Financing

[WDISMYL]

ferdi p said:

OP - NEVER ever mention finance on Pistonheads!

Everyone here is just like me; very rich, sensible, astute, intelligent & would never do anything as common as finance a vehicle!

That's a bit unfair. It's just a true statement that too many people who take out finance don't understand that it is a leveraged purchase in a potentially depreciating asset.

It's just all about the monthly payments and screw the details.

Edited by WDISMYL on Tuesday 9th May 17:32

[andyvdg]

I came across this thread when searching for finance companies. The OP puts a question out there that suggests they think about finance the same way as I do..... "However, that's a lot of money tied-up in an illiquid asset. ". The car depreciates no matter how you fund it. You have to put your money somewhere - into the car or into another asset. The point is that supercars don't sell fast - so if you need cash quickly in an emergency it makes sense to have not put all your cash into the car upfront - a loan is a way of dealing with that risk. I guess there is a logical argument which say paying cash is the cheapest way of owning a car overall but that's not the the point of the question. The leverage into depreciating asset argument doesn't make any sense to me. The conclusion to all that is don't buy a car in the first place - it loses money. Buy heh, this is a petrolhead website so what do you think we're going to do?!

[MingtheMerciless]

I kind of get why this makes some kind of sense in a man maths way. I recall buying a new BMW X5 for my wife for €99,000 (Irish prices) cash and then I calculated it cost me €35 per day in depreciation when I moved it on and I had lost the use of that €99,000 over the period of ownership. So when the time came to chop it in, I PCP'ed it's replacement and it didn't seem to hurt so badly. I know it did in real terms but I used the equivalent money I would have thrown into it to invest in some stocks that I wouldn't have taken a chance on if I couldn't afford to lose all of it and now are doing rather nicely indeed. And I didn't look at the X5 as something that had swallowed otherwise useful cash even though I was really just pretending to myself.

But I think when it comes to a supercar, the "investment" theory does not bear any form of realistic scrutiny. I agree with a lot of the comments above (so don't put money you may need quickly into something which is not ideal for a quick sale). And if there is a cycle change because of Brexit or Trexit or North Korea otr just because it's time you have to assume your asset is going to lose shedloads of money. Certainly I'm assuming if I pull the trigger on a replacement for my 458 it won't be an "investment" if I had to bring it back to the dealer

[mwstewart]

Personally I wouldn't do it. These cars are toys - certainly not regularly used - so I take the view I'd rather buy outright and forget about whatever they are or aren't worth. I find I can focus on enjoying what it's meant for then and not mileage/depreciation.

[Durzel]

I think it really depends on your exposure and risk profile. People who already deal in riskier higher return investments it would make complete sense to finance a supercar simply because they would see a greater return from the capital in their existing portfolio. With finance rates so low the barrier to entry in terms of investments that return a higher growth rate is lower too.

The problem I think is where people take out financing, saving their capital, but don't actually use it to offset the finance. Easily done I imagine, because finance is so painless now, you only have to meet affordability criteria and everyone is falling over themselves to offer it to you. The whole vocabulary of it gives the illusion that you never have to think about the balloon, you can just keep putting it off. Hell, even dealers push it hard with "relationships" and "journeys" because they want you in their marque for life.

Car financing has a place, but it should not be treated lightly. You aren't magically getting the asset for less by taking it out, quite the opposite.

[andyvdg]

I think you're right, it depends on what kind of person you are :

1) Only buys a car with cash, has cash to spare for a rainy day, probably has a mortgage because it's an appreciating asset and may use that to invest in other potentially appreciating assets. Maximises wealth for his next of kin.

2) Buys a car on part finance to de-risk potential lack of liquidity and / or to get a car earlier than just by saving, probably has a mortgage. Get's into a "better" car than 1) earlier, but leaves less after they die.

3) Buy a car finance because they can afford the monthlies. Has to give car up at end as can't afford the balance. Lives with no regrets.

4) YouTubers. This is a mystery. Could well be 3) that try and build a business around it. Can you imagine just talking about cars all day, videoing it and all your friends all do the same? It would drive me insane!


Only a bit of fun!