New SLK...?

[marzman]

As with most things, it all really comes down to what you want for your money.

 

I'm not directing this at you personally Chris, but I see this type of PCP deal as exploiting people who desperately want to be seen in the latest and greatest thing but can't actually afford to be doing so. If you had £35k-£40k cash sitting in the bank, would you drop it all on a diesel SLK? Probably not I'd say. But at £250 a month it seems reasonable, as long as your happy that it's completely dead money like renting a house. The actual depreciation may be the same or more than what you would pay by buying the car but the car would actually be an asset, in the same way that buying a house does.

 

£7,500 over two years seems attractive but I couldn't stomache in two years time driving it to the dealership, handing the keys back and walking out thinking "what have I got to show for that money now?"

 

Yep, im obviously aware that the £250 a month is dead money, in the same way that currently, £166 a month of my car payment is being lost in depreciation each month - on a 10 year old car!!!!

 

This is not aimed at you liam, and im not taking this personally, but i do find it insulting to label anyone who would consider a PCP deal to be trying to buy something they cant afford, or saying they're overreaching etc. Until this last few months I was always of the same opinion, but having given it some thought i no longer feel the same.

 

From a personal point of view i dont have £35k cash waiting in a bank account to be spent, and if i did it would NOT be being spent on a car as you quite rightly said. However that doesnt mean i'm poor and shouldnt consider a £35k car! For me its all about cash flow - lets say i've got £1200 a month of my income *spare* after all my bills have gone out. I could happily go out and get a £35k loan for a new car and afford to pay it, but then i'd have very poor cash flow for a long term. I would rather write off that £250 a month now (which i think with my previous post proved that i would lose more than that in depreciation over 2 years if i bought the car outright) and still have good cash flow to be used for other investment projects, which should eventually earn me more money.

 

However - im raising these points and asking these questions to get some schooling anyway, as any financial advise is always useful.

 

EDIT... i guess what im talking about could be called Opportunity Cost. Tying all my cash in a car to not lose too much money, vs keeping my money free to do other things with and hopefully grow.

[Sarnie]

As with most things, it all really comes down to what you want for your money.

 

I'm not directing this at you personally Chris, but I see this type of PCP deal as exploiting people who desperately want to be seen in the latest and greatest thing but can't actually afford to be doing so. If you had £35k-£40k cash sitting in the bank, would you drop it all on a diesel SLK? Probably not I'd say. But at £250 a month it seems reasonable, as long as your happy that it's completely dead money like renting a house. The actual depreciation may be the same or more than what you would pay by buying the car but the car would actually be an asset, in the same way that buying a house does.

 

£7,500 over two years seems attractive but I couldn't stomache in two years time driving it to the dealership, handing the keys back and walking out thinking "what have I got to show for that money now?"

 

Yep, im obviously aware that the £250 a month is dead money, in the same way that currently, £166 a month of my car payment is being lost in depreciation each month - on a 10 year old car!!!!

 

This is not aimed at you liam, and im not taking this personally, but i do find it insulting to label anyone who would consider a PCP deal to be trying to buy something they cant afford, or saying they're overreaching etc. Until this last few months I was always of the same opinion, but having given it some thought i no longer feel the same.

 

From a personal point of view i dont have £35k cash waiting in a bank account to be spent, and if i did it would NOT be being spent on a car as you quite rightly said. However that doesnt mean i'm poor and shouldnt consider a £35k car! For me its all about cash flow - lets say i've got £1200 a month of my income *spare* after all my bills have gone out. I could happily go out and get a £35k loan for a new car and afford to pay it, but then i'd have very poor cash flow for a long term. I would rather write off that £250 a month now (which i think with my previous post proved that i would lose more than that in depreciation over 2 years if i bought the car outright) and still have good cash flow to be used for other investment projects, which should eventually earn me more money.

 

However - im raising these points and asking these questions to get some schooling anyway, as any financial advise is always useful.

