Porsche Finance Options
Discussion
I've received all the info on the 997tt along with a note to contact the guy for a range of finance options. I've always paid cash for my cars on the following basis:
a) pay cash for the car; earn no interest as I've spent the cash.
b) finance the car; earn approx 4% interest on my unspent cash, pay approx 7% interest on borrowed amount.
...so by financing the car, I am approx 3% worse off.
Then, I often see people on this forum who refer to themselves as financially savvy saying that they are better off financing a car. Given that I work in the City, I would hope that I am reasonably aware so am I missing a trick or are these people simply in need of the liquidity and willing to pay the the 3% or so for it?
a) pay cash for the car; earn no interest as I've spent the cash.
b) finance the car; earn approx 4% interest on my unspent cash, pay approx 7% interest on borrowed amount.
...so by financing the car, I am approx 3% worse off.
Then, I often see people on this forum who refer to themselves as financially savvy saying that they are better off financing a car. Given that I work in the City, I would hope that I am reasonably aware so am I missing a trick or are these people simply in need of the liquidity and willing to pay the the 3% or so for it?
Edited by barry_j on Tuesday 22 August 12:49
AdvocatusDiaboli said:
Good point, I have heard this before. Look forward to hearing some of the views out there. My thought process has always belonging to the "down 3%" school of thought.
Ah, this takes me back to a post that generated almost 150 responses.
I was advocating that paying finance doesn't make pure conomic sense, as the rate you are charged is always going to be greater than that you can invest money at (on a risk-free basis).
Someone else (tony?) supposedly an expert in this type of thing was arguing the opposite. In the end I think I won the argument, but there was a fair amount of amusing (and some more aggresive!) banter on the way to that conclusion.
Personally, I'm happy to use Finance where necessary, allowing me to keep enough liquidity to meet other day-to-day and surprise requirements etc
sidicks
some people will argue that they can make more AFTER tax than the 7% plus that you pay to borrow on finance. as far as i can work out this usually involves commercial property deals or buy to lets.
HOWEVER my observation is that most are idiots who claim to be financially savvy but just arn't. they dont like it when their calculations are shown up as erroneous and eventually result to complaining that why shouldnt they have x car even though they "cant afford it". a few words that always upsets someone.
(PS if anyone needs capital to invest in some guaranteed easy money property deal let me know - i can always borrow some. doh !)
HOWEVER my observation is that most are idiots who claim to be financially savvy but just arn't. they dont like it when their calculations are shown up as erroneous and eventually result to complaining that why shouldnt they have x car even though they "cant afford it". a few words that always upsets someone.
(PS if anyone needs capital to invest in some guaranteed easy money property deal let me know - i can always borrow some. doh !)
Edited by francisb on Tuesday 22 August 12:36
If you have £100k cash lying around and won't miss it, buy the car outright. But for many people that isn't the case and the financing of today has allowed a huge amount of people to get into cars they never would have thought they could.
As it stands interest rates are relatively low at 4.75% (?) but if they were at 10% or greater I don't think anyone would be buying these cars full stop, only the very wealthy would be buying Porsches.
G
As it stands interest rates are relatively low at 4.75% (?) but if they were at 10% or greater I don't think anyone would be buying these cars full stop, only the very wealthy would be buying Porsches.
G
triple7 said:
If you have £100k cash lying around and won't miss it, buy the car outright. But for many people that isn't the case and the financing of today has allowed a huge amount of people to get into cars they never would have thought they could.
Agreed but my point is this; Some people are saying that they are actually better off by financing and I just don't understand how this can be the case. So, if I've got the choice of financing the car or paying in cash, I'd like to know which option makes me better off. I'm not concerned about liquidity.
francisb said:
some people will argue that they can make more AFTER tax than the 7% plus that you pay to borrow on finance. as far as i can work out this usually involves commercial property deals or buy to lets.
Edited by francisb on Tuesday 22 August 12:36
Exactly - hence why my post referred to investing at risk-free rates
Clearly it is possible to generate returns of 10%, 15% even 20%+, however such returns aren't guaranteed (particularly over short tenors, 2-4 years which would be typical of a loan), and it would be easy to lose 20%+ on these types of investment as well !
Sidicks
barry_j said:
Agreed but my point is this; Some people are saying that they are actually better off by financing and I just don't understand how this can be the case. So, if I've got the choice of financing the car or paying in cash, I'd like to know which option makes me better off. I'm not concerned about liquidity.
If you have the cash and don't need the liquidity, then buying the car outright is the optimal 'economic' strategy.
Sidicks
PS - If anyone has any guaranteed 20%+ return risk free investment strategies, I have unlimited funds to invest!!!
Edited by sidicks on Tuesday 22 August 13:14
I financed as im young, and have the free cashflow on a monthly basis, but not so much upfront as bought a house
I think you would have to be really quite lucky to make money on your saved cash above and beyond the cost of borrowing
If you go into financing knowing it will cost more, and maybe things pan out and you make more, then its fine. I worry when people borrow because they think they will make money from it
A porsche isnt a house, after all
I think you would have to be really quite lucky to make money on your saved cash above and beyond the cost of borrowing
If you go into financing knowing it will cost more, and maybe things pan out and you make more, then its fine. I worry when people borrow because they think they will make money from it
A porsche isnt a house, after all
[quote=bermyandy]I financed as im young, and have the free cashflow on a monthly basis, but not so much upfront as bought a house
...a good example of where financing works. I.e. you are not stretching yourself by the repayments and can easily afford them, but you don't have the lump sum to hand for whatever reason.
