Car Buying with Inheritance Options
Discussion
Hi Guys and Girls,
Bit of an odd question possibly - looking for some advice though and thoughts.
Currently I get a car allowance for work - about £350 a month - which is all great and I currently lease a VW TROC R for similar money.
Things have changed though recently, having inherited a large some of money - well fairly large six figure.... sum!
Looking at the possibility of getting a car with the value of anything between £40k - 60k. Possibly an XC90 - or maybe an X5M or something.... SUV luxury esque.....
So the question is, what's the best way to buy one? Clearly the answer should be, well just buy it with your inheritance, it's yours and off you go and you pay the depreciation over the years before you sell it - the thing is the wife doesn't want to go and shell that much money on a new car.
I guess the options are...
One - Buy outright, no ongoing payments, but car depreciates over the next few years to an amount of equity stored in the car....
Two - go and get a car finance loan with a low APR - pay a deposit and finance the rest - seems crazy to be paying interest though when we have the funds available....
Three - lease a new car again - large deposit to bring down the monthly payments to something similar - prices have gone up crazily for leases though and for a decent car that we want, it will be expensive per month.....
Four - PCH? Deposit, residual value at the end of the 3 years, sell up and move on? Can you do PCH for a 2nd hand car? I guess you can? would it be cheaper interest rate wise to do point two though? as can drive a better APR deal?
any help welcome on thoughts!
Rich
Bit of an odd question possibly - looking for some advice though and thoughts.
Currently I get a car allowance for work - about £350 a month - which is all great and I currently lease a VW TROC R for similar money.
Things have changed though recently, having inherited a large some of money - well fairly large six figure.... sum!
Looking at the possibility of getting a car with the value of anything between £40k - 60k. Possibly an XC90 - or maybe an X5M or something.... SUV luxury esque.....
So the question is, what's the best way to buy one? Clearly the answer should be, well just buy it with your inheritance, it's yours and off you go and you pay the depreciation over the years before you sell it - the thing is the wife doesn't want to go and shell that much money on a new car.
I guess the options are...
One - Buy outright, no ongoing payments, but car depreciates over the next few years to an amount of equity stored in the car....
Two - go and get a car finance loan with a low APR - pay a deposit and finance the rest - seems crazy to be paying interest though when we have the funds available....
Three - lease a new car again - large deposit to bring down the monthly payments to something similar - prices have gone up crazily for leases though and for a decent car that we want, it will be expensive per month.....
Four - PCH? Deposit, residual value at the end of the 3 years, sell up and move on? Can you do PCH for a 2nd hand car? I guess you can? would it be cheaper interest rate wise to do point two though? as can drive a better APR deal?
any help welcome on thoughts!
Rich
Edited by funkyfin2000 on Monday 9th May 13:36
So, there are two potential aspects to car financing.
The obvious one is that you are borrowing money. If you don't have £50k spare, but you do have £500 a month available, you can spread the cost of the car over N years. This aspect is however of little value if you have the cash going spare.
The second aspect is who takes the profit/loss on the actual future value of the car compared to what it's predicted to be.
If you buy a car outright then it's yours, if it's worth more than expected when you come to sell then that's a 'profit' you make, if it's worth less then you have lost out.
This is the same with option 2 loan, since the loan is unconnected with the car value.
If you hire a car for 3 years then you never own it, it belongs to the finance company. They will benefit (not you) if the car ends up being worth more, and lose out if it's worth less. The residual value makes literally no difference to you, you just pay the flat monthly fee til the lease ends.
With PCP there's a predicted future value (GFV). If the car's worth more, you can pay this sum, sell it, and pocket the difference (profit). If it's worth less, you just return it and the loss is the finance company's. So it's in a sense the 'best of both worlds', albeit you will pay more for the privilege.
You might decide therefore that you have the money and want a new car, but don't fancy making a bet on what it'll be worth in N years time, and thus would rather PCP or Hire it to protect against eg a major slide in used car values. You will obviously pay in interest charges for this protection, but may consider it worthwhile.
The obvious one is that you are borrowing money. If you don't have £50k spare, but you do have £500 a month available, you can spread the cost of the car over N years. This aspect is however of little value if you have the cash going spare.
The second aspect is who takes the profit/loss on the actual future value of the car compared to what it's predicted to be.
If you buy a car outright then it's yours, if it's worth more than expected when you come to sell then that's a 'profit' you make, if it's worth less then you have lost out.
This is the same with option 2 loan, since the loan is unconnected with the car value.
If you hire a car for 3 years then you never own it, it belongs to the finance company. They will benefit (not you) if the car ends up being worth more, and lose out if it's worth less. The residual value makes literally no difference to you, you just pay the flat monthly fee til the lease ends.
With PCP there's a predicted future value (GFV). If the car's worth more, you can pay this sum, sell it, and pocket the difference (profit). If it's worth less, you just return it and the loss is the finance company's. So it's in a sense the 'best of both worlds', albeit you will pay more for the privilege.
You might decide therefore that you have the money and want a new car, but don't fancy making a bet on what it'll be worth in N years time, and thus would rather PCP or Hire it to protect against eg a major slide in used car values. You will obviously pay in interest charges for this protection, but may consider it worthwhile.
Edited by samoht on Monday 9th May 15:18
OP in true PH tradition I'm not going to answer the question you've asked but instead give some unsolicited advice which is to not rush into anything...
Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
funkyfin2000 said:
Hi Guys and Girls,
Bit of an odd question possibly - looking for some advice though and thoughts.
Currently I get a car allowance for work - about £350 a month - which is all great and I currently lease a VW TROC R for similar money.
Things have changed though recently, having inherited a large some of money - well fairly large six figure.... sum!
