How To Fund My McLaren
Discussion
Xfe said:
A few thoughts below. Please feel free to add/comment if I've missed anything. There is not necessarily one best option - it depends on your circumstances and risk tolerance.
Cash:
+ lowest cost as no interest (0% APR deals aside)
+ instant access, no credit check or finance application required
+ clearer picture of the immediate cost/affordability and impact on your finances, for those who aren't the hottest on budgeting
- reduces your liquidity and flexibility in case you want to use cash for something else while you still have the car
- dependent on selling car to release cash
- possible that your investment returns could have been higher than APR on a PCP, although this won't matter if you are risk averse
PCP:
+ better in terms of liquidity, i.e. you will hold on to any cash savings for use elsewhere. Fixed monthly payments with a guaranteed payoff/value at the end, so easy to meet each month
+ can walk away at the end without hassle of selling
+ can voluntarily terminate mid-term if desperate
- guaranteed value is almost always favourable to manufacturer/lender; you are still paying depreciation in addition to interest
- some may not realise/calculate the true cost over X years as it's slightly more opaque/complex than cash
- usually high APR
- credit check/finance application required
HP: similar to PCP, except you are paying off the whole amount across the term as no lump sum/guaranteed value.
In my opinion, a mortgage facility is (most of the time) the best way to finance a car if possible:
+ low APR as secured against property
+ flexible repayments/can be interest only
+ hold on to your cash
+ if you have significant equity in your property there is little risk
- you're in a tough spot if house prices crash, you lose your source of income and you don't have much equity
- no guaranteed value
NB: I'm sure people know this, but for the benefit of anyone that doesn't: you should pay attention to APR, not the interest rate. The interest rate only pertains to the actual loan/product you are being offered, excluding admin fees and other costs. APR is a single figure that represents the total effective cost of the finance to you, taking into account any admin fees etc. APR is therefore far more useful and a more viable way to compare finance products.
By the way, anyone who questions why you would pay cash for a depreciating asset when you can finance it, as if that eliminates depreciation, should not be listened to.
Thanks , good summaryCash:
+ lowest cost as no interest (0% APR deals aside)
+ instant access, no credit check or finance application required
+ clearer picture of the immediate cost/affordability and impact on your finances, for those who aren't the hottest on budgeting
- reduces your liquidity and flexibility in case you want to use cash for something else while you still have the car
- dependent on selling car to release cash
- possible that your investment returns could have been higher than APR on a PCP, although this won't matter if you are risk averse
PCP:
+ better in terms of liquidity, i.e. you will hold on to any cash savings for use elsewhere. Fixed monthly payments with a guaranteed payoff/value at the end, so easy to meet each month
+ can walk away at the end without hassle of selling
+ can voluntarily terminate mid-term if desperate
- guaranteed value is almost always favourable to manufacturer/lender; you are still paying depreciation in addition to interest
- some may not realise/calculate the true cost over X years as it's slightly more opaque/complex than cash
- usually high APR
- credit check/finance application required
HP: similar to PCP, except you are paying off the whole amount across the term as no lump sum/guaranteed value.
In my opinion, a mortgage facility is (most of the time) the best way to finance a car if possible:
+ low APR as secured against property
+ flexible repayments/can be interest only
+ hold on to your cash
+ if you have significant equity in your property there is little risk
- you're in a tough spot if house prices crash, you lose your source of income and you don't have much equity
- no guaranteed value
NB: I'm sure people know this, but for the benefit of anyone that doesn't: you should pay attention to APR, not the interest rate. The interest rate only pertains to the actual loan/product you are being offered, excluding admin fees and other costs. APR is a single figure that represents the total effective cost of the finance to you, taking into account any admin fees etc. APR is therefore far more useful and a more viable way to compare finance products.
By the way, anyone who questions why you would pay cash for a depreciating asset when you can finance it, as if that eliminates depreciation, should not be listened to.
but why is this a negative in the cash analysis
- possible that your investment returns could have been higher than APR on a PCP, although this won't matter if you are risk averse
Surely that should a plus as if your investment is higher than the APR then you are getting a car cheaper than paying cash ?
MAC 720S said:
The world will look very different when you decide to buy next year. I would pose the question when you are ready to buy.
I think the ways things are going withCars going up
Job insecurity (not mine but in general)
Poor oil price
Economic crash
Possible accès t cheap finance
I can really see me having to wait till next year to buy a nice car. Shame as I just cleared the garage out and could juts about squeeze in a nice new car along with my Beetle and Evo until the new garage is built
Xfe said:
What I'm saying is that you would lose out on potential investment returns if you pay cash. There is a risk that investment returns would have been higher than APR you are paying, and so it would have been better financially to PCP. Therefore a mark against paying cash
Yes I see hat you mean and I agree with you12pack said:
Yes, except that I maxed out on the bit that the bank was happy to lend to me at 1.5% (about 20% of the total).
