Car Finance - How? What? Why?
Discussion
Mastiff said:
Erm - you might want to back up a little there my friend. I'm afraid that statement is not correct.
If you are informing customers that there is no interest element on the deferred amount (GFV), then you are misleading them.
Alot of car dealer use this sales pitch for PCP, a family friendly who is a regular FT reader recently proudly announced to me they had bought a car on PCP because it was the cheapest way to finance a car due to no interst been paid on the GFV.....I couldnt be bothered to argue, but instead suggested he should ADD up the 'true' cost of the deal taking the GFV into account, and than work out the APR based on that.If you are informing customers that there is no interest element on the deferred amount (GFV), then you are misleading them.
In my experience, once you work out the Total/True cost of a PCP deal its nearly always more expensive than a normal loan or hire-purchase. In my experience car all dealers try to use the concept of 'your car been worth more than the GFV at the end' to try confuse you to sign up to PCP....But these days I just do it, pretend I really really want PCP to drive the best deal, and settle the aggrement almost straight away, if car dealers are prepare to lie through their teeth about how amazing PCP is, I'm more than prepared to take the 'finance contribution' for going on the PCP deal, and than pay it all off early so they earn no interest from me
gangzoom said:
Having recently sold my much loved BMW 335i I can understand your concerns about reliability. Before I got the 335i all my previous cars were 3 year old+ Nissan/Hondas, so I simply didn't understand why anyone bothered with an extended warranty....4 years of BMW ownership, and about £2.5k spent on repairs keeping the thing in the road I know better than to buy a BMW without a warranty
We looked at a XF for the wife but the reviews seems to suggest Jags are even less reliable than BMWs, hence we ended up going back to a Japnese car, and now have a Nissan and Lexus on the driveway....No more worries about extended warranties
So I think you don't have much choice but to get a warranty with a used Jag, but any warranty costs will be much less than deprecation on a brand new car. However you wouldn't get any good finance / PCP deals on used cars, so in that situation cash (or prearranged loan) may still be king. Alternative is to get handy with a spanner and do anymore your self, but if Jags are anything like BMW, it's the parts that's often expensive...Labour you can always get around by using a cheap local garage.
I thought I read somewhere that newer Jaguars got good reliability ratings, but I can easily believe they aren't that good. We looked at a XF for the wife but the reviews seems to suggest Jags are even less reliable than BMWs, hence we ended up going back to a Japnese car, and now have a Nissan and Lexus on the driveway....No more worries about extended warranties
So I think you don't have much choice but to get a warranty with a used Jag, but any warranty costs will be much less than deprecation on a brand new car. However you wouldn't get any good finance / PCP deals on used cars, so in that situation cash (or prearranged loan) may still be king. Alternative is to get handy with a spanner and do anymore your self, but if Jags are anything like BMW, it's the parts that's often expensive...Labour you can always get around by using a cheap local garage.
I'd never, ever buy another BMW. Mine is in excellent condition, but the performance of the 330i isn't brilliant, and the maintenence cost is atrocious - things like suspension bushes, clutches, cooling system parts, throttle bodies all seem to be almost service items. My previous Honda had done 20,000 more miles and never needed any of the above.
I do fit my own parts (and have built a couple of cars in the past) so I am capable of doing my own work, but I was hoping to not have to do anything myself apart from basic servicing. I've got better things to do than mess about with daily drivers these days.
In terms of Japanese stuff, what's a decent 4 door car with decent performance. I'm looking for about 6 secs 0-60, preferably a diesel to get some decent economy (maybe 40 mpg average compared with c.29 for the BMW).
Cheers.
walm said:
Mastiff said:
tomglibbery said:
timbo999 said:
Some of the above posts imply that you don't pay interest on the GFV, but trust me you do!!
You don't. It is entirely separate the the finance agreement. Source? I sell cars for a living and arrange finance every day.If you are informing customers that there is no interest element on the deferred amount (GFV), then you are misleading them.
Nah. I refuse to believe it.
You can go out and buy a £1m LaFerrari on PCP which since it is so rare will only depreciate say £50k over a couple of years.
So your total cost to borrow the £1m price is just £50k/2.
There is no interest to pay on the £950k GFV.
dr_gn said:
In terms of Japanese stuff, what's a decent 4 door car with decent performance. I'm looking for about 6 secs 0-60, preferably a diesel to get some decent economy (maybe 40 mpg average compared with c.29 for the BMW).
