimising dealer commission (often dealers hate me for doing this) and making cars as affordable as possible. Often a "fantastic" car comes along, which hits the sweet-spot of residual value, availability, over supply (and cheap up front costs) and is just so cheap. A recent example was a Kia Magentis 2.7 V6 leather and everything, which was less than £200/mth on a 2-year contract. I have not mentioned current deals, I don't want anyone to think I am advertising current stock.

I have 900 customer letters published here ,which may assist anyone with questions, as you can read customer comments, fully attributed with names and addresses.

Good luck to everyone with their new cars, if you prefer an older car running out of warranty and into MOT, fine

Parisien

This is the site which allows you to compare dozens of leasing companies...not sure the Ling cars is anything more than just average!!!

http://www.contracthireandleasing.com/

And if I can eg the Audi A6 2.7tdi highlighted on the Lingcars front page....then you will notice a significant saving by going elsewhere, ie up to £70 a month!!

http://www.contracthireandleasing.com/special-offers-cars1.asp?Start=1&VehicleType=0&Make=Audi&Model=A6+Saloon&Keywords=2.7&PriceMin=45&PriceMax=350

tomstickland

Might keeping current vehicle be cheapest option?

Doozergirl

Parisien wrote: »

And if I can eg the Audi A6 2.7tdi highlighted on the Lingcars front page....then you will notice a significant saving by going elsewhere, ie up to £70 a month!!

http://www.contracthireandleasing.com/special-offers-cars1.asp?Start=1&VehicleType=0&Make=Audi&Model=A6+Saloon&Keywords=2.7&PriceMin=45&PriceMax=350

I can't see the Audi on the front page but looking at the one you linked to and finding it on Ling's website - if you take the cheapest on contract hire and leasing and add VAT, Ling's is £5 cheaper a month

The thing I did like about lings is that it is transparent. After a billion phonecalls to find out that a deal is 'business only' (they do often seem to offer better dels to business users) or comparing my reqiured timescales and mileage, I don't understand why other people don't follow her and actually create a website that gives you a proper price.

mister_bojangles

It is not clear where you live, but if it is in London (or you drive into London), have you considered going 'green'; now that the Mayor wishes to bankrupt anyone with big engines. Would you consider gas, bio-fuels or diesel run cars, rather than consider car makes.

Ling_Valentine

I do try to be very transparent and show full prices. But I will never be the cheapest on everything. I simply do my best to avoid overcharging and cut overheads to a minimum. At risk of being very boring, under the Price Marking order 2004, most contract hire sites break the law on representing prices by not including the VAT.

When a service or goods are offered to private individuals, VAT must be included. However, most contract hire sites do not include the VAT and they aim for "ex-vat" price points (eg £199.99+VAT, when to a normal customer that means £235 - that's £910 "hidden" over a 2-years 3+23 contract). That Contract Hire and Leasing site is good, but many of the prices on it are outdated and not quite true (eg I could upload ANY price to it, but instead send an xml feed of my website prices) and all are "ex-VAT" on that site, I constantly fight to get VAT included. For example, many broker companies add "document fees" which are often made up charges. Some deals are PCP, which mean that road tax is not included (but that is not always declared), and there may be end of contract "option to purchase fees". Even big companies do this, see Mercedes letter that I was copied in to, below).

I have two distinct sides to my website, one "ex-VAT" and one "inc VAT", which is the side Doozergirl refers to. All my personal stuff includes VAT, but as noticed, it means that at first glance it seems more expensive than some "ex-VAT" sites. Frankly, Martin Lewis on Radio Two is one of my reference points in making sure I am offering fair prices (I take note of his criticisms of charges etc, like when he talks about the banks, and I do my very best to follow his advice). Often manufacturers and finance companies don't like me for talking plainly about this stuff.

Here is the reasoning by Mercedes over this issue, justifying a 20% hike in already unnecessary high charges (in my view). I disagree strongly with their excuses for these charges (for instance, sending an annual statement costs pennies). I was sent this letter a week ago - note I refuse to supply these Mercedes deals as they penalise the customer in my view:

Changes to Customer Documentation Fees 1st April 2008
Reference:
Additional information: n/a
Date first issue: 13/03/08
Date this issue: 14/03/2008
Relevant to: Brand Director/Dealer Principal/Business Manager

Dear Colleagues

You will have no doubt seen that there a number of significant changes to the Consumer Credit Act, which come into force during 2008, many of which have added an additional cost to our business. Specifically, we now have to send every customer with a regulated finance agreement an annual statement of account detailing financial transactions made, throughout the term of an agreement. There are also changes to the way that we contact customers who are in arrears and the way that default notices are actioned.

In addition to this, we have seen an increase in the number of fraudulent applications for finance, in common with other UK finance providers, which has led us to decide to make a significant investment into a new fraud detection system. This is important for you, as it will enable us to more effectively filter fraudulent applications for credit earlier in the process.

Recent changes to the Money Laundering Regulations have also added to the administrative burden and associated costs of processing credit applications and documents.

All of the above mean that it is now costing significantly more not just to put a credit proposal onto our portfolio but to administer it during its lifetime.

To recover a proportion of these costs we will be increasing the customer Acceptance Fee for Mercedes-Benz agreements by £30 from £150 to £180.

The Option to Purchase Fee/Purchase Activation Fee payable at the end of Hire Purchase and Agility agreements (where applicable) will increase from £75 to £95 with effect from April 1st 2008.

It is worth noting that the Acceptance Fee paid by the customer enables us to fully protect their interest in the vehicle, by registering the car with the Credit Reference Agencies on their behalf, thus protecting them from any future fraudulent loan applications made against their car. If the vehicle is previously owned, we confirm that the vehicle is not an insurance write-off and that no other finance company has an interest in the vehicle. We also search the electoral and national credit registers when the application is processed, protecting the customer from the dangers of misrepresentation or fraud.

Please also note that our leaflet "Acceptance Fees - What do you get for your money?" is available free of charge for you to use with your customers, which outlines the vital protection and peace of mind that they receive.

If you have any questions regarding these changes please contact your Finance Operations Manager or Retail Manager.

Yours sincerely

---

This is just complete rubbish.

The leafet MB gives away, should read: "Acceptance fees - What do MERCEDES get for YOUR money?"

Personally, I have never had a case of fraud, so MB have nothing "in common" with me, and the measures I take are simple and effective and cheap. It is just an excuse to charge a fee IMHO. 90% of other funders I use do not charge fees (although many brokers add them to fund inefficient operations or just to make extra profit), yet provide similar security and fraud prevention.

Hope this helps. It is interesting to see the stuff from the inside.