As others have said, if you can beat the PCP rate, then by all means - finance. And yes stocks can be over 10% - my US portfolio is well over 20% (a lot of FAANG and T) - but can you guarantee that for the next 3-5 years?
And don't forget that you will be paying tax on your gains.
The only thing worse than buying a depreciating asset is financing it as well. Your money is definitely better spent on that waterfront property - or philanthropy. But if you are going to recognize your supercar is not going to be an “asset”, buy it with cash.
If you don’t have the (liquid) cash - don’t buy it.
I cant guarantee any investment would be 10% or over. Over the last 15 years my modest portfolio of investing has returned approx 6% on average per year. This is how I am now able to afford the Mclaren as I cashed in as I wanted to buy a nice car.As others have said, if you can beat the PCP rate, then by all means - finance. And yes stocks can be over 10% - my US portfolio is well over 20% (a lot of FAANG and T) - but can you guarantee that for the next 3-5 years?
And don't forget that you will be paying tax on your gains.
The only thing worse than buying a depreciating asset is financing it as well. Your money is definitely better spent on that waterfront property - or philanthropy. But if you are going to recognize your supercar is not going to be an “asset”, buy it with cash.
If you don’t have the (liquid) cash - don’t buy it.
Edited by 12pack on Wednesday 8th July 13:41
If youngest in a stocks and shares ISA you do not need to pay capital gains tax.
Yes cash is king for cheapest but you can either put the cash in the car or in an investment . As long as you can afford the repayments and you do not lose all the money you should be alright. The one investment I made myself resulted in a small loos of £1000. Since then I just pay an "expert" and maybe I have been lucky but I have not lost any money but had a good return on it.
I have the liquid cash in my back account but it is deciding what to do with it that is the question .
TCruise said:
I'm yet to understand the "just hand it back" mantra
This isn't a brand new car.
Handing it back too early, will not be possible and likely to result in a penalty.
The finance house would very likely chase you for this by using bailiffs. Similar to not paying Credit Card fees.
If you "hand it back" towards the end of the term, you end up with nothing. You've effectively rented a car, despite investing in maintenance for its future value.
When financing a second hand super car, using a house owner analogy, You're the landlord, paying all the costs, without the benefit of actual ownership of the asset if you hand it back.
I do not think PCP works if you aren't buying new, or very nearly new, on a more normal car, that will likely plummet in price, that in 3 years you want to change and get another me car.
As for 10% returns. If you've bought the right car, I'd rather take the risk of a 10% yearly loss on an old supercar. Rather than a high risk portfolio that could make 10% a year, or lose the entire amount.
If you are genuinely happy with handing it back after ~3 years, with nothing to show for it. Go for something newer and benefit from a complete guarantee and even free servicing.
I think I agree with you as I don't like PCP or Leasing as it feels like you are just renting the car (which you are). Leasing works for me as cost of leasing a run of the mill car is cheaper than buying it (even with cash) and suffering the depreciation over 3 year 30K miles. However that does not work with a supercar as I plan on keeping it for who knows how long, could be 1 year could be 6 years. This isn't a brand new car.
Handing it back too early, will not be possible and likely to result in a penalty.
The finance house would very likely chase you for this by using bailiffs. Similar to not paying Credit Card fees.
If you "hand it back" towards the end of the term, you end up with nothing. You've effectively rented a car, despite investing in maintenance for its future value.
When financing a second hand super car, using a house owner analogy, You're the landlord, paying all the costs, without the benefit of actual ownership of the asset if you hand it back.
I do not think PCP works if you aren't buying new, or very nearly new, on a more normal car, that will likely plummet in price, that in 3 years you want to change and get another me car.
As for 10% returns. If you've bought the right car, I'd rather take the risk of a 10% yearly loss on an old supercar. Rather than a high risk portfolio that could make 10% a year, or lose the entire amount.
If you are genuinely happy with handing it back after ~3 years, with nothing to show for it. Go for something newer and benefit from a complete guarantee and even free servicing.
For me thanks I think I will HP it as even on a Mclaren the HP I am getting quoted is about 5.9% APR and I think I can get the much by investing my money in a stocks and shares ISA with little risk of losing the lot ( as the money would be put in monthly not at once ).
OldAndTired said:
1) 90% of cars bought are with finance.
2) I expect at least 50% of those 90% don’t have offsetting investments or the cash.
3) And close to 90% of those 50% think that using finance means they are not “putting their cash” in a depreciating asset. (Somehow the monthly payments magically don’t count). Dealers perpetuate this myth either because they don’t understand the maths or more likely it helps close the deal.
The pros of the explosion of finance In the market:
It has allowed the market to expand enormously in terms of supply and choice from the manufactures because so many more people can now afford to purchase these cars.