I think most of the Japanese manufacturers tend to be going down the hybrid route rather than performance diesels, with Nissan, Toyota, Lexus and Honda all touting their hybrid ranges over and above the diesel offerings in general.dr_gn said:
^^ If true, this is part of the reason I'm confused about finance in general - quite a bit of conflicting information.
I have a couple of pretty simple rules.1. Ignore the monthly and ignore the APR.
2. Work out the total cost of ownership.
Whichever has the lowest TCO is the best deal.
APR is NOT a good measure.
Monthly payments are a scam used by idiots/liars to get you into a more expensive car than you really want or push you into a bad deal.
My worry for you OP is that, like many, you are SHOCKED by the odd four-figure out of pocket expense on maintenance for a slightly older car.
So to avoid that you are about to spaff £12.6k on depreciation + interest.
So to avoid £1.5k every now and again, you have spent nearly £13k – nearly 10 times as much.
Now sure, every car will face depreciation.
But the 3-5 year period is obviously a lot more than say 5-8yr – yet it isn’t clear that the maintenance costs are that much more.
So what I do is aim for a low mileage but slightly older car in an attempt to minimise BOTH maintenance and depreciation.
The question of finance is just finding the lowest possible TCO and here the MAIN swing factor is far more likely to be depreciation rather than interest rate.
dr_gn said:
In terms of Japanese stuff, what's a decent 4 door car with decent performance. I'm looking for about 6 secs 0-60, preferably a diesel to get some decent economy (maybe 40 mpg average compared with c.29 for the BMW).
Cheers.
How many miles do you do? Unless it's starship mileage I'd avoid a diesel. I currently drive an ancient LS400 and when it finally goes bang, if it ever does, I'll be looking at something like thisCheers.
http://www.pistonheads.com/classifieds/used-cars/l...
If it's anywhere near as reliable as my old LS then it'll only cost the servicing and the occasional suspension component. Lots of power, super comfy, relatively decent mpg, more toys than you'll know what to do with and which won't go wrong and even the RFL isn't too bad for such a big engine.
Edited by rovermorris999 on Thursday 9th July 14:34
Steve Evil said:
I think most of the Japanese manufacturers tend to be going down the hybrid route rather than performance diesels, with Nissan, Toyota, Lexus and Honda all touting their hybrid ranges over and above the diesel offerings in general.
Lexus GS450H is worth a look, £25k buys you ALOT of gear. Don't worry about the hybrid drive, it's one of the most reliable drivetrains around, just look at how many Taxis are now hybrids, and Taxi drivers aren't going to waste their money on unreliable stuff...http://www.autotrader.co.uk/classified/advert/2015...
Or if you can up your budget at Infiniti Q50 hybrid, just under £30k for virtually a brand new car with a 'list' price of £40k+
http://www.autotrader.co.uk/classified/advert/2015...
Mastiff said:
Erm - you might want to back up a little there my friend. I'm afraid that statement is not correct.
If you are informing customers that there is no interest element on the deferred amount (GFV), then you are misleading them.
By the lack of a follow up reply from Tom, I guess that he's gone to educate himself on the financial products that he's selling. If you are informing customers that there is no interest element on the deferred amount (GFV), then you are misleading them.
rovermorris999 said:
dr_gn said:
In terms of Japanese stuff, what's a decent 4 door car with decent performance. I'm looking for about 6 secs 0-60, preferably a diesel to get some decent economy (maybe 40 mpg average compared with c.29 for the BMW).
Cheers.
How many miles do you do? Unless it's starship mileage I'd avoid a diesel. I currently drive an ancient LS400 and when it finally goes bang, if it ever does, I'll be looking at something like thisCheers.
http://www.pistonheads.com/classifieds/used-cars/l...
If it's anywhere near as reliable as my old LS then it'll only cost the servicing and the occasional suspension component. Lots of power, super comfy, relatively decent mpg, more toys than you'll know what to do with and which won't go wrong and even the RFL isn't too bad for such a big engine.
Edited by rovermorris999 on Thursday 9th July 14:34
walm said:
dr_gn said:
^^ If true, this is part of the reason I'm confused about finance in general - quite a bit of conflicting information.
