How to finance a car purchase

[Zstar]

Hi all,

I’m returning to the uk after a 12 year overseas stint and need to get 2 cars - one for the school run and a weekend car for load lugging and holidays.

My budget is 35-45k, and I’m looking at a used 2017 530d touring and a second hand mini for my wife/son.

My simple brain says just pay cash, but am I missing out on other ways to get newer cars? For example, I’d really like the mini electric as the running costs will be minuscule vs an ICE.

What do those of you who could buy cash but don’t, do with the money that you ‘save’?

[CG2020UK]

Cheapest is always cash especially for the BMW.

Next best is a low interest loan sub 5% for the BMW usually best through a bank. Handy if you want to keep the cash for whatever reason.

I'd have a look at leasing the electric mini they are cheap as chips. Most EVs seem to make more sense to lease. Leaseloco is where I'd look.

As for what to do with the cash it's impossible to answer as so many varabilities. I imagine it will be pay off mortage, stocks and shares, buy to let or crypto coming along.

Edited by CG2020UK on Tuesday 14th December 21:32

[Zstar]

Thanks for the reply. I am also guessing cash is best for the BMW. I don’t change cars that often, but also hate being locked into finance arrangements.

My company offers an EV lease scheme and I will be a higher rate tax payer so will look into that if it makes more sense.

I also don’t see a risk free way to use the cash I’d save, and I’m very fortunate to be in a position where I already have an investment property and am doing ok on the mortgage front.

This is PH after all, and life is too short not to wast money on non car related things…

[anonymous-user]

Heres another way to think of this, if you put the money into the car, you lose access to the money quickly. You could finance, PCP and you will always have access to the money if you need it. Doing something else with it is up to you, whatever that might be.

Not my choice of car for the money, but best of luck

[nunpuncher]

I wouldn't be buying a c£30k diesel with my own money these days. Not sure how long "long term" ownership is to you but looking at the price spread of 2015 to 2018 models there's the potential for 50% of that money to evaporate in depreciation in just a few years. I can only see that getting worse as diesel falls further out of favour.

[anonymous-user]

nunpuncher said:

I wouldn't be buying a c£30k diesel with my own money these days. Not sure how long "long term" ownership is to you but looking at the price spread of 2015 to 2018 models there's the potential for 50% of that money to evaporate in depreciation in just a few years. I can only see that getting worse as diesel falls further out of favour.

I agree with your sentiment.

[nunpuncher]

Zstar said:

My simple brain says just pay cash, but am I missing out on other ways to get newer cars? For example, I’d really like the mini electric as the running costs will be minuscule vs an ICE.

I'd also question this way of thinking.

How many miles will this school run car do a year? Mini EV on 5k per year is roughly £280pm. A 3 year old ICE Cooper doesn't have horrendous running cost or depreciation. The running costs calculations start to favour the EV once the mileage climbs but it's only marginal as the lease costs increase with the mileage. You also have to factor in the potential changes to energy costs which have been wild over the last 12 months compared to petrol.

[Gummi]

nunpuncher said:

I'd also question this way of thinking.

How many miles will this school run car do a year? Mini EV on 5k per year is roughly £280pm. A 3 year old ICE Cooper doesn't have horrendous running cost or depreciation. The running costs calculations start to favour the EV once the mileage climbs but it's only marginal as the lease costs increase with the mileage. You also have to factor in the potential changes to energy costs which have been wild over the last 12 months compared to petrol.

Fuel prices this year have been just as wild as electricity!

OP - I’d second the idea of an EV and larger car. The Mini isn’t the best execution as it’s not on a dedicated BEV platform. The Hyundai Kona Electric isn’t a dedicated BEV platform either but performs well, with a strong real world range for something with a medium sized battery. Some ok leases around too and some from stock.

The big car, I agree with the others, avoid an expensive diesel paying cash/loan/other funding. If it’s for weekends and holidays petrol is a better option. The fuel costs will be offset by the EV. Maybe a 2017 540i touring or E43 AMG. Going a little older ca. 2015 E63 AMG 5.5, S6 Avant. Leggy RS6 also an option but maybe a bit risky.

[ZX10R NIN]

Take a look at the 208e they're a cracking EV you should be able to use it as a tax break:

https://www.autotrader.co.uk/classified/advert/new...

Diesels will be around for a long time yet I'd be going for the E400d as long as your usage suits it.

https://www.autotrader.co.uk/car-details/202112100...

https://www.autotrader.co.uk/car-details/202112130...

[Ben Lowden]

Zstar said:

What do those of you who could buy cash but don’t, do with the money that you ‘save’?

We have a whole Finance forum for that https://www.pistonheads.com/gassing/forum.asp?h=0&...