The downside of finance:
Because people judge affordability simply by looking at the monthly payments it has allowed manufacturers to massively raise the list price of new cars.
Yes it seems that financing is the king as the first thing any dealer ask is what is your monthly budget. I always prefer to work out what the total cost of the deal is . Some dealers just look at me and say I would like HP as it is cheaper than PCP. They say but why would you pay £1100 per month instead of £650 and then just trade it in a few years time. Just not from. I would rather buy it , pay for it over the time and then see what I want do with it .2) I expect at least 50% of those 90% don’t have offsetting investments or the cash.
3) And close to 90% of those 50% think that using finance means they are not “putting their cash” in a depreciating asset. (Somehow the monthly payments magically don’t count). Dealers perpetuate this myth either because they don’t understand the maths or more likely it helps close the deal.
The pros of the explosion of finance In the market:
It has allowed the market to expand enormously in terms of supply and choice from the manufactures because so many more people can now afford to purchase these cars.
The downside of finance:
Because people judge affordability simply by looking at the monthly payments it has allowed manufacturers to massively raise the list price of new cars.
drcarrera said:
Cash every time. The last car I bought with any sort of credit was my 205 Gti back in 1989! I'd hate to think how much more it would have cost me had I bought most of the 30 or so cars I've had since on credit.
Likewise every car I have bought for last 10 years has been financed and I would hate to thin how much more it would have cost me if I had paid cash . But I am lucky as my investments in the last 15 years have made more than the interest I paid 650spider said:
It is remarkable that every single time there is a thread like this on pistonheads, especially on expensive cars, nobody, and i mean nobody seems to finance their cars...
Amazing fact.
Especially when around here there are at least 6 McLarens now ranging from £800k to £80k and almost each one of them are on a finance deal or similar, and with maybe an exception or 2, the 'owners' could of easily bought outright.
As i posted before, you 'buy' in the way you are most comfortable doing.
I think for me HP is still the most appealing and what I am most comfortable with. Amazing fact.
Especially when around here there are at least 6 McLarens now ranging from £800k to £80k and almost each one of them are on a finance deal or similar, and with maybe an exception or 2, the 'owners' could of easily bought outright.
As i posted before, you 'buy' in the way you are most comfortable doing.
Paying cash seems such a waste of an opportunity ro invest the cash.
Add to that financing is getting cheap I think that is the route I will go for.
But yes it is good to have this debate as new finance products come and go and nee to to be explored
drcarrera said:
As you say, you are very lucky (or very clever!). If I could guarantee a return greater than borrowing costs then I'd obviously borrow as much as I could! Sadly, that's never been the case for me in anything other than in the very short term.
Definitely not clever. Maybe lucky. I have NEVER picked investments myself, as I have not got the tome of skill set or discipline to trade in stocks and share.I have engaged the services of a financial advisors who have provided a fund or funds that I invest into (usually 3 1 safe, 1 medium risk and 1 higher risk but not silly risk). I then pay in a monthly amount and let it build up, so yes some months my invested amount for the month may be negative and ace versa, In the 15 years I have done this the average is approx 6%. Maybe that is what makes me more inclined to go down the HP route.
If you are not comfortable with that or not been as lucky then yes stick with cash.
Oaky said:
Are all these painful threads utter bollix19?
Probably as everyone ultimately does what they think is best. But I am always open to suggestion .Today Mclaren Glasgow provided a PCP quote on the new 570Gt ( not sure what that is like )
2 year deal , £15,000 deposit
with 7,000 miles per year it is £1600 per month, total cost £51,800 but you get the 3 year warranty thrown in
With 5,000 miles per year it is £1560 per month, total cost £50,880 again you get 3 year warranty thrown in
Now I ma not sure about you guys but that seems a lot of cash (for me) to lose in only 2 years
So my thinking is buy a 2017 570s or maybe a 570Gt for around £85K. The cost of buying this on finance will be approx £93,000 with a £15K deposit. in say 2 years I would expect that to still be worth £65K maybe £60K. So a loss of £33k plus 2 years worth of warranty charges .
To me that seems better value than the PCP option of losing £50k in 2 years just to have a new car that you can hand back. Also if I keep the used car a bit longer then maybe the depreciation will level out and not be as bad per year
But the problem is Mclaren Glasgow are not offering Test drives at the moment so no idea how on earth you are to decide if the car they are selling is for you or not.
bennno said:
I agree I picked up a 18 plate 4k mile 540C with all the options I wanted for a very good price from a main dealer.
I was offered the same as you but figured I'd rather buy one somebody else had depreciated for me.
If you don't mind me asking how much did you pay for it and how are you finding it I was offered the same as you but figured I'd rather buy one somebody else had depreciated for me.
Yes it makes so much sense to buy used at the moment as I firmly believe that there will be a price pint that Mclarens do not go below like Lambos are around £60K now
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