 

EDIT... i guess what im talking about could be called Opportunity Cost. Tying all my cash in a car to not lose too much money, vs keeping my money free to do other things with and hopefully grow.

 

I never said you were poor Chris.

 

But you are wrong on a few points. £250 a month on PCP is 100% dead money. Your current £166 a month loan is not 100% dead money as you are actually purchasing as asset and you can realise that money back as the car will be yours and at some point the loan will be repaid. At that point even if the car is worth £10k or £4k then that is something.

 

With regards to utilising PCP to purchase a car you couldn't ordinarily afford, this is EXACTLY what it is. Your only financing the depreciation of the car whilst you hire it. I don't think it's insulting to say that PCP allows you to get into a car that you ordinarily couldn't afford, as this is EXACTLY what it is designed for.

 

If you can't afford to pay it cash or get a loan or HP and afford the subsequent repayments; then you can't afford it. Hence where PCP comes in and allows you hire it for two years, at a lower cost than purchasing it and pay someone elses depreciation.

[Dblock]

I personally think you havent done yourself a favour by actually working it out. If you just got the car you wouldn't really know how much extra it costs, plus as said you have to hand it back. If you got it now would begrudge it slightly as it costs more?

 

Il be honest I don't keep track of deprecation or how much I have spent on mods as it would leave a sour taste in my mouth. I know it's not crippling so im ok.

 

IMO if you can afford it which according to your sums you can and you don't mind that money being gone then go for it. you can't put a price on fun

[sasha@lazytrips]

The question is really quite simple. You can borrow a car and pay a little bit less than buying one, but you are restricted in what you can do with it/any changes you want to make to it, servicing options, etc, etc. Same as with renting a home vs buying a home or any other similar question.

 

For me personally, the money is a lesser issue when compared to some of the above as I don't want to always be thinking about the miles I put on the car and how that relates to my yearly cap. I want to be able to put on some different/better tyres, change the wheels if I feel like it or do whatever else I want because the car is my pride and joy.

 

If your only need is to have 4 wheels which get you from A to B and you also like these wheels to be fairly new and fresh, then PCP might not be a bad idea. All depends on the inidividual person.

[Chesterfield]

So whats the difference between hiring a car for two years and hiring one for a day? You still get something for your money - you get to drive a new car, just paying for the depreciation along the way.

 

You aren't paying off any of the capital towards purchasing an asset, but so what - maybe you dont want the asset, you just want to use it for a period of time and then hand it back.

 

If you purchase a car outright, then the depreciation is dead money. You just don't see it going every month, it just goes in one big chunk when you sell or trade in the car. Its swings and roundabouts and horses for courses imho.

[sasha@lazytrips]

So whats the difference between hiring a car for two years and hiring one for a day? You still get something for your money - you get to drive a new car, just paying for the depreciation along the way.

 

You aren't paying off any of the capital towards purchasing an asset, but so what - maybe you dont want the asset, you just want to use it for a period of time and then hand it back.

 

If you purchase a car outright, then the depreciation is dead money. You just don't see it going every month, it just goes in one big chunk when you sell or trade in the car. Its swings and roundabouts and horses for courses imho.

 

great minds...

[Chesterfield]

Its like this..

 

a ) buy car outright for 35k, sell it two years later for £28k. You have no car and have £7k less in the bank than you started with

b ) hire car for £250 a month with a £1k deposit then give it back two years later. You have no car and have £7k less in the bank than you started with.

 

With option a however, you have all your £35k tied up in the asset. With option b you have the ability to use the other £28k as you wish. In reality option b will be a premium over option a, but if you can use the remaining £28k over two years to invest and offset thet premium you are better off. Horses for courses.

[Sarnie]

Its like this..

 

a ) buy car outright for 35k, sell it two years later for £28k. You have no car and have £7k less in the bank than you started with

b ) hire car for £250 a month with a £1k deposit then give it back two years later. You have no car and have £7k less in the bank than you started with.

