Cars - Most are financed?

fRostiE

fRostiE

fRostiE

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I recall being in a BMW dealership a while ago and the chap saying that there was a fair percentage of their sales were financed... 60% rings a bell, probably wrong though. I do recall at the time thinking, "wow that's quite a chunk"...

I just wondered who, how, what and why people finance their cars... obviously coming across 25k-30k to throw at a new 3 series isn't something which will happen to most people.

Generally when buying a new car for yourself, how do you manage your purchase? Chop in the old car + cash + finance? Old car + finance and leave your funds where they are?

I personally have purchased both my current and previous cars outright (had very very little outgoings and am quite good at savings)...

Just being nosy and wondered how it works in the real world when there is a mortgage and all the fun extras to pay for :)... So if you're willing, how do you work it?
 
A lot of BMWs that are bought froma dealership will definitely be leased by businesses.

I can imagine a lot are also bought on Finance, people buy cheaper cars or Finance so I wouldn't be suprised.

Both my cars have been bought with cash. If I was using my own money I wouldn't be a brand new car (unless I was rich to the point where it really doesn't matter).
 
I'd imagine most people who buy 'premium' cars could afford to purchase outright but chucking £50k at a car isn't great for cashflow and the amount paid in interest on finance would be nothing compared to what they could do with that amount of cash in the same timeframe.

Then you get people who can't afford to buy outright and get finance based on the 'Oh look a BMW for £300 a month we can afford that' and keep renewing the contract every 3 years and end up with a never ending payment toward a car every month just to have the new plate.
 
A guy I know. He loves 'image'. Buys a 116 in white from dealership. Every penny financed :D Oh how I cried when he told me.
 
I used a work bonus to pay for mine, think I had to put a few K towards it but that was just from my current account.

I'd consider finance as an option in the future if it was financially prudent compared to freeing up cash.
 
If I was spending any more than £12k on a car, I would probably look at financing most of it or a majority of it depending on the package.

The reason why is because the cost of the finance (if any, after negating the amount I'd be able to earn with access to the cash I didn't have to spend there and then) tends to be worth it to me just to be able to have access to the amount I'd otherwise spend in my cash float.
 
Jonny ///M said:
I'd imagine most people who buy 'premium' cars could afford to purchase outright
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Most of them can't - which is why your average X5 is financed. Very few people can afford to spend £50,000 on a car in cash.

but chucking £50k at a car isn't great for cashflow and the amount paid in interest on finance would be nothing compared to what they could do with that amount of cash in the same timeframe.
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I can't help thinking this is a myth perpetuated by those who wish to rid themselves on the 'stigma' they perceive goes with financing a purchase.

Almost all the time (There are, of course, exceptions) dealership finance is exceptionally poor value for money and is easily beaten by borrowing elsewhere. There are only a limited number of people who could pay cash but instead decide to bend over and take dealer finance instead, those that do generally do so where there is a special deal on or similar if you take manufacturer finance.

The interest in a finance package far outclasses the interest you'd gain if you kept the cash and paid finance for the car.

Despite what people may try and argue in most cases the reason for finance is because they simply cannot afford to buy the car any other way, and would rather have the car + the associated costs of finance rather than compromise.

The smart way of borrowing to buy a car is not to go 'Wow, its only %x flat? What a great deal Mr Salesman!'.
 
My 330d was £1k cash deposit and the rest bank loan payable over 2 years.

M3 was cash from private sale of 330d + bank loan payable over 3 years.

I don't really see any difference in saving up and financing a car. You're allocating several hundred pounds away from your current account every month either way - with finance however, you get the car you want several years sooner. So long as you have a steady source of income and don't overstretch yourself, there won't be a problem.
 
NickXX said:
My 330d was £1k cash deposit and the rest bank loan payable over 2 years.

M3 was cash from private sale of 330d + bank loan payable over 3 years.
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For clarity I see car purchase using a bank loan with a decent deposit and car purchase using dealer finance as two different things.

I have no issue with bank loans and would consider it in the future if the need arose.
 
As has been mentioned, I could afford to pay cash for my car, but instead I went 50/50 cash and loan to protect my cash flow. I'll probably do the same with the next one.
 
[DOD]Asprilla;15867549 said:
As has been mentioned, I could afford to pay cash for my car, but instead I went 50/50 cash and loan to protect my cash flow. I'll probably do the same with the next one.
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I dont think I'll ever get my head around the way people word this, I guess we just have different ideas of the term 'afford'. To me, I can 'afford' something if buying it doesn't have a negative affect elsewhere. Clearly for you, buying the car outright would have had that affect so you chose to part bank loan it.

Which is a very sensible idea and probably one I'd have done myself. but then you say you could have 'afforded' to pay cash... :confused:
 
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Financing things has always intrigued me, I was brought up to believe "if you can't afford it then don't buy it". A few of my friends finance their cars, two have Yaris'sisis and only got them new because they don't trust the second hand market. But one has financed an S-Line A5, purely because he wants to have a "flash car" whilst he's young. I just don't get it, why put yourself in debt for something that is not necessary?

What's the general rate of interest on financing a car? Do people who finance spend quite a bit more than the cars actual value just to pay via monthly instalments?
 
I'm with nuvpal.
I buy a car that I already have the money for, if that be £1k or £10k. I can see the reason for purchasing a 0% car with £2k cash back, when your going to keep it until it's no longer worth repairing. But paying 7% on a £55k M3 when you earn £30k is crazy in my view.

Just look at other countries around the world that don't have this UK car 'snobbery' if you will, a much better way of thinking about motoring if you ask me.


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But that also goes for everything I buy, TV's and so on, I buy it with money I have in my bank, or I don't buy it.

I once used a 12 months 0% on my Credit Card, but that's because I made money from using it, it wasn't used to purchase product I could not paid for in the first place, and used it towards a better credit rating.
 
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[TW]Fox;15867545 said:
For clarity I see car purchase using a bank loan with a decent deposit and car purchase using dealer finance as two different things.
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When people "finance" a car and refer to "financing a car" (like I do), it does not necessarily mean "finance from the dealer".

Although, it would be wrong for you to write off all dealer finance - there are dealers who will match the best bank loans available to you.
 
If you are buying a car on finance you are buying 2 items and should therefore shop accordingly. So many people miss this when buying a car on finance and if I had a pound for every person who has told me they have bought a car for 1% interest (totally wrongly of course) I'd be retired!
 
If the car costs more money than I have, I can't have the car. Either I save up for longer or get a cheaper alternative. I thought that was normal :(
 
[TW]Fox;15867574 said:
Which is a very sensible idea and probably one I've done myself. but then you say you could have 'afforded' to pay cash... :confused:
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Ok, with example figures;

I've got 25k in the bank and I see a car I like for 20k. I spend 10k and loan 10k keeping 15k in the bank.

The 15k stays in the bank for a rainy day until I've got 25k again and then I pay off the loan. Whether I took a loan for the full amount, or paid the whole lot in cash has had only a minor financial impact in overall terms, but it reduced my overall risk.
 
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Hmm, my first car came from a graduate loan. Second car was a direct swap with the first, current and third car was cash from sale of the second. My car is mine :)
 
I bought my VXR with a chunk of cash (25%), and financed the rest - I pay 8% yearly, to me, this is an acceptable cost of being able to have the car now.

When I changed to the ST, I traded the Corsa in and paid the difference.
 
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