Audi owners in here!

[[TW]Fox]

Absolute rubbish, and you're one of the worst people I was referring to in my post

It's an interesting debate to have though - its interesting for others to see both sides of the argument and decide which side they like

Yes there are people who this applies to, but there is also a large percentage of those who would just rather not chuck tens of thousands of pounds in to a depreciating asset,

But this is the fallacy - this is EXACTLY what they are doing. Just because they do it a bit every month doesn't change that, it just hides it from them. By the time they hand the car back they have done exactly as you describe and chucked tens of thousands of pounds in to a depreciating asset.

Cars depreciate - they just do. Every single method of financing a car effectively means you pay the depreciation, not the finance company. Nobody else is going to pay for the depreciation - its you, the driver, who pays for it. You cannot avoid it. The asset loses value, the finance company wants that loss of value off you *and* some interest.

There is no reason you'd take a PCP at a higher rate over borrowing with say a loan unless you couldn't or wouldn't stomach the monthly repayment that goes with it. That's the only reason. Because in terms of overall cost, the PCP costs you more. You're borrowing the same amount of money - but at higher interest - it cannot do anything other than cost you more*

If I wanted to go and buy a brand new C63S (the car I want next) tomorrow in cash, I could comfortably. But I never would, and I think anyone that does is a moron, as I'd much rather invest that money and make it work for me, and get far more back than you'd pay in interest over the course of a 24-36 month term

I'll caveat this by saying that I understand and appreciate that sometimes, NEW CAR PCP rates are good. Therefore, my thoughts are on the assumption they are not good (As this is mostly about used where the rates always suck).

If you genuinely have a scenario whereby you can get a return on cash that yields at higher than the interest on a PCP then you are doing very, very well indeed! Getting returns of over 5% on cash is virtually unheard of.

But the 5.4% Maccy quoted, that is hardly terrible

Except it actually is, that's the point. It isn't terrible in the context of a PCP - its actually quite good - but compared to alternative ways of funding a car, it's terrible. Which is the point those of us who are not on the PCP side of the fence are making. Maccy doesn't realise it, but he's actually agreed with me by outlining how in his circumstances, PCP was the only way for him to get into that car. Which is what I am saying as to why people do it. Because it's the only way to get into the particular car they've decided they want. The alternative is to pick a less good car...

You get monthly payments that are profiled to a far lower loan value by virtue of the fact half the loan is basically at the end of the repayment profile, at a cost of higher interest. So, overall, it costs more. But the monthly payment is less....

*Occasionally you'll win the lottery, sorry, end up with a car with loads less than the GFV in which case the PCP has shielded you. But it's you versus the finance company in calculating the chances of that and I wouldn't take those odds. They do it for a living.

 

[Kenai]

But I never would, and I think anyone that does is a moron, as I'd much rather invest that money and make it work for me, and get far more back than you'd pay in interest over the course of a 24-36 month termBut the 5.4% Maccy quoted, that is hardly terrible

Tweaking my above post then, to use 5.4%, 3 year term, but same £38,000 car, you'd be paying just shy of £5,000 in interest. Maybe i'm really out of touch with the world of investment (and that's why you're looking at C63S's whereas i'm looking at A35s at best!) but what on earth are you doing with the £33,000 capital that you'd keep by taking PCP that will earn you over £5,000 in 3 years?

If you're solely dealing in new cars and 0% deals subsidised by manufacturers obviously the value proposition changes significantly.

 

[[TW]Fox]

Out of curiosity, if you were aiming to ultimately purchase on a £38,000 car on a 7.7% PCP, £5k down, over 4yrs as was originally posted, plugging those numbers into a 'total cost' calculator suggests you'd be paying £9,000 in interest, a total cost of £47,000 for that £38,000 car. Is that right? I knew you got stung but damn that's a lot of money for 'nothing'.