 

With option a however, you have all your £35k tied up in the asset. With option b you have the ability to use the other £28k as you wish. In reality option b will be a premium over option a, but if you can use the remaining £28k over two years to invest and offset thet premium you are better off. Horses for courses.

 

This is only the case if you want to swap your car regularly and is also only relevant if you have the cash to purchase outright.

 

Lets say you do this;

 

a) Buy a £35k car and keep it six years. Car is now worth £13-£14k.

Hire a car at £7k every two years = £21k spent.

 

a) This person still owns a car with no monthly repayment and can access the £15k in the car if needed.

This person has bugger all to show for their £21k apart from swanning around in a brand new car that they never owned.

[marzman]

Its like this..

 

a ) buy car outright for 35k, sell it two years later for £28k. You have no car and have £7k less in the bank than you started with

b ) hire car for £250 a month with a £1k deposit then give it back two years later. You have no car and have £7k less in the bank than you started with.

 

With option a however, you have all your £35k tied up in the asset. With option b you have the ability to use the other £28k as you wish. In reality option b will be a premium over option a, but if you can use the remaining £28k over two years to invest and offset thet premium you are better off. Horses for courses.

 

This is only the case if you want to swap your car regularly and is also only relevant if you have the cash to purchase outright.

 

Lets say you do this;

 

a) Buy a £35k car and keep it six years. Car is now worth £13-£14k.

Hire a car at £7k every two years = £21k spent.

 

a) This person still owns a car with no monthly repayment and can access the £15k in the car if needed.

This person has bugger all to show for their £21k apart from swanning around in a brand new car that they never owned.

 

 

Option A and Option B above both result in a £21k spend though over the same period, and i wouldnt have had to have the remainder of my capital tied up in the car (which you're saying i can 'access') going with option B

[Leeroy]

.......This person has bugger all to show for their £21k apart from swanning around in a brand new car that they never owned.

Succinct

[sasha@lazytrips]

Its like this..

 

a ) buy car outright for 35k, sell it two years later for £28k. You have no car and have £7k less in the bank than you started with

b ) hire car for £250 a month with a £1k deposit then give it back two years later. You have no car and have £7k less in the bank than you started with.

 

With option a however, you have all your £35k tied up in the asset. With option b you have the ability to use the other £28k as you wish. In reality option b will be a premium over option a, but if you can use the remaining £28k over two years to invest and offset thet premium you are better off. Horses for courses.

 

This is only the case if you want to swap your car regularly and is also only relevant if you have the cash to purchase outright.

 

Lets say you do this;

 

a) Buy a £35k car and keep it six years. Car is now worth £13-£14k.

Hire a car at £7k every two years = £21k spent.

 

a) This person still owns a car with no monthly repayment and can access the £15k in the car if needed.

This person has bugger all to show for their £21k apart from swanning around in a brand new car that they never owned.

 

 

Unfortunately you missed out a crucial part of the calculation. If person a was to borrow the £35,000 to purchase the car (90% of those who do) OR person b was to have the £35k in cash, but stick it into a savings account over the 6-year period rather than handing it over upfront for the car, at something like 6-7% APR (average over last couple of decades), person b would be around £15k better off in addition to the above calculation. So person b would only have spent £6k relative to the £13-14k outlay for person a.

[marzman]

Your current £166 a month loan is not 100% dead money

 

My current loan is £310 a month, of which i think about £166 is dead money lost on depreciation.

 

 

Unfortunately you missed out a crucial part of the calculation. If person a was to borrow the £35,000 to purchase the car (90% of those who do) OR person b was to have the £35k in cash, but stick it into a savings account over the 6-year period rather than handing it over upfront for the car, at something like 6-7% APR (average over last couple of decades), person b would be around £15k better off in addition to the above calculation. So person b would only have spent £6k relative to the £13-14k outlay for person a.

 

Not quite that calculation as that extra cash has to be saved up monthly over that 6-year period, so you wouldnt earn 7% on 28k until year 6, but having that cashflow for other investment was exactly my point as you say...