I have a couple of pretty simple rules.1. Ignore the monthly and ignore the APR.
2. Work out the total cost of ownership.
Whichever has the lowest TCO is the best deal.
APR is NOT a good measure.
Monthly payments are a scam used by idiots/liars to get you into a more expensive car than you really want or push you into a bad deal.
My worry for you OP is that, like many, you are SHOCKED by the odd four-figure out of pocket expense on maintenance for a slightly older car.
So to avoid that you are about to spaff £12.6k on depreciation + interest.
So to avoid £1.5k every now and again, you have spent nearly £13k – nearly 10 times as much.
Now sure, every car will face depreciation.
But the 3-5 year period is obviously a lot more than say 5-8yr – yet it isn’t clear that the maintenance costs are that much more.
So what I do is aim for a low mileage but slightly older car in an attempt to minimise BOTH maintenance and depreciation.
The question of finance is just finding the lowest possible TCO and here the MAIN swing factor is far more likely to be depreciation rather than interest rate.
Yes, it always amuses me when people say "the cost of fixing it is worth more than the car". You can get a hell of a lot of spare parts and labour (if necessary) for the price of a replacement car - assuming you're not replacing your immobile car with one of the same value, but which will be an unknown quantity. but that wasn't really the point - I just wanted a nice, new-ish car, just for the hell of it. However, the more I learn about all this, the more I'm coming to the conclusion that buying a decent new car on finance is primarily for the genuinely very rich, or very stupid.
While I decide for sure whether this is in fact correct, I'll bask in the glory of soon being mortgage and debt free, but while suffering the ignominy of driving a 13 year old car...
Thanks again folks for all the great information.
dr_gn said:
So, taking all that into account (and assuming I wouldn't be paying cash for an outright purchase) - what's the deal with, say, 3 year old cars, where I guess the bulk of the depreciation has gone? For example, this car would do me just fine:
http://used.jaguar.co.uk/search#/details/2619117
TBH potential repair costs (as opposed to running costs) scare me more than what I'd potentially be paying in interest to drive the car...extended warranties etc... at what point do they become more cost than they're worth?
I recently spent over £1500 in parts for my '52 BMW 330i M-Sport, which I accept becasue it's a 100,000 mile car. How do you rationalise extended warranty benefits/cost vs car value for an older car such as the one I just linked?
All comments are extremely interesting by the way - thanks again.
That's lovely, and I thought mine had low miles at 18k/3yrs old! As for warranty vs. wallet, this is a personal preference. The dealer is giving you 2 year's free warranty which is pretty special on a used car. Beyond that it is a question of affordability - can you afford to throw away £x in a warranty to avoid a potential bill of £y? Put it another way - the warranty WILL cost £x every year, repairs might cost what £1,500? £2,000? Obviously they could be 5 times as much but that is unlikely in the extreme. I would suggest in this day and age you would be very unlucky to be faced with an unforeseen repair on that car that will cost £1k + for quite some time.http://used.jaguar.co.uk/search#/details/2619117
TBH potential repair costs (as opposed to running costs) scare me more than what I'd potentially be paying in interest to drive the car...extended warranties etc... at what point do they become more cost than they're worth?
I recently spent over £1500 in parts for my '52 BMW 330i M-Sport, which I accept becasue it's a 100,000 mile car. How do you rationalise extended warranty benefits/cost vs car value for an older car such as the one I just linked?
All comments are extremely interesting by the way - thanks again.
I ran mine up to 50k, it sold to a guy who had run his first one to 250k plus and wouldn't consider any other replacement. Arun Jaguar have a loaner 2.7 with starship mileage too. I was far more impressed with the build quality on the XF than I am on my new BMW 4 series which feels very much built to a price.
I didn't extend my warranty, and didn't regret it. I would have thought after two years you would either have confidence in the car or not...
I did buy several tyres though, due to road conditions locally and the number of sidewalls that got lunched.
walm said:
I have a couple of pretty simple rules.
1. Ignore the monthly and ignore the APR.
2. Work out the total cost of ownership.
Whichever has the lowest TCO is the best deal.
APR is NOT a good measure.
Monthly payments are a scam used by idiots/liars to get you into a more expensive car than you really want or push you into a bad deal.
My worry for you OP is that, like many, you are SHOCKED by the odd four-figure out of pocket expense on maintenance for a slightly older car.
