Take out finance or save up and just buy outright
Discussion
mp3manager said:
By one letter. 
I save up for the things I buy, including the house, only a mug pays interest.
Really?I save up for the things I buy, including the house, only a mug pays interest.
By your video gaming posts, your car and your attitude i'm going to make a stab in the dark and say you still live at home with mum and dad. If thats the case, come back and talk to us when you've had to fend for yourself for a few years.
IF you're renting while you save for a house, then surely that rental money would be better spent paying off a mortgage?
Oh, and you're not really laying a big egg in life if you had to "save up" for a 2001 car.
DJP said:
Shaoxter said:
Ah yes... bank of mummy and daddy
Nice of them to not charge you rent while you were living there
LOL! Nice of them to not charge you rent while you were living there
The politics of envy is writ large on this thread.
I'll bet your rented car is worth more than my owned one.
And doubtless your rented house, too.
OP, if you can get a cheap loan rate and service it without blowing a hole in your budget then do it. Personally I wouldn't because there is a lot of good stuff around for cheap and generally paying a loan takes a lot longer than the enjoyment of new shiny lasts.
mp3manager said:
I save up for the things I buy, including the house, only a mug pays interest.
This sounds like something I'd say aged 15 before I could even begin to grasp the real world. In some cases you'd have to be a complete mug to not pay interest.If you're running an expanding business in retail why would you tie up all your investment money in a property or car? You'd take a £200,000 mortgage just to have the £200,000 to invest into stock. Which will be sold at a considerably higher margin than the interest repaid.
xRIEx said:
djc206 said:
There are lots of cars available at 0%, that's less than inflation so you actually pay back less than you borrowed in real terms. No brainer if you want a new car.
It's 0% because there is profit elsewhere in the deal, it's just how they choose to wrap it up in numbers.
was about to say this, its not 0% at all.It's all down to reasonable financial management. Whilst I'm not an advisor I do work in that area and would give the following example:
My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
OP - If you are starting a new job then wait until you have got through the probationary period and to also be sure you want to stay there before tying yourself up with debt.
I have never personally had finance on any car. If you save up a decent amount then you can buy a good, tasty car that depreciates slowly.
Finance is the work of satan
I have never personally had finance on any car. If you save up a decent amount then you can buy a good, tasty car that depreciates slowly.
Finance is the work of satan
MagneticMeerkat said:
It's all down to reasonable financial management. Whilst I'm not an advisor I do work in that area and would give the following example:
Suggesting borrowing to invest in equities is not appropriate for most people.And you're assuming the OP has the cash available to buy the car outright - he doesn't. You need to compare the cost of financing against waiting for however long it take to save up the car.
Edited by fandango_c on Friday 29th August 22:44
MagneticMeerkat said:
It's all down to reasonable financial management. Whilst I'm not an advisor I do work in that area and would give the following example:
My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
With that loan, you repay about £129 per month; without the loan, you have an extra £129 from your pay packet floating around, every month for 60 months. Say, what should we do with that money? I know! Let's invest it!My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
So paying for the car in full frees up some of your monthly spend to replenish the capital used to buy it in the first place, gaining interest over that 7 years (in fact, you 'repay' the capital about 5 months early, so it's 'repaid' over 55ish months instead of the 60 month term of the loan) so your figure of £1,320.80 'lost' by removing that money is wrong.
It really is as simple as, if the AER of the savings/investment is higher than the APR of the loan, you earn; if the APR is higher than the AER, it costs you. I have many goal-seeking comparison spreadsheets factoring in timings of payments, etc. to corroborate this.
Net, if you've got a mortgage you could overpay, the equity you have in your car is "borrowed" from your mortgage. Someone feeling smug because they've bought their car with savings is merely paying a lower rate of interest. They have effectively paid for their car with a loan secured on their house.
xRIEx said:
MagneticMeerkat said:
It's all down to reasonable financial management. Whilst I'm not an advisor I do work in that area and would give the following example:
My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
With that loan, you repay about £129 per month; without the loan, you have an extra £129 from your pay packet floating around, every month for 60 months. Say, what should we do with that money? I know! Let's invest it!My parents bought a car using a loan obtained by a peer to peer organisation. Zoopla or Fundscircle are two; potentially riskier than a bank or building society but the interest rates are good.
They could have paid for it outright, they had the money. Instead they got a loan as saving up the required amount would have taken ages. The money they didn't spend on the car was left alone. Currently it forms part of a platform based collectives portfolio. Some of it is ISA wrapped, thus sheltered from CGT, and the rest is either generating income or share/unit accumulation. The thing to remember is the money is working. And it is; the thing performs perfectly well for zero effort.
Anyway to take money out of somewhere it earns profit to invest in a depreciating asset, such as a car, would be silly.
Think of it this way: the car cost £7,000 (it didn't, I'm making these figures up). After, say, seven years the car is worth £1,000 giving a net loss of £6,000.
If the money was placed in a safe-ish collective, say a Bond Fund or even UK large company Equities, and grew at 2.5% p.a. it would be worth £8,320.80 or a gain of £1,320.80. I'm not suggesting such a figure is guaranteed but it's kind of realistic.
Using the loan example, at 3.9% APR over 5 years gives a total repayment due of £7,716.00 or £128.00 per month.
So buy the car outright: At end of year seven you own the car, total loss £6,000. no profit, net position £6,000 down
Get a loan, leave the money invested: At the end of year seven you own the car, total loss £6,716.00. Profit £1,320.80, net position £5,395.20
Difference: Borrower loses £604.80 LESS than the outright buyer.
Therefore the Holier than Thou lot are probably misguided. There are better things to do with money than buy cars so work this kind of thing out first. Credit is cheap!
So paying for the car in full frees up some of your monthly spend to replenish the capital used to buy it in the first place, gaining interest over that 7 years (in fact, you 'repay' the capital about 5 months early, so it's 'repaid' over 55ish months instead of the 60 month term of the loan) so your figure of £1,320.80 'lost' by removing that money is wrong.
It really is as simple as, if the AER of the savings/investment is higher than the APR of the loan, you earn; if the APR is higher than the AER, it costs you. I have many goal-seeking comparison spreadsheets factoring in timings of payments, etc. to corroborate this.
Not a hypothetical scenario.....
Middle aged bloke, married, 4 kids, decent income, no mortgage, boggo TDi repmobile
Middle aged bloke, divorced, hasn't seen his son for 15 years, living with gf, rented house, drives a 996 on finance,
Who would you rather be?
Ps reason the bloke can afford a 996 is because he's paid f'k all in childcare.
Middle aged bloke, married, 4 kids, decent income, no mortgage, boggo TDi repmobile
Middle aged bloke, divorced, hasn't seen his son for 15 years, living with gf, rented house, drives a 996 on finance,
Who would you rather be?
Ps reason the bloke can afford a 996 is because he's paid f'k all in childcare.
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