Exactly. Whereas if you were to up that deposit to, say, £12k and borrow £25k then you'd get that same car with a total interest cost of just 1500 quid*! That is a huge saving. But you'd need to service it over 4 years at £552 a month, which will be more than the monthly repayment on the PCP. But at the end of year 4, you own an asset worth tens of thousands potentially.

*Various lenders offering 2.9-3% APR.

But I know what's coming next - what if you don't have that extra £7k? Controversial comment alert coming up... perhaps if that is your position then a £37k car is something that needs a longer think. However if you'd always done this, you'd have that extra £7k at least in the value of your existing car, which you'd own outright, rather than have handed back to the finance company..

 

[Steedie]

But I know what's coming next - what if you don't have that extra £7k? Controversial comment alert coming up... perhaps if that is your position then a £37k car is something that needs a longer think

This is where I agree with you. If you don't have a deposit and you're paying longer terms/PCP just to get the monthly payments to a point that's affordable, then you can't afford the car and probably shouldn't be doing it.

But the adage of "If you don't have the money to buy it outright, you can't afford it" drives me bonkers.

 

[[TW]Fox]

As an aside, I feel I must say that I have nothing at all against the concept borrowing money for a car. I have done it in the past and would do it again in the future if I needed to.

I'm just all about making sure it's done in the most cost efficient way

 

[Theophany]

Out of curiosity, if you were aiming to ultimately purchase on a £38,000 car on a 7.7% PCP, £5k down, over 4yrs as was originally posted, plugging those numbers into a 'total cost' calculator suggests you'd be paying £9,000 in interest, a total cost of £47,000 for that £38,000 car. Is that right? I knew you got stung but damn that's a lot of money for 'nothing'.

It isn't 'nothing' though. To my mind it's optionality and flexibility always comes with a cost. Could my capital be put to better use and potentially grow, rather than having it all tied up in a car?

 

[Maccy]

Maccy doesn't realise it, but he's actually agreed with me by outlining how in his circumstances, PCP was the only way for him to get into that car. Which is what I am saying as to why people do it. Because it's the only way to get into the particular car they've decided they want. The alternative is to pick a less good car...

You get monthly payments that are profiled to a far lower loan value by virtue of the fact half the loan is basically at the end of the repayment profile, at a cost of higher interest. So, overall, it costs more. But the monthly payment is less....

*Occasionally you'll win the lottery, sorry, end up with a car with loads less than the GFV in which case the PCP has shielded you. But it's you versus the finance company in calculating the chances of that and I wouldn't take those odds. They do it for a living.

Just to add here - I went for HP and not PCP, I have no balloon payment so I'm paying off a larger chunk of the capital over time rather than a larger chunk of interest for the sake of a lower monthly payment.

Yes, I will agree that it's not the most cost effective way of purchasing/leasing/owning/whatever a car but at the time, with my circumstances it was the best option I had available to me.
Also, god forbid any one of you wanting to take finance direct from Porsche on a new car where you'll do well to get 5.9%

EDIT - as an aside, I would argue why shouldn't people take PCP/HP to get into the car they want? At the end of the day, it's their money and if they choose to spend it as such on something they want then go for it. Just do your research...

 

[Kenai]

It isn't 'nothing' though. To my mind it's optionality and flexibility always comes with a cost. Could my capital be put to better use and potentially grow, rather than having it all tied up in a car?

That's why I put 'nothing' in inverted commas, I know it's not genuinely absolutely nothing, you're paying for using someone's elses money is the long and short of it. Whether you can utilise your own money to earn more than that lender is earning off of you is the question. Someone else has determined that the best use of their cash is letting you tie it up in a car and pay for the privilege

As I questioned above, in the original scenario presented you're borrowing £33,000 and depending on whether you look at the 7.7% over 4yrs or 5.4% over 3yrs scenarios that have been discussed, you need to make either £9,000 from that £33,000 in 4yrs or make £5,000 from that £33,000 in 3yrs just to be in an even position.

