How do you prefer to finance your Macan?
For the last 20 years I bought my cars for cash, but that was in a higher interest rate environment. In the UK we have many attractive options, but I am ware f the small print.
Help the neophyte understand the pros and cons.
My objective is to keep the car for the next 10 years, but when my guard is down, another new car might leap at me after 4-6 years.
I am thinking than my next car should be an autonomous EV. That is when EVs have longer range than petrol cars and I don’t have to park it at OPC or at Tesco, to get it charged [emoji38]
Financing your Macan
I don't understand why you'd ever fully fund one of the worst depreciating classes of assets out there. PCP exists for just that. Use either Porsche Finance or Oracle Finance. You can choose just how much equity you want to stump up, it's usually minimum 12 - 13% and what mileage you'd expect. Rates are around 6% on new vehicles (sometimes even lower) and, at the end of it, you swap over, hand back the keys or refinance. Madness to park £70k + into a car unless it doesn't make a dent or touch the sides of your financial position.
Cash buy is your cheapest option in the long run and gives you the most flexibility in when to sell. Only downside is tying up a load of cash at the very start, all the way until you eventually sell it.
PCP finance is very popular and gives you a guaranteed minimum residual value at the end of the term, typically 3-4 years. It's not so good if you intend to keep the car any longer as you would have to pay up or re-finance the large balloon payment at the end. There's also the cost of the finance interest of course. The only time I've gone down this route is when manufacturers have been heavily subsidising the interest rate (like down to 1 or 2% APR, which I've never seen with Porsche). Otherwise it tends to work out expensive compared to a straight cash buy.
Straight forward hire purchase finance is the other obvious choice, which would probably work out better than PCP if you intended to keep the car long term. But all depends on the comparative interest rate. Manufacturers tend to favour PCP, so those deals are sometimes more subsidised, but Porsche finance tends to be expensive.
The maths is easy enough in all cases. With a Porsche I've never seen any point in taking their expensive finance unless you don't have enough cash to buy outright.
Whether you finance it or not, it still depreciates. Unless the PCP residual is well above market value, you will always end up worse off overall after you hand the keys over to the next owner. PCP is great for those who want to perpetually plough a monthly amount into their car, but it is more expensive overall, especially with Porsche finance!GMAN75 wrote: ↑Fri Dec 14, 2018 10:10 am I don't understand why you'd ever fully fund one of the worst depreciating classes of assets out there. PCP exists for just that. Use either Porsche Finance or Oracle Finance. You can choose just how much equity you want to stump up, it's usually minimum 12 - 13% and what mileage you'd expect. Rates are around 6% on new vehicles (sometimes even lower) and, at the end of it, you swap over, hand back the keys or refinance. Madness to park £70k + into a car unless it doesn't make a dent or touch the sides of your financial position.
because cash purchase is the cheapest especially on a low interest environment - why pay 7-8x the base interest rate on both the capital and balloon of the transaction at 6%?GMAN75 wrote: ↑Fri Dec 14, 2018 10:10 am I don't understand why you'd ever fully fund one of the worst depreciating classes of assets out there. PCP exists for just that. Use either Porsche Finance or Oracle Finance. You can choose just how much equity you want to stump up, it's usually minimum 12 - 13% and what mileage you'd expect. Rates are around 6% on new vehicles (sometimes even lower) and, at the end of it, you swap over, hand back the keys or refinance. Madness to park £70k + into a car unless it doesn't make a dent or touch the sides of your financial position.
The car is depreciating but if you are payment interest on capital plus balloon you may end up paying GBP 7-10k in interest in 4 years, so not only you "lost" your monthly payments, the actual gfv of the vehicle is masked by prob GBP10k of interest you paid
Quick example:
Cash - GBP 70k (using your figures)
Finance:
- Assume 10% deposit - GBP7k
- Balloon after 48 months of 50% (being Macan) at say GBP 35k
- Monthly payment of GBP 832 at 6% interest rate (APR)
- Total interest paid: GBP 11,963
- Residual (using above): GBP35k
You would have paid GBP11,963 in interest plus GBP7k deposit plus GBP28k in depreciation, therefore your total cost in a GBP70k, your total payments were GBP39,963 plus a GBP7k deposit, and your guaranteed value is still GBP35k
Compared to cash your break even point is now GBP23,037 - assuming your car is indeed worth GBP35k, yes you lost depreciation and a half on this one and now your hard earned money is on the finance companies' pocket
So...assuming your comments of why not finance a depreciating asset - simple! Because you shouldn't double up on the depreciation by including thousands in interest.
