Finance options

All Porsche Macan Related Discussion
Clive
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Post by Clive »

adam b wrote: Sat Aug 17, 2019 9:15 pm There used to be a saying that you should buy a 3 year old car and sell after 5

The biggest cost of cars is depreciation and generally the best way of maximising that cost is buy new and sell at 2 or 3 years through a dealer.

I bought well IMHO and got a great spec 11k miles turbo. 2 years old and 1/3 off list. I paid 40 cash and borrowed 14, will extend warranty and keep for 4 or 5 years hopefully - don’t need any more pace or luxury than this.

Would never use PCP (unless as a short term tactic to get a discount and then pay off the following month), borrowed the 14 via my bank at 3.3%
I'd have a pre-loved Macan for the reasons you state. The darned dog prevents this...

jk88
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Post by jk88 »

Clive wrote: Sat Aug 17, 2019 9:33 pm If I pay off the PCP after the 1st payment do I pay the balloon at the same time or at the end of the original contract eg 3 years?
I believe there's a difference between settling and withdrawing from a finance agreement. Settling means you pay off the balance owed at any time including interest charges (which may be reduced at the discretion of the lender), whereas withdrawing is when you cancel the arrangement and pay off the balance in full, however I think you have to notify the lender within 14 days of the start of the loan. In this case you get to keep any deposit contribution from the dealer. I've taken this route in the past.

One other feature of car finance is that, by law, you can return the car with no penalty at any time once 50% of the loan (including interest and fees) has been paid off. Probably doesn't help much with Porsche as the residuals are better than average, but can be advantageous for higher depreciating brands taken over say a four year term with a low deposit. More on it here https://www.thecarexpert.co.uk/settle-a-pcp-early-2/
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PaulR
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Post by PaulR »

It's good to finance an appreciating asset but bad to finance a depreciating asset. If you buy something at £50K, spend £10K on interest but it's worth £80K then that was wise. You've made £20K. This is hopefully what happens with a house or investing in a new business for example. However if you purchase a £50K car, spend £10K on interest and it's worth £25K in a few years then that's really not a great decision. You've just wittered away £35K. With a car there's not much you can do about depreciation. However I would have thought wise to try and minimise the cost to you. Any finance will increase the cost, however my bug bear is with PCP as that really exacerbates the cost. Looking solely at the TCO perspective, it really is the worst car finance product out there. The dealers and finance providers must be having a great laugh at all the gullible people taking them out nowadays. They're absolutely raking it in at the consumers' expense.

The dealers make a lot of money out of PCP for various reasons explained elsewhere, which is why they offer great incentives on them. If they'll only offer you a great deal on a PCP then you can take out the PCP and cancel the contract straight away. I've not done this myself, but I've a friend who's done this multiple times. Either pay off in cash or use alternative finance.
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PaulR
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Post by PaulR »

This is a copy-and-paste from my other post, giving a real life example of PCP cost:
PaulR wrote: Mon Dec 17, 2018 7:50 pm Here's a real example showing the difference in financing a car on PCP versus a repayment loan. It assumes a £70K car, a £10K deposit and a 9.6% interest rate over four years (as quoted from a Porsche dealer). Also a £36,000 GMV.

The point of this is to illustrate just how expensive PCP is versus other types of loan - even when the interest rate and other parameters are the same.

PCP
Price: £70,000
Deposit: £10,000
Financed amount: £60,000
- Interest only portion: £36,000
- Repayment portion: £24,000
Monthly cost: £902
- Interest only portion: £288
- Repayment portion: £614
Total payable (excluding final payment): £52,424
Final payment: £36,000
Total payable (including final payment): £88,424
Total interest: £18,424

Repayment/HP
Price: £70,000
Deposit: £10,000
Financed amount: £60,000
- Interest only portion: £0
- Repayment portion: £60,000
Monthly cost: £1,536
- Interest only portion: £0
- Repayment portion: £1,536
Total payable (excluding final payment): £82,222
Final payment: £0
Total payable (including final payment): £82,222
Total interest: £12,222

So PCP costs £902 pm with total interest payable of £18,424. The repayment is £1,536 pm with total interest payable of £12,222.

The PCP looks cheaper if you only focus on the monthly amount. But you pay much more in interest. Not only that, you end up with nothing at the end of the term. If you want to buy the car, you need to find £36,000. The worst thing you could possibly do is finance that, as you'll pay even more in interest.

Which is why most people, once on a PCP deal, are stuck on them car after car. All other options considered, it really is a terrible way to finance a car.

As has been mentioned, those of us with the cash to buy outright might want to finance on the basis our cash (or investments) can earn more than the car interest. When compared to a repayment (or HP), then it's a case of ensuring our cash is getting a higher interest rate. However, when compared to PCP, as I've alluded to above, our cash needs to get a significantly higher rate in order for it to work out better.
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Clive
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Post by Clive »

I'll check the fine print. I'd be surprised if the finance company contribution of £2.5k wasn't repayable if I settle the full amount with 14 days of the contract start. I will calculate the APR taking into account the £2.5k.

Apologies to Steve for sidetracking the thread.
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Pivot
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Post by Pivot »

Back to Steve OP... do you intend to flip cars in your retirement, or is it your last car that you will ride until wheels fall off?

If the former, then you might prefer to finance it. If the latter I would buy for cash and cry once.
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PaulR
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Post by PaulR »

Pivot wrote: Sun Aug 18, 2019 3:00 pm Back to Steve OP... do you intend to flip cars in your retirement, or is it your last car that you will ride until wheels fall off?

If the former, then you might prefer to finance it. If the latter I would buy for cash and cry once.
I'm intrigued to understand your rationale behind this thinking Pivot? I would recommend the other way round! If keeping a car a long time, I can understand financing it (assuming you cannot justify buying it outright). The money spent on interest may not be a big deal due to keeping the car a long time. However, if changing a car frequently and each time financing it, that's a tremendous amount of money wittered away on finance contracts.
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Pivot
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Post by Pivot »

Well, it seems that large part of the UK population is flipping cars, keeping repayments artificially low with PHP and never taking the ownership. I am not in favor of this approach, but speaking to Porsche dealer, it seems to be the default position.

When I reach my retirement I will buy cars only if I have to and for cash. That is my default position... if I don’t have enough cash, I cannot have it.

Life expectancy is increasing, pensions stay relatively flat, inflation makes us poorer year-over-year, add brexit and currency devaluation... if I was preparing for retirement now, I wouldn’t enter into lease agreement, where I don’t own the vehicle at the end of the payment cycle.

Unless, I was a trust-fund beneficiary and money is not a constraint... that is entirely diff scenario.
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Paul
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Post by Paul »

Most of the general public don’t have a “spare” £20K (or whatever amount) to buy a new car, but they do have £300 a month to spend on the nicest form of transport they can.

Ownership has slipped away in favour of usage, at artificially low amounts or otherwise, in fact the lower the better as they can drive a posher car.
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Post by MikeM »

Pivot wrote: Sun Aug 18, 2019 9:55 pm Life expectancy is increasing, pensions stay relatively flat, inflation makes us poorer year-over-year, add brexit and currency devaluation... if I was preparing for retirement now
😳 skip retirement, just bury me now ‼️😉😂😂
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