Pay a chunk off the mortage, invest... or a car?

[antspants]

I'm not entirely sure on the final figure yet, but I'm estimating I will have around a £75k lump sum after tax in the next couple of weeks, and I'm starting to consider my options.

Apart from a mortgage of around £200k and a car loan with approx. £8k outstanding on it (monthly payments around £450), I have no other lending after recently paying off all credit cards and wife's car loan.

I was planning to spend around £25k of it on a new car after my wife had told me to reward myself. However somebody made a comment to me the other day along the lines of "why would you invest your capital in a depreciating asset when you can just lease a brand new car and invest your money?", and it got me wondering if that was the right choice.

I've never been in this position before, I've always been a spender and not a saver, and to be honest have little idea what the best options are.

I could pay a chunk off the mortgage, but I can afford the mortgage just fine and wouldn't feel as if I'd gained any great benefit from it. Whereas a £25k car in the drive would be lovely

However when I think of splashing a third of it on a car which will be worth at least £5k less a year later, that makes me a bit hesitant.

So, questions:

1) Would you buy a £25k car for cash or would you invest the money and lease a car?
2) Would you pay £50-60k off the mortgage or would you invest it?
3) What are the investment options? I've read up about FTSE trackers, and they seem a decent option for an investment virgin

Personal details: I'm 43, married, one child (8 yrs old), higher rate tax payer, not risk averse but wife wouldn't let me lose it.

[antspants]

Sharted said:

Get an offset mortgage and stick the money in there for the time being.

You can take it back whenever you wish and you are unlikely to receive interest to match the mortgage rate (remember that interest on savings is taxed)

That's an interesting option, I hadn't heard of this before nor did I know I'd be taxed on savings. as I said I've always been a spender

Just to clarify my OP, when I said 'new' car I meant new to me, I definitely wouldn't splash £25k on a brand new car. Also I fully intend to pay off the £8k car loan, and then sell my current car which is probably worth £10k. I only mentioned it because it will come out of the 75k, and to point out that I'm used to paying out almost £500 a month for a car, so a lease wouldn't feel any different.

Without turning this into a what car thread, whilst I would love to buy an M3 etc, my 20k miles per annum would mean I'd just divert the car loan payment to my local petrol station. I had seriously considered a 997 c2s, as an older car I expected the depreciation to be far lower, and I'd just need to take account of the higher running costs. However somebody put me off by explaining that they are still mileage sensitive and with my mileage likely to depreciate at a not dissimilar rate to an M3 for instance. So...I'd decided on a TTRS as they are quick but not expensive to run, and would be fine for my predominantly motorway commute.

Anyhoo back on topic, I like the idea of putting the money somewhere I can get quick access to it, therefore paying off the mortgage doesn't feel like the right option. However the offset mortgage option sounds quite interesting, as it will cut my monthly bills.

I may be being a little naïve, however the potential returns on a BTL look better than the different savings account options, in terms of monthly rents and potential increase in property value, although I realise there are the costs of letting agents, 2nd property to maintain etc.

[antspants]

I'm pleased a few people have mentioned doing something nice to enjoy having the money. My wife has already decided she wants to remodel the lounge and dining room, plus she wants to go on holiday for Xmas as this is the first time in 19 years that she's had a decent amount of time off over the festive period.

Strangely I appear to be talking myself out of a chunk of it going on a car, which is weird because it's all I've thought about since my wife suggested I buy a Porsche, I must be getting old and sensible!

I entered some very approximate figures into the Woolwich mortgage offset calculator earlier and it showed me a saving of just over £100 a month if I put £50k in, which seems like bugger all tbh.

BTL is becoming more attractive because a £50-60k flat in the centre of Leicester where I live would probably generate £350 a month.

Napper said:

Regardless...... You're in a nice position by having this conundrum

Thanks for the reminder, think I'm worrying a bit too much at what should be a nice decision to make

[antspants]

superpippo said:

A Gallardo.

/end of thread

That would be a trade off between my son thinking I'm just the best dad in the world vs finding somewhere else to live or death!

[antspants]

gaz1234 said:

R8 v10

Off to the classifieds... blimey you can as well

Right pack it in all of you now I was thinking 25k was too much, now 65k looks reasonable for a car

[antspants]

Sharted said:

You need to change the settings so that the monthly payment stays the same, that way you pay the mortgage off much faster but the cash remains yours for future spending. Try the calculator again maybe?

I'll give it another try.

My wife and I came to the conclusion last night that we're going to stay in this house for a minimum of 5 years, so we're going to use some of the money to redecorate and furnish the lounge and dining room, a new kitchen and new bathroom. With a lump sum of cash available it means we can do it all to a far higher standard than we may have previously been able, and turn what is already a nice home into a really lovely one.

I think I've decided a 17k'ish Boxster (or something else for that amount) will bring me just as much driving enjoyment as a 25k 2010 TTRS, ignoring the slightly higher running costs in an excellent example of man maths.

Going to allocate 5k towards a once in a lifetime holiday and save the rest between now and the summer, 10k to a rainy day fund, probably leaving around 20-25k which I'll decide how to invest once I know exactly how much the taxman is taking from the original sum.

[antspants]

Thanks for the various suggestions, I've tried not to think about it too much while the deal actually went through.

However, a payment of £127k was deposited in my account yesterday. This is before the taxman gets anything, so should reduce to around £90k after CGT.

Plan to pay off car loan immediately, then set up an offset mortgage so I can get access to it all when needed.

I have no intention to pay off the mortgage at this stage, nor take on additional borrowing, and want to get instant access to the money. I'm now working for new bosses so whilst my job is the same and the future is reasonably secure, there is a small amount of uncertainty which is why I want easy access to the money.

If there are any other suggestions based on my situation then let me know.