Cash or finance
Discussion
Pickled Piper said:
I would guess at 90% of new cars in the UK being bought on a finance scheme of some type.
pp
No, I reckon less than that. Now if it was all cars, a lot less than that, but if you think about it some people (often the richer people) often buy many new cars, and can afford to just pay cash outright. Maybe tending towards 80% rather than 90%.
I couldn't buy a £20,000 car without getting a loan. I've done it before and I don't think I'll do it again; certainly not on a new car anyway.
OTOH, if I were buying a £50,000 (or more) car, buying on finance makes sense. £40,000 would be better off earning you money than depreciating on your driveway.
OTOH, if I were buying a £50,000 (or more) car, buying on finance makes sense. £40,000 would be better off earning you money than depreciating on your driveway.
90% plus is a realistic figure.
Whenever I ask somebody how they intend on funding a vehicle, the answer is very often 'my own cash'.
After a few carefully scripted questions, it nearly always reveals that these people are borrowing the money from a bank. FACT
There are VERY few people that have £20K spare for the purchase of a vehicle, and even if they did, paying outright is not a particularly clever way to get a vehicle.
Whenever I ask somebody how they intend on funding a vehicle, the answer is very often 'my own cash'.
After a few carefully scripted questions, it nearly always reveals that these people are borrowing the money from a bank. FACT
There are VERY few people that have £20K spare for the purchase of a vehicle, and even if they did, paying outright is not a particularly clever way to get a vehicle.
Finance at the moment makes sense for most people, my mum bought her last car (7k nearly new) on a credit card, and swapped it a few times so never had to pay interest! My brother has the top AMEX card plus a few others so could probably afford a Boxster or more on credit cards then swap them to an interest free. In this respect what's the point in paying cash?
Cheers,
Rob.
Cheers,
Rob.
Rob_F said:
Finance at the moment makes sense for most people, my mum bought her last car (7k nearly new) on a credit card, and swapped it a few times so never had to pay interest! My brother has the top AMEX card plus a few others so could probably afford a Boxster or more on credit cards then swap them to an interest free. In this respect what's the point in paying cash?
Cheers,
Rob.
Because, at some point debts will need paying! All that's being delayed is the inevitable. Why the hell do people run up debts, simply because they've found a way of paying no interest for a finite period of time? It beggars belief!
Roughly 8% of private buyers in the UK use their own savings, the rest are borrowing the cash from somewhere be it from our finance houses, banks, direct lenders etc.
On the other hand 100% of private buyers in the UK will tell me they are going to pay cash in the hope it gets them some free mudflaps or something.
On the other hand 100% of private buyers in the UK will tell me they are going to pay cash in the hope it gets them some free mudflaps or something.
I used to work in the industry for one of the major finance companies; three years ago we had market data to show that ~70% of new cars registered were subject to a finance agreement of some sort. Clearly this figure excludes people who've gone to a direct lender, so I'd have to agree that 90% is a reasonable assumption. 
markmullen said:Isn't it amazing how many folks think that paying cash will get them a better price or something. If they pay cash you only have one source of profit, the profit in the car, this is the same wether they pay with a bag of money, a cheque, or silver buttons. But if they have finance from you (say at the same rate as the bank for sake of argument) the dealer then has the finance commission to play with to do a better price on the car (if they go to the bank, the bank keeps the lot).
On the other hand 100% of private buyers in the UK will tell me they are going to pay cash in the hope it gets them some free mudflaps or something.
Witchfinder said:
OTOH, if I were buying a £50,000 (or more) car, buying on finance makes sense. £40,000 would be better off earning you money than depreciating on your driveway.
Depends on whether you can make more than the interest rate on a personal loan or finance agreement. IMO if this is the case, there's always an element of risk involved. Could you afford to lose the money whilst at the same time having taken out a loan for a similar amount?
Plus that £50,000 car will be a £30,000 car in 12 months time, and even raising that from selling the car will take time and involvement. I wouldn't feel too good knowing there's, at a point, significantly more outstanding in loans than what the asset securing it is worth...
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