Financially best way to buy a car?

[uncinquesei]

i have tried to follow this but please accept my apologies if i'm repeating someone else's point. There seems to be an assumption that the individual will automatically hand back / swap the car in question at the end of the lease / PCP whereas the cash buyer will sell privately (for more). The option to sell it is available to the finance customer too.

[Marcellus]

anonymous said:

[redacted]

errrm yes, all I asked was a simple question... I've never had a topic go onto it's 5th page before now!!

So how should Mrs P fund her next car purchase.... that's all she wanted to know...

Edited by Marcellus on Friday 26th November 20:05

[uncinquesei]

anonymous said:

[redacted]

beautifully summed up.

[Deva Link]

anonymous said:

[redacted]

Sorry - I've been a bit bored for the last couple of days with the US being on ThanksGiving and daemon has been great value, sometimes posting three replies for every one against him! His tranquilisers were clearly wearing off this afternoon though.

[R26Andy]

All this arguing over approx £1100 quid over 3 years!

Outright Purchase Year3
Cost -20000
Loss of interest on cash -2497
Interest saved on loan 3087
Value of Car 8000
Total Cost -13907

Hire Purchase Year3
Cost -20000
Cost of borrowing -3087
Value of Car 8000
Total Loss -15087

PCP Year3
Cost -12000 (depreciation only)
Cost of Borrowing -4552.00
Value of Car 0 (because its handed back)
Total Loss -14892

Edited by R26Andy on Friday 7th January 15:17

edited due to rubbish maths

Edited by R26Andy on Friday 7th January 15:17

Edited by R26Andy on Friday 7th January 15:24

[Sour Kraut]

R26Andy said:

All this arguing over approx £1100 quid over 3 years!

Outright Purchase Year3
Cost -20000
Loss of interest on cash -2497
Interest saved on loan 3087
Value of Car 8000
Total Cost -13907

Hire Purchase Year3
Cost -20000
Cost of borrowing -3087
Value of Car 8000
Total Loss -15087

PCP Year3
Cost -12000 (depreciation only)
Cost of Borrowing -4552.00
Value of Car 0 (because its handed back)
Total Loss -14892

Edited by R26Andy on Friday 7th January 15:17

edited due to rubbish maths

Edited by R26Andy on Friday 7th January 15:17

Edited by R26Andy on Friday 7th January 15:24

How did you come to the lost interest on cash in the first one. £20k at 3%
compound, is £1,855.

ETA: And isn't accounting for the savings interest forgone AND the loan interest avoided a 'cake and eating it' calculation?

Edited by Sour Kraut on Friday 7th January 15:33

[NoelWatson]

Sour Kraut said:

R26Andy said:

All this arguing over approx £1100 quid over 3 years!

Outright Purchase Year3
Cost -20000
Loss of interest on cash -2497
Interest saved on loan 3087
Value of Car 8000
Total Cost -13907

Hire Purchase Year3
Cost -20000
Cost of borrowing -3087
Value of Car 8000
Total Loss -15087

PCP Year3
Cost -12000 (depreciation only)
Cost of Borrowing -4552.00
Value of Car 0 (because its handed back)
Total Loss -14892

Edited by R26Andy on Friday 7th January 15:17

edited due to rubbish maths

Edited by R26Andy on Friday 7th January 15:17

Edited by R26Andy on Friday 7th January 15:24

How did you come to the lost interest on cash in the first one. £20k at 3%
compound, is £1,855.

It wouldn't be on 20k for the whole terms as you would be paying for the PCP over the 36 months

[R26Andy]

I used 4% assuming the money was locked in for the 3 years to get a better rate.

Agree about the cake and eating it part. I suppose derpreciation could be looked at as a negative interest rate therefore the only thing to include is savings on borrowing cost which makes outright purchase look better on paper.

Althought that all depends on where the £20k came from in the first place lol. I`m getting a headache

[Dr Jekyll]

What about interest on the £640 a month the outright purchaser is saving through not having a car payment?

[Sour Kraut]

R26Andy said:

I used 4% assuming the money was locked in for the 3 years to get a better rate.

Agree about the cake and eating it part. I suppose derpreciation could be looked at as a negative interest rate therefore the only thing to include is savings on borrowing cost which makes outright purchase look better on paper.

Althought that all depends on where the £20k came from in the first place lol. I`m getting a headache

I'm not sure that the 'borrowing cost avoided' is relevant. I think that the only opportunity cost is the alternative use of the money and a 'savings account' reference is, IMO, correct/appropriate.

But, arguably, each and every monthly payment made by the other two forms of finance are an alternative use of cash to simply saving it, so perhaps there are no costs to cash payment. Maybe the cost of buying the car for cash is simply £12k?

My head hurts now too


On the PCP example, why isn't the total cost £16,552? Or have I misunderstood the sums? The cost of borrowing seems very high.

[k-ink]

I agree with some posters here, that I'd only pay cash these days. Partly because of the climate but also because I am freelance. But even when times were booming and I was very safely employed I always put down the largest deposit on new cars that I could. Typically 50% minimum. I hate to be tied up monthly.