Financially best way to buy a car?

[Cupramax]

SimonV8ster said:

Why not buy one a couple of years younger for under 10K ? The worst of the decreciation has gone.......

Run that by me again? How can you buy a car a couple years younger than new?

[NoelWatson]

Engineer1 said:

as this place is anti financing anything they only have mortgages to preserve liquidity or atleast that's what some would have you believe.

?

[oldcynic]

If you've got the cash but can prise a much better deal by taking finance then check the penalty clauses - I've known people take the finance then pay it off weeks later. Nothing the dealer can do about that - and they were banking on commission from the finance to bolster their profits.
The 3 year rule sounds like lunacy though - my Volvo's just passed the 7 year mark, 126K miles, and still going fine - in fact the dealer called me after 3 years suggesting I traded it for a newer car and I pointed out that there was nothing wrong with the one he'd sold me. He didn't have an answer for that.

[Herman Toothrot]

kambites said:

£15k on a 1.6 diesel Focus?!?

ETA: Sorry, not helpful I know, but so much money for so little ]

Just thinking the same, I'm waiting to hear if my Passat has been written off, if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

I know some one has to buy new cars, but £15k on a family hatch? I don't know that there is a good way to buy, it'll loose most of that £15k over three years.

[cheadle hulme]

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Edited by cheadle hulme on Tuesday 23 November 12:50

[edo]

Marcellus said:

OK OK OK enough on the choice of car (please)!!

I accept all the points about depreciation on new cars.

The reason why the Focus is the current choice is that Mrs M has a car allowance from work and the car must be less than 3 years old, so we're thinking buy something possibly 6/12 months old and be able to keep it for 24/30months.

The only ones we've looked at thus far are from Ford Direct thinking that it would come covered by their used car warranty.

(TBH the Focus is much better than Mrs M 1st choice of car which was a Peugeot 3008!!! )

You are missing the point. The issue isnt with the choice of car (although there are plenty of other things I would buy).

The issue is with spending £15k on one, when you can get the same car with 2.5 years of manufacturers warranty left for not far off HALF that.

[Cost Captain]

cheadle hulme said:

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......[quote]

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Well if you buy something for £15k, pay £5k interest and when you've paid it off the car is worth £5k you'll have given the car away.

[cheadle hulme]

Cost Captain said:

cheadle hulme said:

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......[quote]

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Well if you buy something for £15k, pay £5k interest and when you've paid it off the car is worth £5k you'll have given the car away.

Well yes. Not sure what that has to do with the financing decision though.

[angusc43]

cheadle hulme said:

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Edited by cheadle hulme on Tuesday 23 November 12:50

An airline will lease an aircraft only if it can make more money from selling tickets than the cost of the finance.

A car is different (well unless it's a minicab or whatever). It's not generating income. It's just depreciating
I've had a couple of car loans in the past but choose not to go down that route now. That's why I was driving an 11 year old car up to April this this year.

I don't mind borrowing against property however. The long term price trend is up not down.

[Deva Link]

Herman Toothrot said:

kambites said:

£15k on a 1.6 diesel Focus?!?

ETA: Sorry, not helpful I know, but so much money for so little ]

Just thinking the same, I'm waiting to hear if my Passat has been written off, if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

I know some one has to buy new cars, but £15k on a family hatch? I don't know that there is a good way to buy, it'll loose most of that £15k over three years.

Whereas (unless you have an Audi technician in the family) you'll wet yourself every time the car makes a funny noise and practically any significant fault will render the car an economic right off.

After years of losing shed loads of money on new cars a colleague was very pleased with himself to get a 7 Series for £3K. Within a couple of weeks something went wrong with the climate control - he was told it was a dash-out job and the cost to fix was....£3K.

[Marcellus]

Herman Toothrot said:

............................if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

Ah yes we've got one of those already!!

And yes we will be searching round for a good value one........ but still to decide cash or some form of finance..... you never know what the next couple of years will hold so having the cash in the bank might be usefull and Mrs M is paid allowance monthly.... so repayments could equal company contribution

Edited by Marcellus on Tuesday 23 November 14:50

[daemon]

angusc43 said:

Cash is best of course. Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......

Who's rule of thumb is that?

Surely the rule of thumb is actually 'if it appreciates, buy it, if it depreciates, lease it'?

ie, you'd be better off leasing or PCP'ing a focus than buying it outright.