Like I said, maybe i'm out of touch with the world of investing and this is why i'm not able to afford big boy cars like C63s but i'm not aware that there are that many ways to reliably make a £5,000+ return from £33,000 capital in 3 years. Presumably not unless I lend it to someone who wants to buy a car with it?

 

[Theophany]

That's why I put 'nothing' in inverted commas, I know it's not genuinely absolutely nothing, you're paying for using someone's elses money is the long and short of it. Whether you can utilise your own money to earn more than that lender is earning off of you is the question. Someone else has determined that the best use of their cash is letting you tie it up in a car and pay for the privilege

As I questioned above, in the original scenario presented you're borrowing £33,000 and depending on whether you look at the 7.7% over 4yrs or 5.4% over 3yrs scenarios that have been discussed, you need to make either £9,000 from that £33,000 in 4yrs or make £5,000 from that £33,000 in 3yrs just to be in an even position.

Like I said, maybe i'm out of touch with the world of investing and this is why i'm not able to afford big boy cars like C63s but i'm not aware that there are that many ways to reliably make a £5,000+ return from £33,000 capital in 3 years. Presumably not unless I lend it to someone who wants to buy a car with it?

The first scenario you posted would be a pretty high watermark imo, but I think the £5,000 return over 3 years isn't too onerous. You're looking at around a net 5% return per annum, which is broadly speaking, roughly what I would expect a balanced managed fund to return, COVID shock excepted!

As has been said, buying a car requires a good look at your budget and the state of your finances and for that reason I don't think weighing up the pros and cons of how you fund that purchase should be looked at in isolation.

 

[glenimp617]

If you don't have a deposit and you're paying longer terms/PCP just to get the monthly payments to a point that's affordable, then you can't afford the car and probably shouldn't be doing it.

There are people who do this, infact I think a few of our own forum members are doing/have done this. That said, not everyone who takes a PCP does so because they can't afford the car. I know (not personally) of someone who bought a brand new R8 on PCP, had it two years, then traded it in for another one also on PCP. You could argue that they couldn't afford it, until you learn they also own a Mclaren and a Ferrari. This person sold a storage company for £15 million. Some people just want to keep their money close, or for whatever reason don't want a loan to buy a car they never intend on keeping very long.

I've taken PCPs in the past with very low deposits and handed it back 1/4 into the term with no negative equity. It's unusual to do so, but can be done under the right circumstances. There are also people (again many on here) who take PCP and then settle up not long after.

I know what you're saying though, far too many people take PCPs when they are too stretched. What's the worst case scenario though (they are insured, and hopefully have gap insurance). Worst case they sell the car back to the dealer, and have to paid off any negative equity. That's the worst case right.

The biggest thing is knowing what you're getting into. My friend bought a used BMW on PCP with an absolutely stupid APR rate....but even worse than that, he didn't even know what the rate was....and he wasn't even bothered. He's loaded too, and owns a flat in a large city which he rents out so has plenty of money.

 

[Steedie]

My stupid finance moment, and one that was the wake up call (despite my best attempts to justify it at first) was my 120D,

11 years ago I bought a 5 year old at the time, 1 series, with not even that great a spec, and I went and got a 5 year PCP deal on it with a high APR. Urgh, makes me cringe just thinking about it. Fox will remember that one I'm sure

Thread for luls

 

[Mercenary Keyboard Warrior]

That's why I put 'nothing' in inverted commas, I know it's not genuinely absolutely nothing, you're paying for using someone's elses money is the long and short of it. Whether you can utilise your own money to earn more than that lender is earning off of you is the question. Someone else has determined that the best use of their cash is letting you tie it up in a car and pay for the privilege

As I questioned above, in the original scenario presented you're borrowing £33,000 and depending on whether you look at the 7.7% over 4yrs or 5.4% over 3yrs scenarios that have been discussed, you need to make either £9,000 from that £33,000 in 4yrs or make £5,000 from that £33,000 in 3yrs just to be in an even position.