The PH classifieds will have changed a tad since you were here last – plenty of 530ds for you to choose from https://www.pistonheads.com/buy/bmw/g30-5-series-p...

[Shrimpvende]

Zstar said:

Hi all,

I’m returning to the uk after a 12 year overseas stint and need to get 2 cars - one for the school run and a weekend car for load lugging and holidays.

My budget is 35-45k, and I’m looking at a used 2017 530d touring and a second hand mini for my wife/son.

My simple brain says just pay cash, but am I missing out on other ways to get newer cars? For example, I’d really like the mini electric as the running costs will be minuscule vs an ICE.

What do those of you who could buy cash but don’t, do with the money that you ‘save’?

I lease. Well, for daily drivers anyway. No interest charge, and if you get a good lease deal the total cost of the lease is normally less than the depreciation the car would suffer over the period, from purchase price (including discount) to trade in price in 2 or 3 years.

I used to pay cash for nearly new cars, but instead I now stick it in a portfolio of all sorts, from managed stocks and shares ISA's to my own chosen portfolio of funds and shares via various platforms.

Real world example, and why I'll never, ever, ever subscribe to 'if you can't pay cash you can't afford it, cash is always cheaper' etc arguments. My last daily driver was a brand new Range Rover Sport, £80k list price. Leased on 3+35 term for around £700 a month. Total cost of lease approx £26k. This also includes all registration fees and road tax, just add insurance and fuel.

The invested cash has made roughly 20% average return across the board per anum for the last 2 years. All my investments are accumulation type so gains are re-invested. Unless the markets completely crash before the end of the lease (admittedly could happen, although unlikely) it's effectively been a free car. If I paid the £80k cash for it and traded it 3 years later for say £45k (pre covid price madness this would be a reasonable figure) then I'd be £35k out of pocket, plus another £2.5k for first registration fee and 2 years of VED.

The only caveat with leasing is if you want something special and/or something with a big engine, it's generally expensive. If you're happy with a fairly standard car, especially something VAG group, it's a great way of having a brand new car every few years that you can treat as an appliance, letting your invested cash make you a bigger return than the lease is costing without sweating that you're barely breaking even on the 9.9% APR PCP 'deal' that BMW have given you on a used car.

[RoVoFob]

Shrimpvende said:

I lease. No interest charge…

Why is this relevant?

Yes, you’re not paying interest - as you’re not borrowing money - but you’re still paying a company to access the car, so why would rental payments be any better or worse than paying interest?

[Shrimpvende]

RoVoFob said:

Why is this relevant?

Yes, you’re not paying interest - as you’re not borrowing money - but you’re still paying a company to access the car, so why would rental payments be any better or worse than paying interest?

Because the total cost of the 2 or 3 years is generally much less, and and interest is one of the reasons why. Case in point, to continue with my real world example, my local Land Rover dealer would have PCP'd me the exact same car for £1089 per month with the same £2,100 deposit as the lease deal I took. A chunk of that was the 6.9% APR cost of the capital.

Doesn't matter what the payment is called, or whether there's interest or something else entirely, generally one is materially cheaper than the other. (Again, caveat that some cars are much cheaper to lease, some more expensive. Depends where the deals are at the time). The objective here is surely to achieve the lowest monthly payment for access to the vehicle, however that's structured.

[RoVoFob]

Shrimpvende said:

Because the total cost of the 2 or 3 years is generally much less, and and interest is one of the reasons why. Case in point, to continue with my real world example, my local Land Rover dealer would have PCP'd me the exact same car for £1089 per month with the same £2,100 deposit as the lease deal I took. A chunk of that was the 6.9% APR cost of the capital.

Doesn't matter what the payment is called, or whether there's interest or something else entirely, generally one is materially cheaper than the other. (Again, caveat that some cars are much cheaper to lease, some more expensive. Depends where the deals are at the time). The objective here is surely to achieve the lowest monthly payment for access to the vehicle, however that's structured.

If I understand you, you’re comparing manufacturer finance deals and broker lease deals. That’s completely misleading.

Brokers may buy in bulk at way below list price - and therefore be able to pass on savings - while manufacturers will sell at list price. So the higher initial cost of the car could make up a significant proportion of the difference. That has nothing to do with interest.

I’m sure PCP monthly figures on cars sold by brokers will be a lot less than manufacturer figures, so surely those are the ones to compare to broker lease deals to see which are the cheapest/best value?

[Zstar]

By way of update, I’ve acquired a 2015 CLS 3.0 AMG Shooting Brake as my weekend car - this I will pay cash for and hopefully keep it for a few years for long weekends and general torque related joining.

I am still deciding if it’s better to buy something like an older Mini for the wife with cash, and live with the higher running costs, or if it’s cheaper to get a new smaller lease car for her to use during the week if she can’t get in with the Merc.