Supercar Finance - Why are rates so high?
Discussion
I have an unsured personal loan at 2.8%, I also have a 5 year fixed rate mortgage at 1.38% but supercar finance rates seem to be around 6.9%.
How come?
The loan is secured against the car, and providing there is a large deposit (25%+), there is some equity in the car to protect the lender.
With interest rates at 0.1%, I don't get where supercar rates are so high.
I appreciate some cars have high depreciation but not all cars suffer from this, and can be managed through high deposits to reduce risk on the lender.
I can comfortable afford £1k p/m on a car but I refuse to pay such a high interest rates. I'd rather save/invest hard for a few years and then pay for the car in cash.
Am I missing something?
How come?
The loan is secured against the car, and providing there is a large deposit (25%+), there is some equity in the car to protect the lender.
With interest rates at 0.1%, I don't get where supercar rates are so high.
I appreciate some cars have high depreciation but not all cars suffer from this, and can be managed through high deposits to reduce risk on the lender.
I can comfortable afford £1k p/m on a car but I refuse to pay such a high interest rates. I'd rather save/invest hard for a few years and then pay for the car in cash.
Am I missing something?
BenB91 said:
Am I missing something?
Maybe two points.(1) As you say in your post, most high net worth buyers will have access to multiple sources of cheap liquidity, whether that's mortgages, lending against stock portfolios etc etc. This restricts the pool of people that want finance against the car to the "less prime" segment of the buyer base, so the risk is priced accordingly.
(2) Residual values are probably more volatile & linked to the economic cycle for supercars than for regular vehicles? Creates an unpleasant "wrong way risk" where the probability of default is correlated to the loss severity.
The funds may be secured against the car but a car is a mobile object unlike a house.
There is a significant risk to the lender that the borrower disappears and the car ends up in a container on it's way to somewhere.
A mortgage company can come and take a house back.
Unsecured loans are limited to circa £35k.
So, if people want a lender to secure £150k, for example, against a car that can easily disappear, then you have to accept that that risk is reflected in the rate.........
There is a significant risk to the lender that the borrower disappears and the car ends up in a container on it's way to somewhere.
A mortgage company can come and take a house back.
Unsecured loans are limited to circa £35k.
So, if people want a lender to secure £150k, for example, against a car that can easily disappear, then you have to accept that that risk is reflected in the rate.........
mikees said:
Because they can. All car finance seems silly atm, all rates are higher than personal loans. Plus100k unsecured loans are harder to get aren’t they?
What’s the car?
I dunno. In March I took delivery of a new car with 2.2% APR and a 1k manufacturers deposit contribution which more than covers all the finance costs, effectively paying me to take the finance rather than just pay cash. Not a supercar but the world has gone mad and the vehicle is currently worth more than I paid for it What’s the car?
Perhaps people more often default on loans for supercars and therefore the higher rate reflects the additional risk taken by the lender. Find that hard to believe thought.
Ari said:
Numpty with honours said:
If you write the car off and fail a breath test, almost all insurers will not pay out. So the lender has an unsecured debt on its hands
Are you absolutely sure? I don't know, so I'm not saying you are wrong, but that seems very unlikely. krisdelta said:
Ari said:
Numpty with honours said:
If you write the car off and fail a breath test, almost all insurers will not pay out. So the lender has an unsecured debt on its hands
Are you absolutely sure? I don't know, so I'm not saying you are wrong, but that seems very unlikely. Ari said:
Numpty with honours said:
If you write the car off and fail a breath test, almost all insurers will not pay out. So the lender has an unsecured debt on its hands
Are you absolutely sure? I don't know, so I'm not saying you are wrong, but that seems very unlikely. There wouldn't be an issue with them reducing your cover to 3rd party if you're found to be over the limit, but it would have to be a condition of the insurance.
Ari said:
Are you absolutely sure? I don't know, so I'm not saying you are wrong, but that seems very unlikely.
Admiral, make it patently clear and give a warning when you take on their insurance cover that if you are involved in an accident and found to be over the limit then you only have 3rd party coverNumpty with honours said:
If you write the car off and fail a breath test, almost all insurers will not pay out. So the lender has an unsecured debt on its hands
Its the minority of insurers that won't pay out following a breath test....its usually an applied endorsement to drivers who have previousNumpty with honours said:
Ari said:
Are you absolutely sure? I don't know, so I'm not saying you are wrong, but that seems very unlikely.
Admiral, make it patently clear and give a warning when you take on their insurance cover that if you are involved in an accident and found to be over the limit then you only have 3rd party coverThanks all. All good points to consider.
The car is likely to be a Ferrari of some sort. Maybe a 360 manual, F430 F1, 458 or a FF.
I'm saving hard as I refuse to pay a high rate of interest.
You can get unsecured personal loans upto £50k, so may use this to bridge the gap if the rates are reasonable.
It's a mad time to buy a supercar. Will wait 12 months for prices to hopefully drop down.
The car is likely to be a Ferrari of some sort. Maybe a 360 manual, F430 F1, 458 or a FF.
I'm saving hard as I refuse to pay a high rate of interest.
You can get unsecured personal loans upto £50k, so may use this to bridge the gap if the rates are reasonable.
It's a mad time to buy a supercar. Will wait 12 months for prices to hopefully drop down.
The lender also owns the car and therefore if your looking for a 360 or similar you've got the risk of the cars engine seizing and you then not wanting to make the payments.
Depending on lender we also now have the one size fits all on regulated agreements were the lender has to offer the same rate to everyone. Its meant to demonstrate treating customers fairly but ends up with most customers paying more so we don't discriminate on those with a poor payment history. Taking away risk and reward seems a daft idea
Depending on lender we also now have the one size fits all on regulated agreements were the lender has to offer the same rate to everyone. Its meant to demonstrate treating customers fairly but ends up with most customers paying more so we don't discriminate on those with a poor payment history. Taking away risk and reward seems a daft idea
Sarnie said:
Unsecured loans are limited to circa £35k.
.
This isn't entirely accurate. .
Unsecured loans for more than that are available from high street lenders right now but do depend on your circumstances. For instance, the upper limit on a Barclayloan is £50k. Other more niche lenders may do more.
Granted that isn't £150k but it is a decent chunk towards the car the OP is considering.
ETA just noticed OP said something similar 😀
S
Edited by skeeterm5 on Wednesday 21st July 15:40
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