[Sarnie]

Its like this..

 

a ) buy car outright for 35k, sell it two years later for £28k. You have no car and have £7k less in the bank than you started with

b ) hire car for £250 a month with a £1k deposit then give it back two years later. You have no car and have £7k less in the bank than you started with.

 

With option a however, you have all your £35k tied up in the asset. With option b you have the ability to use the other £28k as you wish. In reality option b will be a premium over option a, but if you can use the remaining £28k over two years to invest and offset thet premium you are better off. Horses for courses.

 

This is only the case if you want to swap your car regularly and is also only relevant if you have the cash to purchase outright.

 

Lets say you do this;

 

a) Buy a £35k car and keep it six years. Car is now worth £13-£14k.

Hire a car at £7k every two years = £21k spent.

 

a) This person still owns a car with no monthly repayment and can access the £15k in the car if needed.

This person has bugger all to show for their £21k apart from swanning around in a brand new car that they never owned.

 

 

Unfortunately you missed out a crucial part of the calculation. If person a was to borrow the £35,000 to purchase the car (90% of those who do) OR person b was to have the £35k in cash, but stick it into a savings account over the 6-year period rather than handing it over upfront for the car, at something like 6-7% APR (average over last couple of decades), person b would be around £15k better off in addition to the above calculation. So person b would only have spent £6k relative to the £13-14k outlay for person a.

 

Complete bollocks, far too many holes for me to even bother responding to

[Sarnie]

Your current £166 a month loan is not 100% dead money

 

My current loan is £310 a month, of which i think about £166 is dead money lost on depreciation.

 

 

So £144 a month is actually 'buying' you something. When your loan ends, if your car is worth more than zero (which is where you would be after two years of PCP) then your better off.

 

I think what we are actually debating here is almosy unquantifyable (sp) in that what some people view as value for money is different to other. For me, ownership of the car, even at the expense of higher payments and longer term is better than a shorter term, lower payments and driving a brand new car thats never going to be mine and will be getting swapped in x months time. I, personally, could only have a car on finance that I knew was going to be mine at the end. If I couldn't afford a car either to buy it outright, get a straight loan or finance where I owned the car at the end, then I wouldn't get it.

 

Other people would be/are happy with the low repayments and thought of swapping their car every year or so. My mental image of these people (please don't anyone get offended by this ) is sales reps in shiny suits from River Island, who lives on a new build estate, and loves to show off to the neighbours that he can afford a new £40k every other year, when in fact they have a 120% Interest Only mortgage and the cars are on PCP.

 

As Warren Buffet said; "When the tide goes out, you can see who's been swimming naked"

[marzman]

Your current £166 a month loan is not 100% dead money

 

My current loan is £310 a month, of which i think about £166 is dead money lost on depreciation.

 

 

So £144 a month is actually 'buying' you something. When your loan ends, if your car is worth more than zero (which is where you would be after two years of PCP) then your better off.

 

I think what we are actually debating here is almosy unquantifyable (sp) in that what some people view as value for money is different to other. For me, ownership of the car, even at the expense of higher payments and longer term is better than a shorter term, lower payments and driving a brand new car thats never going to be mine and will be getting swapped in x months time. I, personally, could only have a car on finance that I knew was going to be mine at the end. If I couldn't afford a car either to buy it outright, get a straight loan or finance where I owned the car at the end, then I wouldn't get it.

 

Other people would be/are happy with the low repayments and thought of swapping their car every year or so. My mental image of these people (please don't anyone get offended by this ) is sales reps in shiny suits from River Island, who lives on a new build estate, and loves to show off to the neighbours that he can afford a new £40k every other year, when in fact they have a 120% Interest Only mortgage and the cars are on PCP.