As the original poster obviously has access to the cash up front AND can also easily stomach monthly payments (i.e. either options are just as feasible) it would be hard to argue for financing unless the money had a high opportunity cost (i.e. you wanted to invest in my X-Ray specs business plan).
...a good example of where financing works. I.e. you are not stretching yourself by the repayments and can easily afford them, but you don't have the lump sum to hand for whatever reason.
As the original poster obviously has access to the cash up front AND can also easily stomach monthly payments (i.e. either options are just as feasible) it would be hard to argue for financing unless the money had a high opportunity cost (i.e. you wanted to invest in my X-Ray specs business plan).
Also work in the city so hopefully know a thing or two about crunching numbers. Most people get ripped off because they don't know the basic maths of calculating a financing deal and don't have a clue what they should be negotiating (term, structure, APRs, etc).
For a lot of people financing is not purely down to 'economics' but down to 'convenience'. Instead of putting 75k into my 997S this year I put down 15k which left me with 60k to buy holidays, renovate our house etc. My monthly income is enough to cover the finance payments comfortably and so for me this is 'convenient'. Ultimately I'll end up paying a lot more for the car in total but it suits my circumstances.
One question? You work in the city and can't make more than 4% on your cash..!!?? As an interesting observation, the smart people would've financed their cars at ~7% and stuck the rest into Porsche shares, currently up YTD ~30%... That's what I did!!
For a lot of people financing is not purely down to 'economics' but down to 'convenience'. Instead of putting 75k into my 997S this year I put down 15k which left me with 60k to buy holidays, renovate our house etc. My monthly income is enough to cover the finance payments comfortably and so for me this is 'convenient'. Ultimately I'll end up paying a lot more for the car in total but it suits my circumstances.
One question? You work in the city and can't make more than 4% on your cash..!!?? As an interesting observation, the smart people would've financed their cars at ~7% and stuck the rest into Porsche shares, currently up YTD ~30%... That's what I did!!
JEBLondon said:
One question? You work in the city and can't make more than 4% on your cash..!!?? As an interesting observation, the smart people would've financed their cars at ~7% and stuck the rest into Porsche shares, currently up YTD ~30%... That's what I did!!
One question - you work in the city and can't tell the difference between a guaranteed, risk-free investment and a risky one......................??!!!
sidicks
sidicks said:
JEBLondon said:
One question? You work in the city and can't make more than 4% on your cash..!!?? As an interesting observation, the smart people would've financed their cars at ~7% and stuck the rest into Porsche shares, currently up YTD ~30%... That's what I did!!
One question - you work in the city and can't tell the difference between a guaranteed, risk-free investment and a risky one......................??!!!
sidicks
Erm.... I'd hope so given that I invest for a living...!!
However, you'd have to be a total numpty not to make above 4% on cash in the current environment.
JEBLondon said:
Erm.... I'd hope so given that I invest for a living...!!
However, you'd have to be a total numpty not to make above 4% on cash in the current environment.
However, you'd have to be a total numpty not to make above 4% on cash in the current environment.
Agree - after tax, risk-free, presumably most private investors would be looking at a cash ISA at maybe 5% p.a. ?
Not sure that Porsche shares were a particularly good example given the context of the discussion - good trading decion though !!
Sidicks
Edited by sidicks on Tuesday 22 August 14:09
JEBLondon said:
For a lot of people financing is not purely down to 'economics' but down to 'convenience'.
So, as the other guys have already said, getting a car on finance doesn't make you better off. Its simply gives you the liquidity that you dont have.
JEBLondon said:
One question? You work in the city and can't make more than 4% on your cash..!!??
Of course I can make more than 4% but that is not without its risks. Again as the guys above have already stated we are talking risk-free returns after tax. Libor is currently about 5% so after tax that is 3%. If you want to earn more than that then you need to take more risk!!!
JEBLondon said:
As an interesting observation, the smart people would've financed their cars at ~7% and stuck the rest into Porsche shares, currently up YTD ~30%... That's what I did!!
LMFAO!!! Charles, I'm on my way, Taxi!!
Edited by Barry_J on Tuesday 22 August 14:20
If you want totally risk/tax free stick your cash under your mattress..!!
Nothing is guaranteed but most professional money managers (from conservative long funds to exotic hedge funds) would shoot themselves without at least a double digit return this year.
If you're in a position to spend 60k - 85k cash on a car, you're typically fairly successful and not the type to be happy with ~50k sat in some basic 'high interest' bank account. It's all about managing the risk/return profile.
Nothing is guaranteed but most professional money managers (from conservative long funds to exotic hedge funds) would shoot themselves without at least a double digit return this year.
If you're in a position to spend 60k - 85k cash on a car, you're typically fairly successful and not the type to be happy with ~50k sat in some basic 'high interest' bank account. It's all about managing the risk/return profile.
JEBLondon said:
Nothing is guaranteed but most professional money managers (from conservative long funds to exotic hedge funds) would shoot themselves without at least a double digit return this year.
With long Gilts at under 4.5%, I doubt that any 'conservative' fixed income manager would have a benchmark of more than Gilts + 200bps
Hedge funds would have a target return of maybe 10%-15% over a 3-5 year period, not 1-year.....and these funds are often subject to significant drawdown from year to year, hence capital is most definitely at risk!
Sidicks
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