Financing your Macan

[Deleted User 1874]

I look at it in a different way. I know that one day I’m going to die and at my age that event is getting closer much more quickly than if I was still in my twenties or thirties. I’m at a point in my career where I can generate more income than I need to live a comfortable life and I have assets and cash in the bank which I’m probably not going to be able to take with me when my times up so will go to my family for them to enjoy.

But I buy my cars on finance. Why? Because so long as I get a deal on the rate I prefer to use someone else’s money to buy cars and keep my money where I can get it when I want it.

I know it’ll cost more in the long run but I fully intend to enjoy my life and buy what I want when I want and accept the associated costs because it has little impact on the overal picture. Life costs money so enjoy life while you spend it.

Thank you for a nice, well-balanced and sanguine comment which I think people should appreciate.

What the dying part?

[Pivot]

Thanks for the insightful exchange. Would be fair to say that by buying cash, I save 6% before I do anything, but of course I tie in liquid capital into illiquid depreciating asset.

So, when do you suggest PHP? Is it when you decide to lease the car with an intent of flipping cars every 3-5 years without taking ownership.

The HP would be to lease from the bank and take ownership when the car is paid off.

Pay cash, if you are sitting on the cash and not generating return over 6%.

Did I miss anything?

[mavg1986]

Thanks for the insightful exchange. Would be fair to say that by buying cash, I save 6% before I do anything, but of course I tie in liquid capital into illiquid depreciating asset.

So, when do you suggest PHP? Is it when you decide to lease the car with an intent of flipping cars every 3-5 years without taking ownership.

The HP would be to lease from the bank and take ownership when the car is paid off.

Pay cash, if you are sitting on the cash and not generating return over 6%.

Did I miss anything?

Not really

Cash if you sitting on it you can save 6%
PCP the most expensive but affordable (monthly), gets people into ownership at very expensive rates especially because of the balloon or gfv
PHP good if you don't have the upfront cash but you want to keep the car for long - remember that PCP you are paying interest on the ballon twice (if you choose to keep the car later) and PHP not as you are paying the car throughout

[PaulR]

My first post, although I feel like I've been a member for years! Thought I'd wade in here, as I'm fascinated by the fact so many cars are now financed on PCP. I've done tonnes of research of this, much to the boredom of everyone I know. I've spreadsheets showing how the options compare. In summary, cash is always the cheapest way to purchase a car. I've never found anything else that works out cheaper. And the most expensive way to finance a car? PCP.

This is what makes PCP so fascinating. It's the most expensive way to finance a car, yet it's the most popular way to do so. It's a finance plan that's designed to look cheap, and it does this by having a lower monthly payment than other types of finance. It's similar purchasing a house on an interest-only mortgage versus one on a repayment. The interest-only mortgage has a lower monthly payment, however you pay more in interest over its term. With PCP, part of the loan is 'interest-only' and part is 'repayment'. The loan amount up to the GMV is interest-only and the rest is repayment. As you increase the GMV, you increase the interest-only portion, and this results in a smaller monthly payment. This might sound good - but a larger amount of your monthly premium is interest. The TCO of the car is increased.

Versus any other types of finance (assuming similar interest rates) PCP simply works out the most expensive way to finance a car. Every other type of finance will give you a lower TCO. And cash gives the lowest TCO of them all.

I'm absolutely not knocking PCP or other forms of finance; they're all there for a reason to suit different people's circumstances. PCP in particular is popular for a reason!

[MikeM]

Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.

Clearly some of the comments here are tongue in cheek, a 6% return net? Maybe you can enlighten us on some legit tax avoidance schemes while we are on the subject If you have it, cash is the only winner here, even the schemes with 0% APR tie you into a car that you have just paid list for, when you can find double digit discount elsewhere. Each to their own but if you are purchasing any depreciating asset any additional expense is just further money lost. If your happy with that no problem but if you have the funds available and don't need them for anything pressing, then spend it. You can't take it with you and HMRC will take any additional at a rate that makes even PCP's a bargain

[pmg]

Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.

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 suspect it could well be better to spend money before Corbin places larger taxes on both the capital and the income from it than keep the capital and borrow.

[mavg1986]

Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.

Clearly some of the comments here are tongue in cheek, a 6% return net? Maybe you can enlighten us on some legit tax avoidance schemes while we are on the subject If you have it, cash is the only winner here, even the schemes with 0% APR tie you into a car that you have just paid list for, when you can find double digit discount elsewhere. Each to their own but if you are purchasing any depreciating asset any additional expense is just further money lost. If your happy with that no problem but if you have the funds available and don't need them for anything pressing, then spend it. You can't take it with you and HMRC will take any additional at a rate that makes even PCP's a bargain

Just to be clear your "quote" here is me quoting someone else's view - I agree with you on your view

[MikeM]

Generating 6% per annum elsewhere is easy so utilising your free capital to beat that hurdle shouldn't present any issues whatsoever.

Clearly some of the comments here are tongue in cheek, a 6% return net? Maybe you can enlighten us on some legit tax avoidance schemes while we are on the subject If you have it, cash is the only winner here, even the schemes with 0% APR tie you into a car that you have just paid list for, when you can find double digit discount elsewhere. Each to their own but if you are purchasing any depreciating asset any additional expense is just further money lost. If your happy with that no problem but if you have the funds available and don't need them for anything pressing, then spend it. You can't take it with you and HMRC will take any additional at a rate that makes even PCP's a bargain

Just to be clear your "quote" here is me quoting someone else's view - I agree with you on your view

[Miopyk]

To add to my earlier post, anyone that doesn't think finance costs more than cash unless the interest paid can be offset by interest earned is probably being somewhat foolish. Even 0% deals aren't always all they're cracked up to be as in a lot of cases you could probably get a discount that would be more than likely better that the additional depreciation you would suffer at full price.

However, in my case, buying through finance has meant that we now own the Cayman and the SLK outright and we still have our capital untouched. Now I know that the argument would be pay cash and save what you would have paid each month and I'd be better off but unfortunately my brain doesn't work that way. So as I said I accept that it'll cost me more but I'm happy that for me the other way works.

[PaulR]

When a car's purchased on finance, the finance company is buying from the dealer and charging the customer for the privilege. The finance company only exists to make money out of us. So much money in fact, that they usually give the dealer a reasonable commission - ultimately paid for by the customer in interest payments. It stands to reason that anything purchased on finance is going to be more expensive than purchasing yourself outright.

Agree about the 0% deals not really being 0%. For example, a £20K car at 0% interest is still more expensive than negotiating a discount and buying outright for £19K. I'm sure many cars these days have artificially inflated RRPs, so dealers can 'pretend' you're getting a good deal, whether that be 0% interest or a dealer contribution towards a finance product.