Buying vs financing, (probably) thread MMDLXVII
Discussion
I'm looking for a large, petrol engined estate car - something comfortable and (when you want it to be) fast.
I have my eye on a BMW 550i Touring, with the 4.8 litre V8. It's ~£10,000, and on 68,500 miles (2007).
The alternative is, basically anything new - that uses up to all of that 10k as a deposit, and (say) £600ish/month.
What does the PH hive-mind recommend? The BMW? Something else?
I have my eye on a BMW 550i Touring, with the 4.8 litre V8. It's ~£10,000, and on 68,500 miles (2007).
The alternative is, basically anything new - that uses up to all of that 10k as a deposit, and (say) £600ish/month.
What does the PH hive-mind recommend? The BMW? Something else?
that's one extreme to the other!
In the past I've always cash bought second hand cars still in warranty and never thought twice about finance. However, I'm just about to lease a new daily and wish I'd done this before. For around £5-6k over two years I can have a brand new (decent) car with only a small deposit and monthly payment and know it'll only cost me around £3k per year all in. You have to be flexible on the car and buy when deals are on, e.g the latest round of Audi A4's are far cheaper to lease than the equivalent Kia currently!
If you do finance something you need to work out how much you want to spend and what you want to achieve. You can almost make a PCP on a second hand car like a lease on a new one if you play your cards right. i.e you want a car that is £25k and the guaranteed future value after 2 years is £18k. If you PCP it you're funding the £7k depreciation over the term + interest. Higher deposit means less to finance so less interest paid. You know you're losing £7k + interest worst case, but there is the potential that after 2 years it's worth more than that or you can sell it privately for more so your total cost is slightly less.
If you bought the car for £25k cash and then traded it in 2 years later it would still achieve roughly the same trade in so you've lost around the same amount of money over the term (less interest), but you've had your £25k tied up in the car the whole time. For this sort of model shorter agreements are better as they minimise the interest but increase the monthly payments. So I suppose by doing it this way you could turn your £10k into 2 years of running a £25-30k car - you just wouldn't own it.
Long winded but I hope that helps?
In the past I've always cash bought second hand cars still in warranty and never thought twice about finance. However, I'm just about to lease a new daily and wish I'd done this before. For around £5-6k over two years I can have a brand new (decent) car with only a small deposit and monthly payment and know it'll only cost me around £3k per year all in. You have to be flexible on the car and buy when deals are on, e.g the latest round of Audi A4's are far cheaper to lease than the equivalent Kia currently!
If you do finance something you need to work out how much you want to spend and what you want to achieve. You can almost make a PCP on a second hand car like a lease on a new one if you play your cards right. i.e you want a car that is £25k and the guaranteed future value after 2 years is £18k. If you PCP it you're funding the £7k depreciation over the term + interest. Higher deposit means less to finance so less interest paid. You know you're losing £7k + interest worst case, but there is the potential that after 2 years it's worth more than that or you can sell it privately for more so your total cost is slightly less.
If you bought the car for £25k cash and then traded it in 2 years later it would still achieve roughly the same trade in so you've lost around the same amount of money over the term (less interest), but you've had your £25k tied up in the car the whole time. For this sort of model shorter agreements are better as they minimise the interest but increase the monthly payments. So I suppose by doing it this way you could turn your £10k into 2 years of running a £25-30k car - you just wouldn't own it.
Long winded but I hope that helps?
Thanks - I find it hard to get away from the "you own nothing" aspect at the end of leasing, much as I know that you are hopefully paying slightly less than you lose in depreciation.
I wonder whether my 10k+36*600 would get me into a V8 Panamera, and if it did whether it would be a dog?
I wonder whether my 10k+36*600 would get me into a V8 Panamera, and if it did whether it would be a dog?
Dammit said:
Thanks - I find it hard to get away from the "you own nothing" aspect at the end of leasing, much as I know that you are hopefully paying slightly less than you lose in depreciation.
I wonder whether my 10k+36*600 would get me into a V8 Panamera, and if it did whether it would be a dog?
You own nothing either way even if you buy a car !I wonder whether my 10k+36*600 would get me into a V8 Panamera, and if it did whether it would be a dog?
Imagine that you buy a car for 20k and 2 years later it is worth 10k.
Imagine that hypothetically you leased a car at the very same time to, that also cost you 10k over 2 years.
At the end of the 2 years if you sold your physical car you would have lost 10k. Your lease also cost you 10k. There is no bloody difference to your bank account.
Depends how long you want your £10k to last - check out the lease deals thread as you can currently have an S4 for around £10k for 2 years.
As said above, unless you want to keep the car for ages the owning it part doesn't really matter, you're always going to lose money between buying and selling. Just with finance you're not sinking the whole purchase price into the car, just paying off the depreciation loss in instalments. A very good friend of mine bought a 2011 120D coupe from BMW in 2015 and traded it back in to the same dealer for another used beemer 15 months later. He lost £6k on it in that time - he could have leased a number of arguably better brand new cars for less and kept the original purchase price in the bank!
Having said all that I still buy my main sports cars with cash. They haven't tended to depreciate too badly and due to the high purchase price any finance is expensive. Also allows me to buy privately where possible, as sometimes this is where the best cars are (my Aston was bought privately)
As said above, unless you want to keep the car for ages the owning it part doesn't really matter, you're always going to lose money between buying and selling. Just with finance you're not sinking the whole purchase price into the car, just paying off the depreciation loss in instalments. A very good friend of mine bought a 2011 120D coupe from BMW in 2015 and traded it back in to the same dealer for another used beemer 15 months later. He lost £6k on it in that time - he could have leased a number of arguably better brand new cars for less and kept the original purchase price in the bank!
Having said all that I still buy my main sports cars with cash. They haven't tended to depreciate too badly and due to the high purchase price any finance is expensive. Also allows me to buy privately where possible, as sometimes this is where the best cars are (my Aston was bought privately)
I've been thinking about a halfway house option: pay £10K down, the rest on a 0% card for up to 30 months - Sainsbury's bank have 0% on purchases for that period at the moment - and pay off the card like a loan. This would still not use capital, I'd own the car at the end of the time and I can sell or pay off the debt any time I like. I can also extend the "term" if circumstances change for the worse by bouncing to another low rate deal or personal loan if I absolutely have to.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff