As a final figure in a finance agreement, though.
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As a final figure in a finance agreement, though.
Soldato
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Wasn't really renting as he has equity in it.
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It's worth more than £11600, thats the point. I've no idea what his spec and mileage is, but a base spec car with average miles is worth £13600 trade so he's been asked for a favourable final payment.
[TW]Fox;28097385 said:
Yeah, I guess it's not too bad. It does mean mathematically that his car is only worth £2k to him after paying £12k over 3 years was my point. I'd be a little disappointed, but I guess that's what happens when you buy new? I assume it wasn't the best APR either. As long as he's happy, it's all good
Indeed, hence the quote.
Although a % figure on the finance would be just as useful.
I'm curious why more people don't just go to the bank and get a loan.
Not always, but surely a more competitive price can be had?
Unless he wasn't planning on buying originally, but even so, a few grand saved is still a few grand..
Because unsecured loans are harder to get and become less competitive once you head north of £20k and most people taking out finance are doing so because they do not have cash so therefore need to finance a sufficient proportion of the price that taking the smaller loan and topping up with cash isn't an option.
For example the current Santander offer for silly low APR is only for loans of £7500 to £15000 (Or £20k for 123 customers) meaning if you want to buy a £30k car and dont have £10k spare you are fresh out of luck.
Once you start borrowing more than that lenders want some sort of collateral before offering tidy deals.
Soldato
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or you have a secure job and like the idea of driving around in a brand new £33k car for £250 a month inc vat for four years. Plus the option at the end to either buy the car, taking advantage of a low rate apr, or simply handing it back keeping your options completely open
lloyds do most of the lease agreements, and the final payments to buy the car at the end tend to be very generous
everyone says that leasing is a bad idea as you have nothing to show for your 48x£250 payments at the end. What they fail to understand, is that every single new car driving off the forecourt loses thousands before it hits your driveway. New cars lose money, no matter if they are bought or leased. Leasing just means you are paying the depreciations over x years, which anyone buying a new car will lose
now the kicker with a lease, is that after the four years you have paid £12,000......but the car probably hasn't lost that amount. It's maybe only lost £7,000.....in which case leasing has cost you an extra £5,000 - minus whatever hit you would have had with interest rates if you borrowed that initial amount from a standard loan.....so probably £2,500 - £3,000 as a total lost (lease vs finance). The upside is like I said earlier, options and pretty much not finding a lender willing you give you £30k+
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I know of very few people who see car ownership as an investment in an asset... Why do you want to spend 30k on something that's on a fairly rapid downwards value towards zero?
If you want a 30k car, you're probably not going to be keeping it for more than 3-4 years so what's the point in buying it outright with a loan to then trade it in again at the end? A bank loan is a good way to OWN a car but most people (in the general public not this forum) don't want to OWN a car, they just want to drive a car... So what's the benefit in paying £500 a month on a loan rather than £250 a month on PCP? A loan will work for a lot of people and there are good deals around but it's not an alternative to PCP - neither are bad things, they just suit different sorts of buyers. Someone who wants a brand new Nissan Juke is unlikely to want to carefully shop around for a low rate loan and cherish it for years... They want to spend £150 a month for an car.
And being particular - PCP is not a lease. A lease is a lease where you rent the car. A PCP is a contract purchase where you owe the agreed price on the car which is paid over the term with a balloon payment at the end
If you want a 30k car, you're probably not going to be keeping it for more than 3-4 years so what's the point in buying it outright with a loan to then trade it in again at the end? A bank loan is a good way to OWN a car but most people (in the general public not this forum) don't want to OWN a car, they just want to drive a car... So what's the benefit in paying £500 a month on a loan rather than £250 a month on PCP? A loan will work for a lot of people and there are good deals around but it's not an alternative to PCP - neither are bad things, they just suit different sorts of buyers. Someone who wants a brand new Nissan Juke is unlikely to want to carefully shop around for a low rate loan and cherish it for years... They want to spend £150 a month for an car.
And being particular - PCP is not a lease. A lease is a lease where you rent the car. A PCP is a contract purchase where you owe the agreed price on the car which is paid over the term with a balloon payment at the end
Odd post that makes little sense. The reason to find with a loan is nothing to do with ownership it's because it simply results in a lower total overall cost in some scenarios, that's all.
Total cost is what matters. That lower monthly payment often results in a higher overall cost.
Total cost is what matters. That lower monthly payment often results in a higher overall cost.
It doesn't make sense to you but that's not surprising. The point is that most people don't think like that - rightly or wrongly. Most people take home a monthy salary, they want to use a certain amount to run a car. I'm not saying it's cheaper or better but I am saying it's understandable. Total cost is what matters to you and that's uncompromisingly logical, but what matters to you isn't the same thing that matters to a lot of people
And it is about ownership, totally. Not owning the car gives flexibility by not having money tied up in a depreciating asset.
And it is about ownership, totally. Not owning the car gives flexibility by not having money tied up in a depreciating asset.
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It's about the most cost effective way to have the use of Vehicle A for Time Period Y. Generally, the cheapest way will be to cash purchase a discounted car and the most expensive will be a straight lease, with a bank loan, PCP and HP occupying the middle ground.
There are exceptions to everything - but on average, the above is true. The ownership/not ownership thing is entirely separate really.
It's not that straight forward though is it - compare a 3 year PCP to a 3 year loan, cost of ownership for those 3 years is miles lower with the PCP. At the expense of equity obviously.
Or you could compare it to a 5-6 year loan to give a similar payment and outstanding amount at the 3 year mark... But then the total cost isn't actually that much different if you get a decent rate on a PCP
Or you could compare it to a 5-6 year loan to give a similar payment and outstanding amount at the 3 year mark... But then the total cost isn't actually that much different if you get a decent rate on a PCP
You can't ignore the equity as it's a fundamental part of the total cost of ownership!
Imagine doing a TCO appraisal on something and going 'Yea lets just ignore the equity'
You'll generally never better PCP if you only consider your finances on a monthly basis without any consideration for how much something will actually cost you, which is why it's so popular - most people care little for how much they're paying, as long as the immediately noticeable monthly figures are within the tolerance of their monthly in vs out figures.
Ultimately, most people won't purchase with a loan because they simply cannot afford to repay £500 per month rather than £300 on a PCP deal, in order to save themselves £1000 over a 3 year period. They'd rather pay that £1000 extra in order to be able to afford the nice new car now (quite understandably given our 'keep up with the neighbours, i want everything now' society I suppose).
Ultimately, most people won't purchase with a loan because they simply cannot afford to repay £500 per month rather than £300 on a PCP deal, in order to save themselves £1000 over a 3 year period. They'd rather pay that £1000 extra in order to be able to afford the nice new car now (quite understandably given our 'keep up with the neighbours, i want everything now' society I suppose).
[TW]Fox;28098193 said:You can't ignore the equity as it's a fundamental part of the total cost of ownership!
Imagine doing a TCO appraisal on something and going 'Yea lets just ignore the equity'
I'm not saying ignore it, in fact I specifically mentioned it? But if you're not trying to build an equity then maybe it's better to work your finances in such a way that doesn't work well for building it?
I totally get that it's cheaper overall to use a loan, I'm just saying there's more to it than that. Yeah I could spend £500 a month on a loan to build an equity in a rapidly depreciating asset or I could spend £250 a month to run the same car and pay £250 a more on my mortgage, paying towards an asset that's actually worth something. There's all sorts of factors that might make the more expensive option a better/more appealing one - they may not apply to you but it doesn't make them invalid
It's irrelevent whether you are 'trying to build an equity' or not, it plays into the total cost
Yea but
Make your mind up please, or just admit you don't really understand it, which is fair enough.
And we've completed a line of finance-bingo. The ridiculously overplayed and frankly totally irrelevant 'depreciating asset' line.
Whichever has the lowest TCO would enable you to have more money left unspent you could then pay into your mortgage in that example. You don't pick the loan to 'build equity', you'd pick it because it represented the lowest cost of driving the vehicle you want for the period of time you want to drive it. It just happens to produce the lowest TCO by virtue of it's equity. The equity isn't the goal, it's just another number in the calculation.
Yes, a car is a depreciating asset. Well done. But thats totally irrelevant really because it doesn't stop being a depreciating asset just because you've PCP'd it. It's still depreciating and somebody still has to pay for that. And guess who that somebody is - the entire cost of the agreement is dictated by this depreciation!
My point isn't 'always get a bank loan LOLLLLLLLL' my point is 'Look at the various methods of funding a car and select the one with the lowest TCO. If things are sufficiently tight that only the most expensive option is open to you, reconsider whether a brand new car is the right move'.
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