If you buy a car on finance you can not afford it?
Discussion
InitialDave said:
Shakermaker said:
That won't include the "optional final payment" though.
Well, so what?If they buy a £25k car that's worth £15k in a couple of years, they're spending £5k a year for two years no matter how you cut it.
They can do so by whichever methodology they like. If they can find one that works out at only spending £4k a year or something, seems stupid not to.
What it doesn't highlight is that after say 8 years of 'spending' 5K a year in one instance, you've only in fact spent 5 years ie £25K and saved £15K and have an 8 year older but still useable car, in the other instance you will have spent £40K saved nothing and are faced with the start of another finance deal, your only benefit being that you've always been in a newer car over the 8 years.
Not a problem for some but the initial comparison of the 2-3 year flip on finance compare to ownership focuses on finances strong points, it's peak efficiency as it were, during the highest chunk of depreciation?
I just view it as depreciation on drip, you're just looking at losing as little money as possible over a window of time, be it by financing with low APRs and dealer incentives or getting a cracking cash deal, ultimately your loss on finance is fixed and accountable and your loss on cash purchase is less defined but buy carefully and you shouldn't be miles out in an estimate.
Can many with 30k plus cars afford to just drop 30k on a car, probably not, so leasing is the best bet, even if they had the 30k, they'd still lose c50% of it even if the could afford to 'buy it' so as long as the finance costs about the same or less than the c50% depreciation, then why not have it ?
I have used most mainstream methods to acquire cars and generally anything over 25k makes more sense to PCP / Lease than it does to own.
If you truly can 'afford' the car then truth is if the sh** hits the fan you should be able to extricate yourself from the deal anyhow.
Can many with 30k plus cars afford to just drop 30k on a car, probably not, so leasing is the best bet, even if they had the 30k, they'd still lose c50% of it even if the could afford to 'buy it' so as long as the finance costs about the same or less than the c50% depreciation, then why not have it ?
I have used most mainstream methods to acquire cars and generally anything over 25k makes more sense to PCP / Lease than it does to own.
If you truly can 'afford' the car then truth is if the sh** hits the fan you should be able to extricate yourself from the deal anyhow.
If you spend £30k on a car that will lose 2/3 of its value in 4 years and which you’re going to replace at that point...
Then guess what?
You need to be saving that £20k lost over the next 4 years. That’s not unlike a finance agreement, no?
Bottom line - if you can afford to make the arrangements to pay for the car then you can afford it, regardless of how you raise that capital.
A much more interesting question to ask might be “Do people buying a new car weigh up the opportunity cost effectively”
Then guess what?
You need to be saving that £20k lost over the next 4 years. That’s not unlike a finance agreement, no?
Bottom line - if you can afford to make the arrangements to pay for the car then you can afford it, regardless of how you raise that capital.
A much more interesting question to ask might be “Do people buying a new car weigh up the opportunity cost effectively”
Dr Jekyll said:
Alex_225 said:
That said, if you had £30k aside would you drop the lot on a car or would you finance it and pay that off until you own the car?
Neither, I'd drop maybe 10-15k on a car.If I were to spend £30k on any car, it would be something I'd be aiming to keep. My CLS63 cost me enough as it was a mint, low mileage example. Potentially it's worth* virtually what I paid for it but I bought it to keep so I'm not overly worried.
- I say worth, it's worth what someone will pay for it but compared to other examples I've seen.
I thought it had been a while since we had this thread. Good to see that it's back again, it's like an old friend you've not seen for a while.
You know, the one who turns up, drinks all your beer, tells you exactly the same stories he told you the last dozen times, then goes away for a while before coming back a few weeks later and drunkenly telling you the same stories again.
Always a pleasure.
You know, the one who turns up, drinks all your beer, tells you exactly the same stories he told you the last dozen times, then goes away for a while before coming back a few weeks later and drunkenly telling you the same stories again.
Always a pleasure.
ashleyman said:
Let's say you want to purchase a £45,000 car and you have the cash in the bank ready to buy. Why would someone choose to finance that purchase instead of just outright buying the car?
With finance you'd get things x amount of % off list price, dealer/manufacturer contributions etc - you'd probably get very little incentives as a cash buyer? Dealerships now sell finance with cars attached to them. Scootersp said:
This is the catch (if there is one at all), in that they get you thinking in 2-4 year cycles where what you say if definitely true in fact doing finance you can come out on top over buying/selling for cash.
What it doesn't highlight is that after say 8 years of 'spending' 5K a year in one instance, you've only in fact spent 5 years ie £25K and saved £15K and have an 8 year older but still useable car, in the other instance you will have spent £40K saved nothing and are faced with the start of another finance deal, your only benefit being that you've always been in a newer car over the 8 years.
Not a problem for some but the initial comparison of the 2-3 year flip on finance compare to ownership focuses on finances strong points, it's peak efficiency as it were, during the highest chunk of depreciation?
Then make your financial decisions based on the timeframes you prefer to work on for ownership.What it doesn't highlight is that after say 8 years of 'spending' 5K a year in one instance, you've only in fact spent 5 years ie £25K and saved £15K and have an 8 year older but still useable car, in the other instance you will have spent £40K saved nothing and are faced with the start of another finance deal, your only benefit being that you've always been in a newer car over the 8 years.
Not a problem for some but the initial comparison of the 2-3 year flip on finance compare to ownership focuses on finances strong points, it's peak efficiency as it were, during the highest chunk of depreciation?
Choosing a certain car on finance for a couple of years doesn't mean you're locked into any kind of repeating cycle unless you choose to be.
ashleyman said:
Let's say you want to purchase a £45,000 car and you have the cash in the bank ready to buy. Why would someone choose to finance that purchase instead of just outright buying the car?
The desire to protect capital. If you lease it you know exactly what it will cost and don't give a damn about future value and if you PCP it you have a contractual agreement as to what the value will be after X number of years.Most cars are pretty predictable in terms of depreciation but there is always that 1 in a million chance that you might end up with something that tanks in value.
It also leaves the chunk of cash readily available for actual investments or perhaps paying a boatman to sail you and your favourite child to safety when WW3 kicks off.
ashleyman said:
Let's say you want to purchase a £45,000 car and you have the cash in the bank ready to buy. Why would someone choose to finance that purchase instead of just outright buying the car?
Cause if you lease/finance you can make the payments from your wage and use the 45k more wisely aka not on a depreciating asset..At the end of the day its all about whats going to hold value, if you can get a cheap deal on a car that you know will still be the same price in 2/3 years then buy it. If not all youre doing with a finance is spreading your depreciation over monthly payments
Gibonz said:
Financing a car is no different than financing a house, via a mortgage.
It's a means to an end...
Except one is a good financial decision as (usually) the house goes up in value.It's a means to an end...
The "rule of thumb" that is often quoted on here appears to be to "rent depreciating assets / buy appreciating ones." But where does this even come from ? It's not as if the lessor is going to be taking a loss on the rental.
99% of new cars hemorrhage cash particularly in the first few years, getting trapped in a perceptual cycle of paying expensive finance over the most expensive ownership period is never going to be a smart financial move. But we all know that already, right ?
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