Financing or not?

[jogzc]

Hey I have just put down a deposit to buy an MY19 Approved Macan and the dealer is pushing me to apply for a manufacturer financing at 7.9% APR. I can buy it outright cash as well, but just wanted to understand what the benefit of me buying it on financing rather than outright. Anyone else had similar queries in the past? 7.9% is quite a high rate comparing to mortgage rate is currently below 2%!

The dealer is mentioning about residual value protection, but I do feel given the lack of petrol Macan in the future, the rresale value will be pretty good.

I understand the opportunity cost side if I could invest the money and get return above 7.9% then it is better to do financing, but in reality I have not got much luck getting that type of return by just throwing cash...

[Deleted User 4436]

SE will make money on the finance deal, so will always push it. If you can afford to buy it cash I think you should.

[Wing Commander]

If you have the cash lying around, I’d certainly pay cash. Unless the dealer is offering a massive discount/incentive if you use their pricey finance. The salesperson is almost certainly targeted to sell a certain number of finance deals to get their bonus, so that’s their motivation. 7.9% APR is really expensive. And there is no guarantee whatsoever that you could earn more than 7.9% on your money elsewhere.

P.S. Welcome!

[Col Lamb]

Try to get a deal with the Dealer by getting a discount on the price of the Macan in excess of what you would pay in admin and interest fees if you took out the loan.

The Dealer may get a lower cut but you would be a winner as well.

Or ring around and you will find a financing deal far better than Porsche offers.

Search back a few years and you will find plenty of financing posyts.

[MacanPNeil]

There’s a few finance company’s always claiming to beat the dealers. Magnitude finance often show up as a featured ad on my social media….

[gasgas1]

no brainer, why pay 7% plus and only get at best 5% back on your money, plus no garantee on residules.

[New User]

Firstly the money that you have available really needs to be earning 14% plus pre-tax assuming that you are already maxxing out your CGT annual allowance and used up the rest of your dividend allowances (I am making some assumptions here but it takes a fair bit of accumulated wealth to buy a Macan outright). That is if you are really concerned about offsetting the finance costs.

Secondly the Residual Value Guarantee used to be a no hassle route before the rise of Motorway and WBAC whereas now if you think about the interest cost will the dealer RVG really be massively better than the online buyers?

Thirdly you could always take it and pay it off early assuming it is a PCP or even pay if down to a peanuts level after a month or so so you get the RVG as backup but not the interest headache.

I have only used PCP when I had a upcoming overseas posting and wanted the flex to get rid/buy outright within a 18month window and structured it accordingly. Sometimes this flexibility is worth paying a premium for but most of the time it will be better to use your cash if you have it unless there is a zero %APR or a massive manufacturer deposit contribution (BMW i8 had both for a while).

[sd1985]

I buy all my cars in cash
Finance allows the OPC to make ££
If you have investment plans to use the cash then that’s a different story. If it’s just going to sit in the bank then I’d use the cash.
Problem with finance can be cash flow. Each month a considerable amount will leave your account along with all your other bills etc, so will you be able to save etc.
The answer is very dependent on you own circumstances. But the fact that you’ve said you could just use the cash and that you wouldn’t do anything with it anyway, tells me that you already have the answer… use the cash

[Rashg60]

I am also a cash buyer on all my cars and when purchasing via any dealership, they always try and push me towards finance. Initially I always refuse, saying I've got the cash. Then the balls in my court and I always ask for further incentives if I went for their finance deal instead (playing this card reluctantly so they offer incentives). Once incentives have been agreed, I take out the finance deal with them and then pay the finance company off after the first monthly payment has gone through. Simples!

[Nick the Greek]

I am also a cash buyer on all my cars and when purchasing via any dealership, they always try and push me towards finance. Initially I always refuse, saying I've got the cash. Then the balls in my court and I always ask for further incentives if I went for their finance deal instead (playing this card reluctantly so they offer incentives). Once incentives have been agreed, I take out the finance deal with them and then pay the finance company off after the first monthly payment has gone through. Simples!

This ^^^