New 540C vs. Used 570GT
Discussion
But of course your assumptions are flawed. The finance guy KNOWS what his risk is. Even if he makes nil return he still has £1m in the bank.
What is the car worth after 5 years? The finance guy hands it back. It has cost him £250,000 in your example. He has had the pleasure of driving it at £50K per annum known cost. The buyer does not have £1m anymore. He has the trade in value of the car. Finger in the air as to what that might be worth. Let’s assume this is a very disciplined individual and he does fully save his entire £50K per annum. I’d say that’s unlikely as there are very few of those highly dedicated savers around. Assume he saves enough to get back £250K. The risk factor in all of this equation is how much is the trade in value of the car (a glaring emission in your calculations). If less than £750K the buyer loses if greater the buyer wins and that is assuming they have been disciplined enough to save the majority of the £50 per annum interest savings saving. That’s unlikely.
When residuals are high the outright buyer is better of in monetary terms. When residuals are on the floor the finance guy wins as he can walk away.
What is the car worth after 5 years? The finance guy hands it back. It has cost him £250,000 in your example. He has had the pleasure of driving it at £50K per annum known cost. The buyer does not have £1m anymore. He has the trade in value of the car. Finger in the air as to what that might be worth. Let’s assume this is a very disciplined individual and he does fully save his entire £50K per annum. I’d say that’s unlikely as there are very few of those highly dedicated savers around. Assume he saves enough to get back £250K. The risk factor in all of this equation is how much is the trade in value of the car (a glaring emission in your calculations). If less than £750K the buyer loses if greater the buyer wins and that is assuming they have been disciplined enough to save the majority of the £50 per annum interest savings saving. That’s unlikely.
When residuals are high the outright buyer is better of in monetary terms. When residuals are on the floor the finance guy wins as he can walk away.
av185 said:
FrankieBee said:
I love to sleep at night with no worry whatsoever what the value of my “investment” in the garage is worth or will be worth when the bottom crashes out of the super car market as it surely will.
Why would the bottom crash out of the supercar market?We are seeing softening of prices across the car market board for the often stated reasons of uncertainty etc etc but a crash is extremely unlikely.
IF, and it is a big IF prices tank, one thing is certain. They will recover as rapidly as they fell as they did during the financial crisis 2008 2009.
WDISMYL said:
FrankieBee said:
But of course your assumptions are flawed. The finance guy KNOWS what his risk is. Even if he makes nil return he still has £1m in the bank.
What is the car worth after 5 years? The finance guy hands it back. It has cost him £250,000 in your example. He has had the pleasure of driving it at £50K per annum known cost. The buyer does not have £1m anymore. He has the trade in value of the car. Finger in the air as to what that might be worth. Let’s assume this is a very disciplined individual and he does fully save his entire £50K per annum. I’d say that’s unlikely as there are very few of those highly dedicated savers around. Assume he saves enough to get back £250K. The risk factor in all of this equation is how much is the trade in value of the car (a glaring emission in your calculations). If less than £750K the buyer loses if greater the buyer wins and that is assuming they have been disciplined enough to save the majority of the £50 per annum interest savings saving. That’s unlikely.
When residuals are high the outright buyer is better of in monetary terms. When residuals are on the floor the finance guy wins as he can walk away.
You simply don’t understand the maths. I can’t be bothered to try to explain your lack of comprehension. It’s why 90% of the market is bought on finance!What is the car worth after 5 years? The finance guy hands it back. It has cost him £250,000 in your example. He has had the pleasure of driving it at £50K per annum known cost. The buyer does not have £1m anymore. He has the trade in value of the car. Finger in the air as to what that might be worth. Let’s assume this is a very disciplined individual and he does fully save his entire £50K per annum. I’d say that’s unlikely as there are very few of those highly dedicated savers around. Assume he saves enough to get back £250K. The risk factor in all of this equation is how much is the trade in value of the car (a glaring emission in your calculations). If less than £750K the buyer loses if greater the buyer wins and that is assuming they have been disciplined enough to save the majority of the £50 per annum interest savings saving. That’s unlikely.
When residuals are high the outright buyer is better of in monetary terms. When residuals are on the floor the finance guy wins as he can walk away.
Yes the finance buyer guy has a GFV but he’s paying £250,000 over 5 years for that insurance!!!
Plus in general the finance company usually gets the GFV conservatively right to encourage the “dupe” into rolling into another car.
Plus there is no guarantee his stock market portfolio doesn’t drop 50%. So he’s taking huge risk there.
Sorry but you really haven’t got a clue.
ks. I’m sorry but you simply don’t understand the risk calculation. Buying the car cash is taking the risk in what the future value of the car might be. One which I don’t have. It’s not rocket science. Guaranteed future value versus an unknown. I choose the latter you choose the former. But to say I have not got a clue is complete nonsense. FrankieBee said:
But of course your assumptions are flawed. The finance guy KNOWS what his risk is. Even if he makes nil return he still has £1m in the bank.
Assuming that the post tax return on the investment is > than the finance cost is one thing.Assuming that “even if he makes nil return” is the downside is false.
The downside on the investment could be at least as catastrophic as the potential fall in the supercar market.
WDISMYL said:
@frankiebee
You sir are why the finance companies are in business and probably have your number on speed dial.
You are embarrassing yourself with your total lack of understanding.
It’s very simple. I’d rather lease it than put my hard earned cash in and buy it. That’s it!You sir are why the finance companies are in business and probably have your number on speed dial.
You are embarrassing yourself with your total lack of understanding.
Depending on areas of investment, the threat of a subsantial portfolio kicking is very real atm if that is what many are comparing with buying a car outright.
But many prefer to be in risky assets and buy fast depreciating cars on expensive finance too!
Strange behaviour imo and a double wammy!
But many prefer to be in risky assets and buy fast depreciating cars on expensive finance too!
Strange behaviour imo and a double wammy!
FrankieBee said:
1. Never put all your assets in one basket i.e. a car
2. Finance is so far away from expensive currently. It’s the cheapest it’s been for many years.
1. The debate has been about relative economics. Nothing about investment diversification. No-one had said put all your eggs in one basket. 2. Finance is so far away from expensive currently. It’s the cheapest it’s been for many years.
2. Again, the debate hasn’t been about relative real interest rate over the last few decades.
Simple question from me.
Are McLaren/finance company really guaranteeing the future value with the GFV?
My understanding from other PCP deals is the so called GFV was renamed Optional Final Payment due to GFV being a misleading term and is simply the balloon payment that needs to be paid at the end of the term to own the car.
So if the car is worth more than GFV at the end then you have equity and if it’s worth less you are in negative equity.
Maybe the deals people are discussing on here do have truly guaranteed values, but that’s new to me.
Happy to be edumacated
Are McLaren/finance company really guaranteeing the future value with the GFV?
My understanding from other PCP deals is the so called GFV was renamed Optional Final Payment due to GFV being a misleading term and is simply the balloon payment that needs to be paid at the end of the term to own the car.
So if the car is worth more than GFV at the end then you have equity and if it’s worth less you are in negative equity.
Maybe the deals people are discussing on here do have truly guaranteed values, but that’s new to me.
Happy to be edumacated
garyhun said:
So they actually guarantee the value?
So how does that compare with the optional final payment, is that simply the same or am I missing something?
Thanks.
the value's only guaranteed in that the finance company, rather than you, takes the hit if the car's worth less than the balloonSo how does that compare with the optional final payment, is that simply the same or am I missing something?
Thanks.
( althouigh technically there's nothing to stop you paying the balloon if the car's worth less ! )
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