Take out finance or save up and just buy outright
Discussion
xRIEx said:
I think that description is one of the dangers - it doesn't remove exposure to depreciation, it fixes the level of depreciation; so often I hear or read "PCP/leasing means I avoid depreciation" - no, all you're paying is the depreciation (if you don't/can't keep the car), it's just a known amount rather than unknown.
Thinking in terms of total cost of ownership would be more useful (one calculation where PCP/leasing allows far less uncertainty).
There can be a lot of uncertainty in depreciation - I lost more on a 12 month old RX-8 than I did on a brand new Civic Type-R, because although the residual projections were very good when I bought it, the lovely government hiked the VED rates and everything juicy took a good kicking - even after it was decided that the rates would not apply retrospectively.Thinking in terms of total cost of ownership would be more useful (one calculation where PCP/leasing allows far less uncertainty).
Qwert1e said:
otolith said:
There can be a lot of uncertainty in depreciation -
... as people find out every time a fuel crisis arrives. Many forget there was a time when cars like Jensen Interceptor and E-type Jags could hardly be given away!The last recession hit car values hard. BMW lost hundreds of millions because they had set up so many PCP deals with strong residuals, and people just handed them back in their droves because they were worth significantly less than the residual value.
One thing i would say is, i dont think we're necessarily comparing apples with apples here.
Theres people who'll put a new car on finance or PCP - and probably get enhanced / incentivised deals to do so, but the people who are advocating buying for cash rarely buy new.
They then point out how much extra it WILL cost the person using finance over the person who "might" buy cash - when in reality, very few people are going to drop £35K of their own hard earned on a new BMW for example.
So it might suit some people to pay a PCP deal on a new BMW and they might budget £300 a month to do so out of their expendible income. For that there are various benefits - they're getting a minimum 3 year warranty, no ad hoc maintenance bills, usually servicing, no mot's to worry about and after 3 years they'll rinse and repeat.
Your typical cash buyer is usually buying in the £1,000 - £10,000 band - they're getting a car that is over the worst of its depreciation, may have cost several times that new, and they'll budget for the odd repair bill.
So really, predominantly are these two groups close to mutually exclusive? Because we're not really talking about buying a brand new car with your own hard earned OR using a finance deal. Because those who save up the cash will rarely buy new anyway?
Theres people who'll put a new car on finance or PCP - and probably get enhanced / incentivised deals to do so, but the people who are advocating buying for cash rarely buy new.
They then point out how much extra it WILL cost the person using finance over the person who "might" buy cash - when in reality, very few people are going to drop £35K of their own hard earned on a new BMW for example.
So it might suit some people to pay a PCP deal on a new BMW and they might budget £300 a month to do so out of their expendible income. For that there are various benefits - they're getting a minimum 3 year warranty, no ad hoc maintenance bills, usually servicing, no mot's to worry about and after 3 years they'll rinse and repeat.
Your typical cash buyer is usually buying in the £1,000 - £10,000 band - they're getting a car that is over the worst of its depreciation, may have cost several times that new, and they'll budget for the odd repair bill.
So really, predominantly are these two groups close to mutually exclusive? Because we're not really talking about buying a brand new car with your own hard earned OR using a finance deal. Because those who save up the cash will rarely buy new anyway?
daemon said:
So really, predominantly are these two groups close to mutually exclusive? Because we're not really talking about buying a brand new car with your own hard earned OR using a finance deal. Because those who save up the cash will rarely buy new anyway?
I don't have any stats to confirm or refute that, but it sounds plausible to me. Certainly people who harp on about "finance costs more in the long run" (such as me), then they're also likely to avoid the bulk of the depreciation if they can, like you say.xRIEx said:
daemon said:
So really, predominantly are these two groups close to mutually exclusive? Because we're not really talking about buying a brand new car with your own hard earned OR using a finance deal. Because those who save up the cash will rarely buy new anyway?
I don't have any stats to confirm or refute that, but it sounds plausible to me. Certainly people who harp on about "finance costs more in the long run" (such as me), then they're also likely to avoid the bulk of the depreciation if they can, like you say.djc206 said:
Replying to acehood, you're absolutely correct. If your disposable income constitutes such a low percentage of your whole income and such a small amount then there is a real danger that some months it won't be that disposable and as such financing anything is not a good idea.
My only challenge about your post is taxation. Earning ~£20k a 2nd job wouldn't be taxed silly. Not that anyone should have work 2 jobs just to exist of course.
I don't think people realise it until it's too late. I certainly didn't. It's caused me A LOT of financial trouble for the last few years and I'm still paying for things I stopped owning a long time ago. My only challenge about your post is taxation. Earning ~£20k a 2nd job wouldn't be taxed silly. Not that anyone should have work 2 jobs just to exist of course.
I looked into doing some part-time shifts at a supermarket but it just worked out that I'd barely be earning anything, it wasn't worth my time. May be different now or depending on individual circumstances but taking a <16hours a week 2nd job which is minimum wage doesn't seem to be profitable.
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