So to avoid that you are about to spaff £12.6k on depreciation + interest.
So to avoid £1.5k every now and again, you have spent nearly £13k – nearly 10 times as much.
Now sure, every car will face depreciation.
But the 3-5 year period is obviously a lot more than say 5-8yr – yet it isn’t clear that the maintenance costs are that much more.
So what I do is aim for a low mileage but slightly older car in an attempt to minimise BOTH maintenance and depreciation.
The question of finance is just finding the lowest possible TCO and here the MAIN swing factor is far more likely to be depreciation rather than interest rate.
A good post but if I could add a couple points:1. Ignore the monthly and ignore the APR.
2. Work out the total cost of ownership.
Whichever has the lowest TCO is the best deal.
APR is NOT a good measure.
Monthly payments are a scam used by idiots/liars to get you into a more expensive car than you really want or push you into a bad deal.
My worry for you OP is that, like many, you are SHOCKED by the odd four-figure out of pocket expense on maintenance for a slightly older car.
So to avoid that you are about to spaff £12.6k on depreciation + interest.
So to avoid £1.5k every now and again, you have spent nearly £13k – nearly 10 times as much.
Now sure, every car will face depreciation.
But the 3-5 year period is obviously a lot more than say 5-8yr – yet it isn’t clear that the maintenance costs are that much more.
So what I do is aim for a low mileage but slightly older car in an attempt to minimise BOTH maintenance and depreciation.
The question of finance is just finding the lowest possible TCO and here the MAIN swing factor is far more likely to be depreciation rather than interest rate.
When working out TCO - it's difficult to factor in what, if any equity remains in the vehicle at the end of the term.
Rates are nearly always lower on new car PCP than used (a point raised earlier) - this is how the manufacturers keep the new cars going out.
SUBSIDISED Service Plans are available on new - but not used vehicles. Yes, I know that you can get service packs on used, but these are usually just discounted costs as you pay upfront - new cars get much better service deals.
NB - As far as I am aware any vehicle funded on PCP must be no older that 7 years at the end of the agreement (certainly, that's the rules here), so you will be looking at cars 3yrs old or younger if looking at 4yr deals.
For those that dismiss these finance deals as "tricks of the trade" and a way for the dealer to have you over - I can assure you that the FCA now strictly monitor how they are sold - the fines for not being completely upfront and honest with the customer can be high enough to close BIG businesses for just one infringement.
The whole finance industry is now all about treating customers fairly (their term, not mine) and complete transparency.
Ah yes, TCF!!
I viewed PCP as an alternative to personal leasing to get a more interesting car, paying a minimal deposit and a monthly payment that effectively is the depreciation on drip. Ok with a lease car you get the VED thrown in so factor that in to the equation.
I had a budget of £1,500 deposit/initial payment £350 + VED a month and chose to get a 3 yr old 18k mile XF 3.0D Premium in a colour I liked with a spec I liked. The logical alternative would have been leasing a new 2.0 Diesel BM/Merc or Audi. I would rather the 18k mile old XF any day of the week, especially with 2 yrs main agent warranty thrown in. I knew that if I bailed out I could be pretty certain I would not be in negative equity and that proved to be the case, I even chopped it in to the trade. So just like a lease, except cheaper to jump from mid-term. OF COURSE - there was a risk I would be underwater, but the depreciation on an XF is easy to predict within a reasonable margin so I felt the risk was worth it.
Sadly the tax position makes the lease option the only intelligent one for me, so 2.0 tedium it is for 24 months.
I viewed PCP as an alternative to personal leasing to get a more interesting car, paying a minimal deposit and a monthly payment that effectively is the depreciation on drip. Ok with a lease car you get the VED thrown in so factor that in to the equation.
I had a budget of £1,500 deposit/initial payment £350 + VED a month and chose to get a 3 yr old 18k mile XF 3.0D Premium in a colour I liked with a spec I liked. The logical alternative would have been leasing a new 2.0 Diesel BM/Merc or Audi. I would rather the 18k mile old XF any day of the week, especially with 2 yrs main agent warranty thrown in. I knew that if I bailed out I could be pretty certain I would not be in negative equity and that proved to be the case, I even chopped it in to the trade. So just like a lease, except cheaper to jump from mid-term. OF COURSE - there was a risk I would be underwater, but the depreciation on an XF is easy to predict within a reasonable margin so I felt the risk was worth it.
