Porsche inflation (sometimes best not to look)

[Scooby_Doo]

Well you could mitigate the costs somewhat if you said you had the £57k loan invested at say 4.5% interest you'd get £10,900 in interest over the 4 years.
Going back a few years I took out a 3 year loan to pay for one of my cars at a really good interest rate, which was close to the interest rate on my savings, to convince my wife that I wouldn't sell the car until I'd paid off the loan.

[Jon A]

It's a bad idea to buy a depreciating asset on finance. It's a worse idea if that finance is PCP, the most expensive finance product out there. Given the popularity of PCP though, I presume most people don't understand the product, do it because everyone else does it, badly want something they cannot otherwise afford, or simply don't care!

I think there are a lot of naive buyers out there who don’t have the first idea how much they are actually paying in interest. They are drawn in by the only thing that matters to them, how much does it cost a month….. they are a salesman’s dream!

Before we all start getting a downer on PCP, it all depends on circumstances. I get a car allowance for example. This is only available to me if I have a car so I could buy an old Bangor and pocket the cash or use it to pay the monthly payments on a PCP for a car I really want.
Given this is available to me, I would be mad to use my own savings to fund a depreciating asset. The interest rate is relevant but not critical as it’s not my money paying it!
It’s worked very nicely for me for the last 15 years

[Plyphon]

I love PCP. It allows me to keep my capital for property and home improvements, which keeps the Mrs happy, but my monthly salary pays for my cars. All whilst tucking away into investments for my future.

Perfect.

If I wanted to buy cars in cash - which I could have done when I took delivery of mine - it would put out our next property purchase by a number of years. This way I can have both, now.

[Col Lamb]

It's a bad idea to buy a depreciating asset on finance. It's a worse idea if that finance is PCP, the most expensive finance product out there. Given the popularity of PCP though, I presume most people don't understand the product, do it because everyone else does it, badly want something they cannot otherwise afford, or simply don't care!

I think there are a lot of naive buyers out there who don’t have the first idea how much they are actually paying in interest. They are drawn in by the only thing that matters to them, how much does it cost a month….. they are a salesman’s dream!

Before we all start getting a downer on PCP, it all depends on circumstances. I get a car allowance for example. This is only available to me if I have a car so I could buy an old Bangor and pocket the cash or use it to pay the monthly payments on a PCP for a car I really want.
Given this is available to me, I would be mad to use my own savings to fund a depreciating asset. The interest rate is relevant but not critical as it’s not my money paying it!
It’s worked very nicely for me for the last 15 years

Everyone is different, financially speaking that is.

In 2003 I gave back the Company Car and bought a new 3.0 litre Jag with the Car Allowance.

Said Jag was bought cash, having cashed in some Option shares so using what the Share Options cost be the actual price of the new car was £19k.

So minus the Car Allowance for about two years the annual depreciation of actual cash paid over the 11 years that I had the car was a miserly £1,000

No complains financially from me at that, the Jag served its purpose and on the whole was very comfortable and pretty reliable which is more than can be said for the dealers After Sales Service.

[Scooby_Doo]

I love PCP. It allows me to keep my capital for property and home improvements, which keeps the Mrs happy, but my monthly salary pays for my cars. All whilst tucking away into investments for my future.

Perfect.

If I wanted to buy cars in cash - which I could have done when I took delivery of mine - it would put out our next property purchase by a number of years. This way I can have both, now.

with PCP rates currently @ circa 11% and savings rates @ circa 5% surely paying for a car with savings would be the best option.

[dammitjanet]

Everyone is different, financially speaking that is.

In 2003 I gave back the Company Car and bought a new 3.0 litre Jag with the Car Allowance.

Said Jag was bought cash, having cashed in some Option shares so using what the Share Options cost be the actual price of the new car was £19k.

So minus the Car Allowance for about two years the annual depreciation of actual cash paid over the 11 years that I had the car was a miserly £1,000

No complains financially from me at that, the Jag served its purpose and on the whole was very comfortable and pretty reliable which is more than can be said for the dealers After Sales Service.

Did you include the tax as a result of the P11D benefits in that calculation? I can see where someone with the capital could be better off in that situation, but the extra taxation would/should put a dent in in the plus column

[Jon A]

Everyone is different, financially speaking that is.

In 2003 I gave back the Company Car and bought a new 3.0 litre Jag with the Car Allowance.

Said Jag was bought cash, having cashed in some Option shares so using what the Share Options cost be the actual price of the new car was £19k.

So minus the Car Allowance for about two years the annual depreciation of actual cash paid over the 11 years that I had the car was a miserly £1,000

No complains financially from me at that, the Jag served its purpose and on the whole was very comfortable and pretty reliable which is more than can be said for the dealers After Sales Service.

Did you include the tax as a result of the P11D benefits in that calculation? I can see where someone with the capital could be better off in that situation, but the extra taxation would/should put a dent in in the plus column

A car allowance is not taxed as a P11d benefit but rather attracts income tax instead. Is this what you meant?

[Plyphon]

I love PCP. It allows me to keep my capital for property and home improvements, which keeps the Mrs happy, but my monthly salary pays for my cars. All whilst tucking away into investments for my future.

Perfect.

If I wanted to buy cars in cash - which I could have done when I took delivery of mine - it would put out our next property purchase by a number of years. This way I can have both, now.

with PCP rates currently @ circa 11% and savings rates @ circa 5% surely paying for a car with savings would be the best option.

Well I didn't take 11%! That would be a different kettle of fish, for sure.

[PaulR]

Two golden rules of wealth management:

1. Never finance a depreciating asset
2. Do consider financing an appreciating one

Say you buy something at £50k with £10k interest. If that's worth £25k a few years later, it's lost you £35k. Not only have you lost money on depreciation, but you've lost even more by paying interest on it.

However, if your asset is worth £70k, you've overall gained £10k. Your £10k expenditure in interest was worth it.

Many get the first rule wrong; I hear people say you should finance a depreciating asset. The likely reason for this is that it's painful to spend your hard-earned savings on a depreciating car. Finance 'helps' because the focus moves to monthly payments and not the TCO.

[Jon A]

Two golden rules of wealth management:

1. Never finance a depreciating asset
2. Do consider financing an appreciating one

Say you buy something at £50k with £10k interest. If that's worth £25k a few years later, it's lost you £35k. Not only have you lost money on depreciation, but you've lost even more by paying interest on it.

However, if your asset is worth £70k, you've overall gained £10k. Your £10k expenditure in interest was worth it.

Many get the first rule wrong; I hear people say you should finance a depreciating asset. The likely reason for this is that it's painful to spend your hard-earned savings on a depreciating car. Finance 'helps' because the focus moves to monthly payments and not the TCO.

Agree with this entirely except that equation can change if you are in receipt of a regular income which is not derived from your other assets.