[daemon]

angusc43 said:

cheadle hulme said:

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Edited by cheadle hulme on Tuesday 23 November 12:50

An airline will lease an aircraft only if it can make more money from selling tickets than the cost of the finance.

A car is different (well unless it's a minicab or whatever). It's not generating income. It's just depreciating
I've had a couple of car loans in the past but choose not to go down that route now. That's why I was driving an 11 year old car up to April this this year.

I don't mind borrowing against property however. The long term price trend is up not down.

You're confusing leasing with financing. Getting a loan for your car / aircraft is totally different than leasing a car / aircraft / whatever.

Edited by daemon on Tuesday 23 November 14:58

Edited by daemon on Tuesday 23 November 15:00

[Herman Toothrot]

Deva Link said:

Herman Toothrot said:

kambites said:

£15k on a 1.6 diesel Focus?!?

ETA: Sorry, not helpful I know, but so much money for so little ]

Just thinking the same, I'm waiting to hear if my Passat has been written off, if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

I know some one has to buy new cars, but £15k on a family hatch? I don't know that there is a good way to buy, it'll loose most of that £15k over three years.

Whereas (unless you have an Audi technician in the family) you'll wet yourself every time the car makes a funny noise and practically any significant fault will render the car an economic right off.

After years of losing shed loads of money on new cars a colleague was very pleased with himself to get a 7 Series for £3K. Within a couple of weeks something went wrong with the climate control - he was told it was a dash-out job and the cost to fix was....£3K.

Scare storys for those that don't do research.

I've run the 4 motion V6 for a year and had one bill, VW said £1600 I got it done without getting my hands dirty for £250.

[Herman Toothrot]

Marcellus said:

Herman Toothrot said:

............................if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

Ah yes we've got one of those already!!

And yes we will be searching round for a good value one........ but still to decide cash or some form of finance..... you never know what the next couple of years will hold so having the cash in the bank might be usefull and Mrs M is paid allowance monthly.... so repayments could equal company contribution

Edited by Marcellus on Tuesday 23 November 14:50

Ah, I see your other posts - indeed no need for a practical barge then Quite a co-incidence I suggest such a car you already have(not listed in your garage). They look a good alternative if I don't get my Passat back.

Its a shame you need such a new car for your wife as whatever you get you'll be forced to effectively throw the money away. I guess you just have to think of it as a "ticket" for a new car,.. all it can be is a new/ nearly new, nothing else. I guess all it comes down to is do you want the money in your saving / investments or tied up in a car. If you make something on the investments then take the finance.

[angusc43]

daemon said:

angusc43 said:

cheadle hulme said:

angusc43 said:

Rule of thumb; try to never finance a depreciating asset - you end up paying interest for the benefit of losing money......

Depreciation is the monetary expression of the usage of an assets life.

Any chance you could explain the rule of thumb? I guess businesses should stop buying machinery and airlines stop buying aircraft too.

Edited by cheadle hulme on Tuesday 23 November 12:50

An airline will lease an aircraft only if it can make more money from selling tickets than the cost of the finance.

A car is different (well unless it's a minicab or whatever). It's not generating income. It's just depreciating
I've had a couple of car loans in the past but choose not to go down that route now. That's why I was driving an 11 year old car up to April this this year.

I don't mind borrowing against property however. The long term price trend is up not down.

You're confusing leasing with financing. Getting a loan for your car / aircraft is totally different than leasing a car / aircraft / whatever.

Edited by daemon on Tuesday 23 November 14:58

Edited by daemon on Tuesday 23 November 15:00

Yes I am using the terms loosely. I am assuming that;

(a) all transactions that involve raising finance incur a cost for that finance - if not, why would the third parties bother?.

I am also assuming that ;

(b) all cars depreciate at an alarming rate.

I was therefore suggesting to the OP that the best way to buy a car is one that avoids finance of ANY sort. As the OP will end up paying for the finance AND the depreciation.

In summary, the original question was "what's the best way to buy?". My answer was "cash". Still is.

EDIT; maybe I am missing the point of PCP/Leasing and just lazily assuming they are another way of financial institutions to skim a few % points off the top.

Edited by angusc43 on Tuesday 23 November 15:21

[Chris_w666]

Herman Toothrot said:

Deva Link said:

Herman Toothrot said:

kambites said:

£15k on a 1.6 diesel Focus?!?

