Cars - Most are financed?

[DOD]Asprilla;15867695 said:
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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I suppose the question is one of why there is an immediate supposition that if you have £30,000 in savings you can "afford" to pay £30,000 in cash for a car. I guess that "afford" does somewhat imply being able to meeting the cost of something without being adversely impacted. If your own assessment of the risk of living requires that you have £5,000 in savings, then you can't really afford the £30,000 car until you have £35,000 in savings. Similarly, if you require £10,000 for cash-flow purposes, you really need £40,000 before you can afford it.

The only time you will finance something when you can really afford it, is if the potential lost interest or opportunity from the missing money is greater than the interest on the borrowing. It requires that you have better investments available than the lending institution.
 
If you look at it that way then there are thousands of possible factors that would help define affordability. I'm just looking at financial terms.

As I implied, the loan has now been paid off and as it turns out I would have been able to pay cash in the first place without any impact at all. I chose not to in order to mitigate any risk.
 
jakeke said:
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 :(
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same here, always the way ive been. its like im alergic to borrowing money. getting a mortgage should be fun
 
Easily 50% of the new cars I sell are on finance we arrange for the customer, probably about 30% on used cars. Not many people have £15-£30k handy in the bank to buy new cars outright.
 
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My parents drummed in to me as a kid that getting in to debt was a bad thing to be avoided at all costs. Obviously this didn't include mortgages and other than the 2/3 of our house that I owe to the Nationwide my only other debt is my student loan (which in hindsight I wish I had never got but now I have it I won't be paying it off early)

I can't see a time that I would finance a car when a grand can buy something perfectly serviceable.
 
NickXX said:
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.
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I can see the logic but so many people think "Oh I save £300 a month... that means I can easily finance a car at £275 a month." Then when that massive £25 slush fund doesn't cut it for a couple of months they are straight into the red.

I always over estimate the cost of things, over budget and try to keep a nice amount of cash on hand at zero notice but I will admit that I am probably over cautious when it comes to cash.

For that reason I can't get my head around borrowing money for a car without alarm bells going off.
 
[TW]Fox;15867528 said:
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.



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!'.
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Sorry I wasn't very detailed in what I meant. Most people I know pay a cash deposit and have a bank loan to buy cars. The rates I see in the local paper for BMW dealer finance make baby jesus cry and you'd have to be mad to take it out.

I know it's possible to get a bank loan for a relatively cheap car but is it possible to get a £50k loan classed as a car loan?
 
A scenario for you and it's not me.

Could Mr Porsche nut spend £120K cash on a new 997 GT3RS.2 today? Well no not really, not unless he sold something to fund it. Could he afford to put down, for the purposes of this thread, £30K and finance the rest for say £1200 per month over 3 years? Well yes, probably, £1200 per month is not something he'd struggle to find or fund and he'd still have more than enough left (into 4 figures) when he had paid all his other outgoings each month. If he needed to get out quickly, say if his situation changed and he needed the cash, could he do it for no more cash to pay off any outstanding debt, well yes, easy, arguably for a profit if early in its life. This is quite a common approach I hasten to add, I use it as a fair example of how many people WILL fund such a car. So then, can he afford the car?

This thread does seem to have many people who look at fiance as a bad thing. Now while I fully accept that badly thought out finance is rubbish and people who don't give themselves a risk free way out and who can afford to kiss their deposit goodbye are idiots. Those who look down their noses at people who acquire things they want today, on well structured and de-risked best rate finance are niave. I know many wealthy people, the types that earn more in a month than 90% of poeple earn in a year yet they are more than happy to finance all sorts of things.

It is ALL relative.
 
im not in the gt3 rsr turbo gti example situation up there, but if you had to find £120k i think most people would rather a whole chunk of that still sat in their account for day to day eventualities rather than sink it all into one car.

they would probably find far better (profitable) uses for it seeing as theyre £120k people in the first place
 
Financing a car has obvious cash flow benefits, especially if you run a business. My car wasn't that expensive so I bought it cash.
 
Personally I would never take out finance on a car, id always go the bank loan route, gives you greater flexibility and the cash isn’t intrinsically tied to the car. At the moment I’m currently saving for a car and once I have a decent deposit together I’ll most likely finance the rest through a bank loan, having said that I doubt I’d ever spend much more than 10k on a car.
 
finance is for people who live outside of their means. simples
i always pay cash for everything.
this is why i don't have credit cards because they are a great way of getting into debt
 
[DOD]Asprilla;15867695 said:
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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No it didn't - there was no risk. You'd have been better to buy the car outright, pay no interest and then rebuild your savings.

You, like many others, fall into the category of paying interest on a loan, while earning no interest on savings because you like the psychological comfort of knowing you have money on deposit.

It may comfort you, but logically it makes no sense.
 
photoshop said:
finance is for people who live outside of their means. simples
i always pay cash for everything.
this is why i don't have credit cards because they are a great way of getting into debt
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Not true. If I can afford to pay £200 on car finance payments after I've paid my various bills and other outgoings then how am I living outside my means?

You can't buy everything in cash. Well.. the vast majority of us can't.

Credit cards used sensibly are no problem. Its the people who regard it as an extension of their bank balance that get in to debt with them.
 
photoshop said:
finance is for people who live outside of their means. simples
i always pay cash for everything.
this is why i don't have credit cards because they are a great way of getting into debt
Click to expand...

I'd generally agree with this, but there are exceptions. If you can invest the cash and make more than the interest you're paying on the car back, it's the more sensible choice. If you finance a brand new Kia, pay a ridiculous interest rate and have little spare cash, it's just silly - you'd be far better with a reasonable £2k second hand car.
 
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