 

As Warren Buffet said; "When the tide goes out, you can see who's been swimming naked"

 

Ouch But i like that

As Warren Buffet said; "When the tide goes out, you can see who's been swimming naked"

 

I can assure you there are no shiny shirts here and i've not been in river island since i was about 18

 

Lets draw a line under it then that we've got different opinions. I dont place too much stock in actual ownership, and at the end of the day, to get this SLK i would be 'throwing away' £84 a month more than i am currently with my zed - which for a 10 year newer car, i think, is a good deal.

[Sarnie]

Nooooooooooooooooooooooooooooooooooo

 

I think that a one off period in a new car like the SLK could be ok, if you were going to give it back and get back into buying a car of some description. I just feel that once your in the 'system' your never going to have the disposeable cash to pay the monthly payment plus the deposit every 24 months, and then also saving a separate amount to buy another car or at least save a deposit for one etc.

 

There are so many similarities to buying/renting houses. Once your renting it's hard to get out of the cycle and save your own deposit to buy your own house.

 

I fully accept that my profession means that I am propably hyper sensitive to finance and the benefits of any such finance, and apologise if I've upset or annoyed anyone, but my opinion and or advice is based on seeing endless amounts of clients in the @*!# financially based on not really knowing the full implications of what they are getting into etc etc.

 

 

If you can stomache blowing £3-£4k a year on hiring a car then go for it,

[Chesterfield]

I don't think there are that many similarities to houses at all. Houses for the most part are not deprecating assets. That is the key with car finance of any kind whether purchase or hire based.

 

Finance options that have deposits and guaranteed future values are just fancy hire arrangements, you can either cough up the final payment (normally the guaranteed value) or hand back the car. therefor making it no different to a hire or lease scheme.

 

The only way you purchase the asset is if there is no option to return the vehicle and you just make x payments for x years and you get the asset at the end.

 

Any car loan at all is buying you nothing but time in the drivers seat until the amount you have paid exceeds the amount the car has depreciated, regardless of how it is structured.

 

For me ive not financed for two reasons. One, there was nowhere that the capital could have been invested at the time that would have offset the extra costs of the finance over buying outright and Two, because when I bought my first "flash" car the fezza, I didn't want people doing a quick hpi and it coming back showing outstanding finance, call it a pride/ego thing but that as/is the reason I don't finance. If my position was different though, I could see the benefit of a hire scheme like these to ensure I was in a new (and covered by warranty) car. Though I would be having the same debate as to whether it is worth it compared to keeping my older car and owning it in time..

[marzman]

...and with that, lets have a drool over some pics

 

[Sarnie]

I don't think there are that many similarities to houses at all. Houses for the most part are not deprecating assets. That is the key with car finance of any kind whether purchase or hire based.

 

Finance options that have deposits and guaranteed future values are just fancy hire arrangements, you can either cough up the final payment (normally the guaranteed value) or hand back the car. therefor making it no different to a hire or lease scheme.

 

The only way you purchase the asset is if there is no option to return the vehicle and you just make x payments for x years and you get the asset at the end.

 

Any car loan at all is buying you nothing but time in the drivers seat until the amount you have paid exceeds the amount the car has depreciated, regardless of how it is structured.

 

For me ive not financed for two reasons. One, there was nowhere that the capital could have been invested at the time that would have offset the extra costs of the finance over buying outright and Two, because when I bought my first "flash" car the fezza, I didn't want people doing a quick hpi and it coming back showing outstanding finance, call it a pride/ego thing but that as/is the reason I don't finance. If my position was different though, I could see the benefit of a hire scheme like these to ensure I was in a new (and covered by warranty) car. Though I would be having the same debate as to whether it is worth it compared to keeping my older car and owning it in time..

 

Chris, I know your a smart cookie, but your post is way off base.

 

Finance options that have deposits and guaranteed future values are just fancy hire arrangements, you can either cough up the final payment (normally the guaranteed value) or hand back the car. therefor making it no different to a hire or lease scheme.

 

Deposits and GFV's are what PCP's are based on. No one is argueing this, apart from you.

 

My arguement is for if Finance is needed then a straight forward = Deposit + 36/48/60 months of x amount = purchase of the car is the only way to go in my opinion. if you can't afford the payments that result in full ownership of the car at the end, then you can't afford the car imo.