ETA: Sorry, not helpful I know, but so much money for so little ]

Just thinking the same, I'm waiting to hear if my Passat has been written off, if it has we have decided to push the boat out and get a 2002 4.2 V8 A6 Quattro, one owner, 80,000miles, fsh, tax and years mot, spend £5k.

I know some one has to buy new cars, but £15k on a family hatch? I don't know that there is a good way to buy, it'll loose most of that £15k over three years.

Whereas (unless you have an Audi technician in the family) you'll wet yourself every time the car makes a funny noise and practically any significant fault will render the car an economic right off.

After years of losing shed loads of money on new cars a colleague was very pleased with himself to get a 7 Series for £3K. Within a couple of weeks something went wrong with the climate control - he was told it was a dash-out job and the cost to fix was....£3K.

Scare storys for those that don't do research.

I've run the 4 motion V6 for a year and had one bill, VW said £1600 I got it done without getting my hands dirty for £250.

A colleague was quoted £1150 as a minimum to fix an issue with his Passat TDI by a VW dealership, I suggested he took it to a specialist who solved the problem and 3 more that they found and gave him a bill for £350. The issue VW flagged up turned out to be nothing that needed work and he could have ended up spending £2k or more rectifying the problem by just sticking with what the VW man told him (i.e. nobody but us can do this for you).

[Deva Link]

The Beemer repair price was from an indie.

And on the VW front a colleague recently spend £4500 getting his 5yr old 80K mile Touareg fixed - £1K at a VW dealership and another £3500 at an indie. Both the dealership and a couple of indies suggested the same work and they were all a similar price.

It's still cheaper than buying and running a new one but somehow big repair bills hurt a lot more than depreciation.

The other snag for a lot of people is they just haven't got the time or inclination to mess about, especially if they haven't got the kind of job where they can slip out for a couple of hours. He put up with the car being very difficult to start for a few months but you can't expect a woman to do that.

[oldcynic]

Is it worth working the problem backwards and figuring which cars have the best residuals after 3 years? Or forwards to work out which have the worst residuals after 6-12 months?
The £9000 Focus sounds like a good start, and I agree with earlier posters that there's no benefit paying "main dealer premium" for a car which will already have manufacturer's warranty for the whole time you own it - as long as the basics are above board an independent or private purchase will probably save you a fair amount of cash.
Also check out low mileage ex-rentals from the hire companies - they bulk buy for discounts and can be very good value for money. If you don't buy it then the dealer will, and they'll then add their significant markup.

[daemon]

angusc43 said:

Yes I am using the terms loosely. I am assuming that;

(a) all transactions that involve raising finance incur a cost for that finance - if not, why would the third parties bother?.

Not strictly true. Leasing is a monthly payment for a set time and then hand the car back. There is no interest rate that can be varied by the customer. The leasing companies make their money by buying cars in bulk at a much discount than you or i could attain and fund this in a much more cost effective way than you or i could.

angusc43 said:

I am also assuming that ;

(b) all cars depreciate at an alarming rate.

Not strictly true. You can minimise that depreciation by negotiating the best deal possible on a car known to depreciate the least. There was a recent example on here of a guy who bought a brand new m3 at a heavily discounted price drove it a year and got what he paid for it. On paper buying a new m3 is a bad idea, but in this particular instance it cost the guy nothing in depreciation.

Also, by opting for a PCP finance deal you are agreeing the residual value of the car up front. Therefore your depreciation is known. You are also paying for the car monthly, therefore your outgoings are known.

angusc43 said:

I was therefore suggesting to the OP that the best way to buy a car is one that avoids finance of ANY sort. As the OP will end up paying for the finance AND the depreciation.

Not strictly true. Take a look at the deal here on the Mercedes GL

http://www2.mercedes-benz.co.uk/content/unitedking...

Heres an example whereby the manufacturer is putting £6000 into the deal and offering a low rate of finance. The finance charges only come to £4423 therefore the customer is £1600 better off by taking finance. Also this deal guarantees a future value of £28,850 for the car. I would say you would struggle to get £28,850 at three years old for a GL - What Car? predicts it will be worth just £24,000, so the purchaser using finance will be £4,850 better off.

angusc43 said:

In summary, the original question was "what's the best way to buy?". My answer was "cash". Still is.

Then you could on occasions be wrong.