Sadly the tax position makes the lease option the only intelligent one for me, so 2.0 tedium it is for 24 months.
Mastiff said:
For those that dismiss these finance deals as "tricks of the trade" and a way for the dealer to have you over - I can assure you that the FCA now strictly monitor how they are sold - the fines for not being completely upfront and honest with the customer can be high enough to close BIG businesses for just one infringement.
The whole finance industry is now all about treating customers fairly (their term, not mine) and complete transparency.
Ironically the most 'trusty' car dealer I've delt with is my local Nissan dealer, Lexus and BMW are both as bad as each other at telling the truth....Though both will happily do it with a nicer smile in a nicer suit. Personally I find dealing with car dealers is the WORST part of car ownership. I actually cannot wait for more brands to take after Tesla, and essentially bypass the whole dealership network and sell cars directly to you. One fixed price for everyone, none of this, 'This is our extra extra special discount just for you' rubbish. Infact I'll even happily pay MORE for such a degree of REAL transparency on price rather than the what we got now.
Mastiff said:
I can assure you that the FCA now strictly monitor how they are sold - the fines for not being completely upfront and honest with the customer can be high enough to close BIG businesses for just one infringement.
The whole finance industry is now all about treating customers fairly (their term, not mine) and complete transparency.
As it should be!The whole finance industry is now all about treating customers fairly (their term, not mine) and complete transparency.
Yet we have our friend on here who claims there is no interest to pay on the GFV.
Finance just works for some people, it really shouldn't need to be sold with anyone being mislead.
Strongly agree with your points on the residual value - that's always a guess!
tomglibbery said:
I sell cars, so I'm probably fairly well qualified to advise on this.
Wow, qualified to advise, really?Then, in reference to interest on the deferred portion of the loan
tomglibbery said:
You don't. It is entirely separate the the finance agreement. Source? I sell cars for a living and arrange finance every day.
hahahahaha, Maybe try advising the Greek government on finances instead
Apologies for starting a bit of ding dong on whether the GFV attracts interest! I have NEVER seen a PCP advertised that doesn't include interest on the GFV...
Do people really think that the finance company (to whom you pay the balloon at the end, so its clearly part of the finance deal...) lend you all that money for free?
Do people really think that the finance company (to whom you pay the balloon at the end, so its clearly part of the finance deal...) lend you all that money for free?
tomglibbery said:
I sell cars, so I'm probably fairly well qualified to advise on this.......................................................................
Some cars are far more suitable for PCP than others. Ideally the car should be less that 36 months old and have strong residuals as that way the depreciation will be lower and the amount you have to borrow will be smaller.
It was clear from this that Tom has no idea what he is talking about. I think that in the sales industry 'training' means giving someone a script full of bSome cars are far more suitable for PCP than others. Ideally the car should be less that 36 months old and have strong residuals as that way the depreciation will be lower and the amount you have to borrow will be smaller.
ks, and telling them that if they recite it to the customer they will get a sale. But the salesman thinks that having been 'trained', they actually know something about the product.
gangzoom said:
Pigs might fly
Oh I understand your thoughts exactly - but I can only tell you the rules, I cannot make you believe them.Things in the finance industry have changed dramatically.
As a previous poster said, finance does not suit everyone but for those it does, we are now required to be COMPLETELY honest and transparent.
If we are not, there is a (self-funded) regulatory body with HUGE powers, just waiting to catch us out.
gangzoom said:
Ironically the most 'trusty' car dealer I've delt with is my local Nissan dealer, Lexus and BMW are both as bad as each other at telling the truth....Though both will happily do it with a nicer smile in a nicer suit. Personally I find dealing with car dealers is the WORST part of car ownership. I actually cannot wait for more brands to take after Tesla, and essentially bypass the whole dealership network and sell cars directly to you. One fixed price for everyone, none of this, 'This is our extra extra special discount just for you' rubbish. Infact I'll even happily pay MORE for such a degree of REAL transparency on price rather than the what we got now.
Tesla - is that the same company who mislead a little on the tax benefits for company car drivers and get round the bail out out of a finance deal after 2 months by linking their GFV to having finance throughout?Gassing Station | Finance | Top of Page | What's New | My Stuff