Looking at the possibility of getting a car with the value of anything between £40k - 60k. Possibly an XC90 - or maybe an X5M or something.... SUV luxury esque.....
So the question is, what's the best way to buy one? Clearly the answer should be, well just buy it with your inheritance, it's yours and off you go and you pay the depreciation over the years before you sell it - the thing is the wife doesn't want to go and shell that much money on a new car.
I guess the options are...
One - Buy outright, no ongoing payments, but car depreciates over the next few years to an amount of equity stored in the car....
Two - go and get a car finance loan with a low APR - pay a deposit and finance the rest - seems crazy to be paying interest though when we have the funds available....
Three - lease a new car again - large deposit to bring down the monthly payments to something similar - prices have gone up crazily for leases though and for a decent car that we want, it will be expensive per month.....
Four - PCH? Deposit, residual value at the end of the 3 years, sell up and move on? Can you do PCH for a 2nd hand car? I guess you can? would it be cheaper interest rate wise to do point two though? as can drive a better APR deal?
any help welcome on thoughts!
Rich
Before doing anything you need to know what you want, an XC90 is a very different car to an X5M & the running costs will be different too.Bit of an odd question possibly - looking for some advice though and thoughts.
Currently I get a car allowance for work - about £350 a month - which is all great and I currently lease a VW TROC R for similar money.
Things have changed though recently, having inherited a large some of money - well fairly large six figure.... sum!
Looking at the possibility of getting a car with the value of anything between £40k - 60k. Possibly an XC90 - or maybe an X5M or something.... SUV luxury esque.....
So the question is, what's the best way to buy one? Clearly the answer should be, well just buy it with your inheritance, it's yours and off you go and you pay the depreciation over the years before you sell it - the thing is the wife doesn't want to go and shell that much money on a new car.
I guess the options are...
One - Buy outright, no ongoing payments, but car depreciates over the next few years to an amount of equity stored in the car....
Two - go and get a car finance loan with a low APR - pay a deposit and finance the rest - seems crazy to be paying interest though when we have the funds available....
Three - lease a new car again - large deposit to bring down the monthly payments to something similar - prices have gone up crazily for leases though and for a decent car that we want, it will be expensive per month.....
Four - PCH? Deposit, residual value at the end of the 3 years, sell up and move on? Can you do PCH for a 2nd hand car? I guess you can? would it be cheaper interest rate wise to do point two though? as can drive a better APR deal?
any help welcome on thoughts!
Rich
Edited by funkyfin2000 on Monday 9th May 13:36
If it's a nice SUV that you want then I'd put down a decent deposit on an AUC car on a 3 year PCP get a couple of years warranty thrown into the deal (with the plan to extend the final year) that way if you decide you like it then you buy it outright at the GFV.
You may well find that you want something else after 3 years of ownership.
How long is left on your lease? Seems pointless to be stuck paying your lease and buy another SUV?
Personally, I'd wait and see what the market is like at the end of your term, having invested the inheritance. Market feels inflated right now considering what's around the corner economically.
Lending is getting more expensive, used car finance rates are high; BMW AUC is 7-9%. Cash is king.
Personally, I'd wait and see what the market is like at the end of your term, having invested the inheritance. Market feels inflated right now considering what's around the corner economically.
Lending is getting more expensive, used car finance rates are high; BMW AUC is 7-9%. Cash is king.
Edited by Mark83 on Monday 9th May 21:55
Thanks all - useful to chat it through with people so appreciate that!
Yeah - its not a knee jerk, got the money must go and buy - it's essentially a replacement for the TROC R that comes a year in October - so thinking about it now, as know if we did go new car, there are long lead times...
Sounds like PCH is probably the right way to go - large deposit down and then low (ish!) monthly payments, with the option at 3 yr to sell up and start again or buy etc.
I do agree as well, X5M is a different car to an XC90 - that's also part of the dilemma, always had fast cars generally speaking and want something exciting, but also head says should go semi sensible with a hybrid! That's a whole different thread about what car!!!!!!
Yeah - its not a knee jerk, got the money must go and buy - it's essentially a replacement for the TROC R that comes a year in October - so thinking about it now, as know if we did go new car, there are long lead times...
Sounds like PCH is probably the right way to go - large deposit down and then low (ish!) monthly payments, with the option at 3 yr to sell up and start again or buy etc.
I do agree as well, X5M is a different car to an XC90 - that's also part of the dilemma, always had fast cars generally speaking and want something exciting, but also head says should go semi sensible with a hybrid! That's a whole different thread about what car!!!!!!
Canon_Fodder said:
OP in true PH tradition I'm not going to answer the question you've asked but instead give some unsolicited advice which is to not rush into anything...
Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
I would go further than that and say never buy a depreciating asset with an inheritance Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
CG2020UK said:
Personally I’d be using an inheritance that large to pay my mortgage off first.
only pay 10% off a year as stuck in fixed at mo - there's loads we could do with it - independent school education for the kids is another along with investments etc. It's a lovely place to be but it's also very complex too!
Canon_Fodder said:
OP in true PH tradition I'm not going to answer the question you've asked but instead give some unsolicited advice which is to not rush into anything...
Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
This.Let the dust settle for a few months and see how you feel as a newly minted man... I have been in a similar position and after a few months the need / itch to buy new things seemed to fade
You may never come into this kind of money again.
A fool and his money is soon parted.
Think things through very carefully.
Yeah echo the others really. It can be hugely tempting to go out and buy shiny stuff. If six figures isn't that much of a deal to you then great, get what you want but if it is a potential life affecting (not changing) amount then the last place id be using it would be on a Volvo.
Think of the hols you could have with the family over the next 5-10 years with it, could really have some great adventures instead.
Think of the hols you could have with the family over the next 5-10 years with it, could really have some great adventures instead.
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