Cash vs Finance
Discussion
Hi all,
Just joined this forum a few weeks ago and so far very impressed with the set up (and some of the kit that you all have!).
Have just ordered a new Cayenne this week as the family wheels (I can hear you purists groan, but you try putting wife, baby and all the gear in a Boxster!) and now looking to treat self to a 1-2 year old 997. Was going to put cash down on them both, but thinking about it, that's a lot of dough that could be used elsewhere. That's where you lot come in...
How have you all done it? I like the idea of putting the cash down and then saving the repayments each month so that when it comes to trade in I've saved the depreciation amount. But then again, maybe a bit of cheap financing would save me my hard earned cash?
Any advice out there (or budding accountants?) on what's best over the long term?
Thanks
Just joined this forum a few weeks ago and so far very impressed with the set up (and some of the kit that you all have!).
Have just ordered a new Cayenne this week as the family wheels (I can hear you purists groan, but you try putting wife, baby and all the gear in a Boxster!) and now looking to treat self to a 1-2 year old 997. Was going to put cash down on them both, but thinking about it, that's a lot of dough that could be used elsewhere. That's where you lot come in...
How have you all done it? I like the idea of putting the cash down and then saving the repayments each month so that when it comes to trade in I've saved the depreciation amount. But then again, maybe a bit of cheap financing would save me my hard earned cash?
Any advice out there (or budding accountants?) on what's best over the long term?
Thanks
Key points to note:
1) Regardless of how you finance the car, you wwill end up funding the same amount of depreciation!
2) Typically, finance rates are higher than interest rates so paying cash would be cheaper over the lifetime of ownership, particularly when you look at the net interest rate (after tax)
3) By using finance, you can then retain the cash to be used elsewhere which could potentially achieve a higher return than the cost of finance, but not without additional risk - e.g. investing in property would be expected to offer a higher long-term return, but over a short (3-year) could easily produce a negative return
4) Owning the car through a business may mean the above does not necessarily apply, if the depreciation and finance costs can be used to offset profits etc
Regards
Sidicks
1) Regardless of how you finance the car, you wwill end up funding the same amount of depreciation!
2) Typically, finance rates are higher than interest rates so paying cash would be cheaper over the lifetime of ownership, particularly when you look at the net interest rate (after tax)
3) By using finance, you can then retain the cash to be used elsewhere which could potentially achieve a higher return than the cost of finance, but not without additional risk - e.g. investing in property would be expected to offer a higher long-term return, but over a short (3-year) could easily produce a negative return
4) Owning the car through a business may mean the above does not necessarily apply, if the depreciation and finance costs can be used to offset profits etc
Regards
Sidicks
fbrs said:
johnv said:
...cheap financing...
the only cheap financing is against property because mortgage banks think you are too stupid or lazy to remortgage after the discounted period. car finance rates are a jokeIt’s difficult; I was in the same position a few months ago. Should I purchase my 996 Turbo for cash or finance it, as I was also looking to invest in a new business at the same time. In the end a went with the cash purchase, due to a couple of reasons 1) depreciation and 2)interest charges on amount borrowed, these factors would be losing me money. At least with the cash option, I am only losing the depreciation value.
Having said this if I was already in business and the business was in a position to afford a lease plan type of finance, then I would consider this option and hang on to the cash.
I think in the end its going to come down to your personnel circumstance and needs.
good luck!
Having said this if I was already in business and the business was in a position to afford a lease plan type of finance, then I would consider this option and hang on to the cash.
I think in the end its going to come down to your personnel circumstance and needs.
good luck!
911wise said:
fbrs said:
johnv said:
...cheap financing...
the only cheap financing is against property because mortgage banks think you are too stupid or lazy to remortgage after the discounted period. car finance rates are a joke911wise said:
rates of around 6% apr advertised.
where? all the deals i see people asking about on PH are 8-9% when you PV the payments/balloon properlyrubystone said:
Yes, I financed a car at base rate a couple of years ago, put the money into ING Direct and even after paying tax on in the interest, still came out slightly ahead...
