To Buy or to Finance? That's the question..
Discussion
Hi Guys,
So I've just recently sold my car.
I've found a nice Audi at £20,000. I tend to change my cars every 2 years or so, but like to have the option to get rid of my car at any time.
This is the finance deal on the Audi (rough figures):
PCP
£6,000 deposit
£200 a month
48 Month Contract
Balloon payment £8000 at the end (I think that's what the dealer said)
I asked what the APR % is and he gave me 2 figures... 4% 6%. One is flat rate, and not sure what the other is.
I know for a fact I will not be keeping the car for the full 4 years so I won't even get to the balloon payment.
So I'm unsure whether to get it financed for 2 years, then sell the car. Or just buy it out right in cash.
Please share your opinions, cheers.
So I've just recently sold my car.
I've found a nice Audi at £20,000. I tend to change my cars every 2 years or so, but like to have the option to get rid of my car at any time.
This is the finance deal on the Audi (rough figures):
PCP
£6,000 deposit
£200 a month
48 Month Contract
Balloon payment £8000 at the end (I think that's what the dealer said)
I asked what the APR % is and he gave me 2 figures... 4% 6%. One is flat rate, and not sure what the other is.
I know for a fact I will not be keeping the car for the full 4 years so I won't even get to the balloon payment.
So I'm unsure whether to get it financed for 2 years, then sell the car. Or just buy it out right in cash.
Please share your opinions, cheers.
Is the total finance charge you will pay for the finance over the course of the term greater or lower than the interest you will receive on the cash you would use to pay for the car in full?
If the charge is greater, pay cash for the car.
If the charge is lower, finance the car. And please tell us where you are getting the awesome interest on your savings
If the charge is greater, pay cash for the car.
If the charge is lower, finance the car. And please tell us where you are getting the awesome interest on your savings
Fox- said:
Is the total finance charge you will pay for the finance over the course of the term greater or lower than the interest you will receive on the cash you would use to pay for the car in full?
If the charge is greater, pay cash for the car.
If the charge is lower, finance the car. And please tell us where you are getting the awesome interest on your savings
Ok I'm confused.If the charge is greater, pay cash for the car.
If the charge is lower, finance the car. And please tell us where you are getting the awesome interest on your savings
Well if you mean the total amount I would pay on finance would be around £23,600 as opposed to paying £20,000 straight full in cash. But as I said I doubt I would be keeping the car for the full length of the 48 month contact, so I would get an early settlement figure.
You will pay most of that interest in the first year or two anyway, so you're not saving by paying the deal off early. In fact it's the most uneconomical way of doing the deal.
6% is the APR and it what is a comparable benchmark to other loans or finance available. 6% on a PCP is a good rate to be fair. Normally Audi sit at around 12% on used vehicles and 7% on new.
Having said that, 4% on a personal loan is achievable at the moment if you have a good credit rating etc.
Ignore the flat rate, that's what car dealers use to confuse and make deals sound better than they are.
6% is the APR and it what is a comparable benchmark to other loans or finance available. 6% on a PCP is a good rate to be fair. Normally Audi sit at around 12% on used vehicles and 7% on new.
Having said that, 4% on a personal loan is achievable at the moment if you have a good credit rating etc.
Ignore the flat rate, that's what car dealers use to confuse and make deals sound better than they are.
Ok fair enough.
So you guys think I shouldn't go through car finance at all because of the higher APR rates, and if I did want to finance the car I would go through a personal loan to finance the remaining £14,000 seeing as the rates are much lower than car finance company rates.
Makes more sense now, I think I'll go ahead and pay it full in cash
So you guys think I shouldn't go through car finance at all because of the higher APR rates, and if I did want to finance the car I would go through a personal loan to finance the remaining £14,000 seeing as the rates are much lower than car finance company rates.
Makes more sense now, I think I'll go ahead and pay it full in cash
Just buy the car using the cheapest funding method. Remember, cash has a cost of capital associated with it - you must use the 'lost interest' on the cash over the term as the cost of capital for using the cash.
So lets say for example that you have £20k in a Santander 123 account @ 1.8% after tax (It's 3% before tax), you have the option of a personal loan @ 4% APR for £15k with the rest cash or you have the option to dealer finance the entire thing at 8% APR.
The cheapest option is to use your cash as it has the lowest cost.
So lets say for example that you have £20k in a Santander 123 account @ 1.8% after tax (It's 3% before tax), you have the option of a personal loan @ 4% APR for £15k with the rest cash or you have the option to dealer finance the entire thing at 8% APR.
The cheapest option is to use your cash as it has the lowest cost.
Fox- said:
Just buy the car using the cheapest funding method. Remember, cash has a cost of capital associated with it - you must use the 'lost interest' on the cash over the term as the cost of capital for using the cash.
So lets say for example that you have £20k in a Santander 123 account @ 1.8% after tax (It's 3% before tax), you have the option of a personal loan @ 4% APR for £15k with the rest cash or you have the option to dealer finance the entire thing at 8% APR.
The cheapest option is to use your cash as it has the lowest cost.
I think this is a bit beyond OPSo lets say for example that you have £20k in a Santander 123 account @ 1.8% after tax (It's 3% before tax), you have the option of a personal loan @ 4% APR for £15k with the rest cash or you have the option to dealer finance the entire thing at 8% APR.
The cheapest option is to use your cash as it has the lowest cost.
If there's nothing else you would want the liquid cash for then buy it cash. It'll be the cheapest way to fund it.
If you want a new kitchen, bathroom, summerhouse with hot tub, a private pilot's license or whatever else then consider financing it if the finance costs are acceptable to you.
Only you can decide. There's an obvious answer and a more comprehensive answer.
Will you re-earn the money fast enough or have enough additional liquid cash that you aren't skint after buying it? If so then great. If not you'll have the cheapest ownership model but at the expense of the rest of your quality of life.
Is the finance cost worth keeping your money in the bank or not?
If you want a new kitchen, bathroom, summerhouse with hot tub, a private pilot's license or whatever else then consider financing it if the finance costs are acceptable to you.
Only you can decide. There's an obvious answer and a more comprehensive answer.
Will you re-earn the money fast enough or have enough additional liquid cash that you aren't skint after buying it? If so then great. If not you'll have the cheapest ownership model but at the expense of the rest of your quality of life.
Is the finance cost worth keeping your money in the bank or not?
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