This is of course only true if you can choose between paying cash or not
Deposit paid: Cayenne 3.0
Current: Audi Q7 272hp (2016)/ SQ5 (2015)
Weekend: 911 Carrera 4 (1999)
Daily: BMW i3 (2016)
Current: Audi Q7 272hp (2016)/ SQ5 (2015)
Weekend: 911 Carrera 4 (1999)
Daily: BMW i3 (2016)
If you want to lock up your capital in what will always be a depreciating asset, go for it. The constant here is depreciation and whether you finance your car or not, you'll eat that number. The variable factor is the interest rate. Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.mavg1986 wrote: ↑Fri Dec 14, 2018 11:33 ambecause cash purchase is the cheapest especially on a low interest environment - why pay 7-8x the base interest rate on both the capital and balloon of the transaction at 6%?GMAN75 wrote: ↑Fri Dec 14, 2018 10:10 am I don't understand why you'd ever fully fund one of the worst depreciating classes of assets out there. PCP exists for just that. Use either Porsche Finance or Oracle Finance. You can choose just how much equity you want to stump up, it's usually minimum 12 - 13% and what mileage you'd expect. Rates are around 6% on new vehicles (sometimes even lower) and, at the end of it, you swap over, hand back the keys or refinance. Madness to park £70k + into a car unless it doesn't make a dent or touch the sides of your financial position.
The car is depreciating but if you are payment interest on capital plus balloon you may end up paying GBP 7-10k in interest in 4 years, so not only you "lost" your monthly payments, the actual gfv of the vehicle is masked by prob GBP10k of interest you paid
Quick example:
Cash - GBP 70k (using your figures)
Finance:
- Assume 10% deposit - GBP7k
- Balloon after 48 months of 50% (being Macan) at say GBP 35k
- Monthly payment of GBP 832 at 6% interest rate (APR)
- Total interest paid: GBP 11,963
- Residual (using above): GBP35k
You would have paid GBP11,963 in interest plus GBP7k deposit plus GBP28k in depreciation, therefore your total cost in a GBP70k, your total payments were GBP39,963 plus a GBP7k deposit, and your guaranteed value is still GBP35k
Compared to cash your break even point is now GBP23,037 - assuming your car is indeed worth GBP35k, yes you lost depreciation and a half on this one and now your hard earned money is on the finance companies' pocket
So...assuming your comments of why not finance a depreciating asset - simple! Because you shouldn't double up on the depreciation by including thousands in interest.
This is of course only true if you can choose between paying cash or not
Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.
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I am not sure I would call it "easy" to generate 6% (break even) per annum - it beats real estate (perhaps not student accomodation), most dividend yields and bonds - unless this money is going to your business with a greater than 6% profit margin.
Care to share some other investment ideas?
[/quote]
I am not sure I would call it "easy" to generate 6% (break even) per annum - it beats real estate (perhaps not student accomodation), most dividend yields and bonds - unless this money is going to your business with a greater than 6% profit margin.
Care to share some other investment ideas?
Deposit paid: Cayenne 3.0
Current: Audi Q7 272hp (2016)/ SQ5 (2015)
Weekend: 911 Carrera 4 (1999)
Daily: BMW i3 (2016)
Current: Audi Q7 272hp (2016)/ SQ5 (2015)
Weekend: 911 Carrera 4 (1999)
Daily: BMW i3 (2016)
I just knew that would come up!
It's just the same as saying that you don't actually have the cash to put directly into the car, which is fine. Any cash you do have generating more than 6% per annum is either at risk or you are putting considerable time and effort into making it perform at that level. It's certainly not sitting around in a safe bank account generating that kind of interest.
For those who have enough personal savings and don't want the hassle and risk of chasing investment opportunities above 6% just to break even, it's just easier and cheaper to buy the car outright and forget about it.
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