Like I said, maybe i'm out of touch with the world of investing and this is why i'm not able to afford big boy cars like C63s but i'm not aware that there are that many ways to reliably make a £5,000+ return from £33,000 capital in 3 years. Presumably not unless I lend it to someone who wants to buy a car with it?

Making £5k on £33k over 5 years is pretty easy actually.
It depends on your appetite for risk

I made a fair bit over £5k on under £30k in just over 3 years via ratesetter, lending on P2P

£5k on £33k over 3 years is a shade under 4.9% per year assuming reinvestment of interest. I averaged a shade under 6% and I know some others who average over 6%, but its a risk and right now that risk looks a lot higher than it did a year ago due to covid.

There is a place for PCP if you can get the repayments to be close to the likely equivalent cost of buying outright, loss of return on investment etc

PCP can be a no brainer on a new car. Even forgetting I withdrew from the PCP, Audi gave a contribution that was larger than the interest payment on my last car, ridiculous frankly that it was cheaper to buy PCP than cash outright. I can only assume there is a tax advantage for them to do this although cant be bothered to work out what angle that needs them to undertake.

The big upside for PCP is that you can just make the payments and walk away at the end, IF there is a crash in car values its not your problem.
Selling used cars is tricky for many, and they end up getting less than real value, they just struggle with WBAC or trade in etc.

The big negative to me is that should something bad happen being able to keep up the monthlies can be a problem and if really desperate you cant just rock up at WBAC any sell your car for cash, which you can do with a ownersjip (even if thats financed via non secured lending)

 

[Fusion]

Wonder how many people actually do what is sometimes suggested- take out a lease/PCP because they’re so sure they can invest the money and make more that way? Not too many. Buying new car vs investing money and leasing is the wrong argument. If you were that concerned about making money and building wealth, you wouldn’t be leasing/PCP’ing vehicles every five minutes.

In the vast majority of instances, ownership is the way to fly. Property, businesses, land, cars, patents, whatever. The ultimate scenario is when your assets make you money. Next best is when they cost the minimal amount possible.

Similar argument with credit cards. People debate forever about this card, that card, cash back here, “free” insurance there. No. American Express, MasterCard, HSBC- they are geared to win. They excel at it. Consumers generally do not win. We’re mugs, bottom of the food chain. Best we can do is try to break even, or lose the least amount possible.

 

[Blackhawk47]

I won't join the finance debate. But the mk3 TTRS is a fantastic car. It should not be viewed as 'just a 3 year old TT'. You have to remember this car was I think £60k+ new with a few options added on. It has one of the best sports car interiors out there in my opinion and an amazing engine.

I've seen some for slightly less than £38k but of course the spec varies.

The arguments in this thread are ridiculous. Again, obviously the most 'cost efficient' way is buy outright with cash. Just because someone chooses finance doesn't make them any less worthy, providing they can afford the payments, then they can afford the car ownership.

Also I saw something mentioned where the OP was thinking about taking the PCP and settling after 6 months. This absolutely can be done and if settled early then you don't pay interest on the full loan amount.

Many people on here still live in a dream world it seems, but it's funny how the tide has changed with a lot of members seemingly going down the lease route (if you see some of the threads on here). Leasing...something that was named and shamed only a few years ago as being the worst way to drive a car.

I get it though, IIRC Fox is an accountant.

 

[glenimp617]

I won't join the finance debate. But the mk3 TTRS is a fantastic car. It should not be viewed as 'just a 3 year old TT'. You have to remember this car was I think £60k+ new with a few options added on. It has one of the best sports car interiors out there in my opinion and an amazing engine.

I've seen some for slightly less than £38k but of course the spec varies.

The arguments in this thread are ridiculous. Again, obviously the most 'cost efficient' way is buy outright with cash. Just because someone chooses finance doesn't make them any less worthy, providing they can afford the payments, then they can afford the car ownership.