???base rate currently 5.5
you'd need to be earning 9.2% before tax to cover that today
I financed - basis being I have no kids etc so relatively cash rich on a monthly basis, and get annual bonuses of which a small sum goes into the car each year to pay off some of the capital, for no extra cost
Yes in the long run it will cost me more, but I couldnt afford to pay the whole thing in cash. I can however comfortably afford the repayments
Yes in the long run it will cost me more, but I couldnt afford to pay the whole thing in cash. I can however comfortably afford the repayments
Thorny said:
was offered 2.7% rate from OPC through BMW finance when I said I was paying cash, I can get 6% on a savings account so went with that option.
fair enough. so you clear 1% profit after tax and have cash on hand.care to share the payment/fee structure? why does everyone else get 8-9% offers?
fbrs said:
Thorny said:
was offered 2.7% rate from OPC through BMW finance when I said I was paying cash, I can get 6% on a savings account so went with that option.
fair enough. so you clear 1% profit after tax and have cash on hand.care to share the payment/fee structure? why does everyone else get 8-9% offers?
think it's around 1200 per month over two years, no balloon with 20k down.
I think the offer was so good as Dick Lovett BMW were short on their finance target for the month and were offering a low rate...
Edited by Thorny on Tuesday 26th June 10:28
jb12 said:
In the end a went with the cash purchase, due to a couple of reasons 1) depreciation and 2)interest charges on amount borrowed, these factors would be losing me money. At least with the cash option, I am only losing the depreciation value.
no.1 is irrelevant in the decision, you suffer depreciation whichever the optionno.2 is also incorrect, your cost is interest on amount borrowed LESS interest earned on wherever you put the cash you could have used, be that a high interest account or a business investment
fbrs said:
Thorny said:
was offered 2.7% rate from OPC through BMW finance when I said I was paying cash, I can get 6% on a savings account so went with that option.
fair enough. so you clear 1% profit after tax and have cash on hand.care to share the payment/fee structure? why does everyone else get 8-9% offers?
But more pertinently-why on earth are you buying a Cayanne. They are truely hideous and depreciate like a stone.
If you REALLy need a 4x4 (again cannot imagine why-but then again I drive a car that exceeds 180mph!!) have you not considered an ML or new X5?
Better still how about an RS4 or a 535d. They will all hold their money better than a Cayanne and have not been beaten with an ugly stick and best of all will not make your wife look like a WAG!
If you REALLy need a 4x4 (again cannot imagine why-but then again I drive a car that exceeds 180mph!!) have you not considered an ML or new X5?
Better still how about an RS4 or a 535d. They will all hold their money better than a Cayanne and have not been beaten with an ugly stick and best of all will not make your wife look like a WAG!
fbrs said:
911wise said:
rates of around 6% apr advertised.
where? all the deals i see people asking about on PH are 8-9% when you PV the payments/balloon properlyrubystone said:
Yes, I financed a car at base rate a couple of years ago, put the money into ING Direct and even after paying tax on in the interest, still came out slightly ahead...
???base rate currently 5.5
you'd need to be earning 9.2% before tax to cover that today
"they offered 2.75% p.a. over 18 months"
I don't get it. Why would any finance house offer these rates? Why wouldn't they just keep their money earning better interest somewhere - almost literally anywhere?
And most folks buying Porsches are going to be 40% tax payers so even these 6% savings rates only really return 3.6% after the Revenue has had a bite... If you can borrow below that, go for it!
I don't get it. Why would any finance house offer these rates? Why wouldn't they just keep their money earning better interest somewhere - almost literally anywhere?
And most folks buying Porsches are going to be 40% tax payers so even these 6% savings rates only really return 3.6% after the Revenue has had a bite... If you can borrow below that, go for it!
fbrs said:
Thorny said:
think it's around 1200 per month over two years, no balloon with 20k down.
borrowing how much? (if you dont mind divulging)Edited by Thorny on Tuesday 26th June 11:29
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