 

Simples.

 

You 'value' the ownership of a car. You bought a car outright for circa £95k rather than putting down a deposit and buying a Huyara or Veyron and swishing around showing off to the world, a car that you could actually afford, and wasn't yours and never was going to be! Which I massively admire and respect. In the same way that I would respect someone more on here by owing a £7k zed outright more than someone wh0 leases a '12 plate Merc that has to give it back in 24 months...

 

The similarities to house purchases is remarkably similar, especially given recent economic times. House prices have been 'depreciating' for at least five years but people haven't suddenly started buying them on Interest Only mortgages........quite the opposite, people/lenders have been strengthening their position by ensuring that repayment mortgages are the norm.

 

When the @*!# hits the fan and you've been on the brink financially, would you rather be in a PCP deal that you have to pay up to the end of the contract or have a loan that you could pay off by selling the car?

[BJW]

Thats if you want to purchase it - if you can hand it back after the £1500 down and two years of £250 a month would mean a total spend of £7500 wouldnt seem too bad depending on how much the car would depreciate if you bought outright - the current model doesn span the last two years so its hard to guage depreciation accurately.

 

Well said marzman.. Below maybe not relevant to this discussion but if anyone buys a 370 they do depreciate rather quickly.. To sell private I may have gained a few more ££'s but for some reason people prefer to get screwed by garages if cars are £20000 +.. My experience of 370 below.. Honest opinion !!

 

I sold my 370 and lost approx £8000 grand after a years ownership..

All cars will cost you money but will the merc depreciate as quickly as the 370... I wonder??

The 370 comfy em yes till you started driving on our roads, ouch ouch ouch springs to mind, suspension is too hard..

High rev gear changes em not the best and needs some refinement, and yes I have drove a good few sports cars and the 370 gear box is not up with the best..

Fancy self healing (gimmick) paint em hardest car to polish I ever had, now back to conventional paint, polish on polish off easy as..

So yep I did love my 370 but there are issues that needed resolving, I think the 2012 model has softer suspension but that for me does not go far enough..

Just my honest opinion... All cars have there issues I suppose..

[Sarnie]

On a final note, as I actually have to do some work today , if you take out the PCP and then find that either you can't afford it, don't like the car or lose your job etc, your stumped. Just like all these people trying to get someone to take over their agreements;

 

http://www.takemylease.co.uk/index.php

[ioneabee]

On a final note, as I actually have to do some work today , if you take out the PCP and then find that either you can't afford it, don't like the car or lose your job etc, your stumped. Just like all these people trying to get someone to take over their agreements;

 

http://www.takemylease.co.uk/index.php

what would be the point in taking over someone else lease deal - there appears to be no financial incentive at all and your driving a "2nd hand" car - the main point of a lease (well one of them anyway)

[Ekona]

Blimey, it's like PH on here sometimes.

 

 

 

Fun cars are not about practicality, or common sense, or anything boring. They're a passion from the heart, and if someone wants to put themselves in a fair amount of debt to finance their one true passion then I see that as totally up to them. No point in being the richest man in the graveyard.

[Sarnie]

On a final note, as I actually have to do some work today , if you take out the PCP and then find that either you can't afford it, don't like the car or lose your job etc, your stumped. Just like all these people trying to get someone to take over their agreements;

 

http://www.takemylease.co.uk/index.php

what would be the point in taking over someone else lease deal - there appears to be no financial incentive at all and your driving a "2nd hand" car - the main point of a lease (well one of them anyway)

 

The financial incentive is that you do not have to pay the initial deposit which is usual 2 or 3 times the monthly payment

[sparky370z]

Fun cars are not about practicality, or common sense, or anything boring. They're a passion from the heart, and if someone wants to put themselves in a fair amount of debt to finance their one true passion then I see that as totally up to them. No point in being the richest man in the graveyard.

 

+1 on that!!!