Also I saw something mentioned where the OP was thinking about taking the PCP and settling after 6 months. This absolutely can be done and if settled early then you don't pay interest on the full loan amount.

Many people on here still live in a dream world it seems, but it's funny how the tide has changed with a lot of members seemingly going down the lease route (if you see some of the threads on here). Leasing...something that was named and shamed only a few years ago as being the worst way to drive a car.

I get it though, IIRC Fox is an accountant.

PCP for 12 months and switching to a loan saves £4k interest

Obviously after only six months it's a bit more of a saving, but loans cap out at 25k so I'd need a larger deposit, which I don't have this year....but I will next August.

Regarding the car itself, the deal on the table is £37,750 which for a 67 plate, 11,400 miles, 1 owner with the most expensive options on it, nothing else on the market comes close.

 

[Fusion]

But the mk3 TTRS is a fantastic car. It should not be viewed as 'just a 3 year old TT'. You have to remember this car was I think £60k+ new with a few options added on.

This is what we're getting at though. £60k for a TT is pretty crazy, however well specced it is. Nudge that figure up to £64k and you can have a Cayman GTS, with a 4.0 litre flat six!

New F-Type (as in, new model, not just a 20 plate) is £70k and you get a 450ps 5.0 litre V8. C43 AMG Premium Plus Coupe (so, top spec) is £58k list, and you get a 395ps 3.0 V6 (twin turbo). Even an M4 is £67k list, but can be had for about £51k after discounts.

Probably me missing the point, but just seems like there would be better options out there, and that's before looking at used and nearly new. As I said earlier, the fact a used TT RS is the same price as a C63 would make it no contest for me.

 

[Dis86]

This is what we're getting at though. £60k for a TT is pretty crazy, however well specced it is. Nudge that figure up to £64k and you can have a Cayman GTS, with a 4.0 litre flat six!

New F-Type (as in, new model, not just a 20 plate) is £70k and you get a 450ps 5.0 litre V8. C43 AMG Premium Plus Coupe (so, top spec) is £58k list, and you get a 395ps 3.0 V6 (twin turbo). Even an M4 is £67k list, but can be had for about £51k after discounts.

Probably me missing the point, but just seems like there would be better options out there, and that's before looking at used and nearly new. As I said earlier, the fact a used TT RS is the same price as a C63 would make it no contest for me.

None of those cars are as good handbags though.

 

[Blackhawk47]

This is what we're getting at though. £60k for a TT is pretty crazy, however well specced it is. Nudge that figure up to £64k and you can have a Cayman GTS, with a 4.0 litre flat six!

New F-Type (as in, new model, not just a 20 plate) is £70k and you get a 450ps 5.0 litre V8. C43 AMG Premium Plus Coupe (so, top spec) is £58k list, and you get a 395ps 3.0 V6 (twin turbo). Even an M4 is £67k list, but can be had for about £51k after discounts.

Probably me missing the point, but just seems like there would be better options out there, and that's before looking at used and nearly new. As I said earlier, the fact a used TT RS is the same price as a C63 would make it no contest for me.

haha I get it. There is always going to be options and personal preference. I think you are discounting how good a TTRS is...you realise they are 420ps+. It’s going to be far more nimble then a C63S I imagine...different cars really.

The nearest competitor is a Porsche Cayman. Personally I only really like the Cayman GT4 or like you said the GTS. But again the TT is a more practical car in terms of it Interior space and probably running costs.

 

[D3K]

A5 lease went back today.

Damage to the bumper that was quoted at £1500 to replace from Audi dealership down the road, got inspected and put through at £138 by the BCA Sales chap... The guy even marked it down as "within standards" so it rang through free. Only got called on minor LFW trim damage and a replacement tyre. £66 all-in.

 

[glenimp617]

None of those cars are as good handbags though.

So long as you stick a pair of babyliss hair clippers in the glovebox it's fine to own a TT you know. I have a set of remmingtons, which will have to do.