Motors How did you purchase (or rent) your car?

I was curious about the PCP option you guys were talking about, and after a couple minutes on Google I see that it's similar to a lease with a balloon payment at the end of the loan period.

All of my cars have been financed on a standard 4 year loan from a bank. Whenever I'm ready for a new car, I trade in my current car plus about $2,000 for a down payment, then finance the rest for 48 months. Yes, this does add interest to the total cost of my car. However, I have excellent credit and I tend to wait for favorable interest rates. For the next car I'm considering reducing the loan period to 2 or 3 years to further reduce the total cost.

The benefit for me is that I get a new car, which means a warrantee and little maintenance cost over the life of the loan. I tend to drive my cars for many years after the loan, and only look into getting a new car when the cost of servicing the vehicle becomes a large enough monthly expense.

 

My wife works for a car company and for her to get an assigned car and fuel card, we have to buy a new car every 4 years.

Suzi Blue II was employee pricing, financed over 48 months. We are about to turn her in and get an new one. Suzi III. Although I doubt I'll get her in blue this time.

The Big Cat was cash.

 

Yep agreed.
Cash for my latest one £6k

£7k really if you count the repairs of flawing it offroad into a field

 

A few individuals with similar sentiments - "if you can't buy it cash, you can't afford it" - interesting view and I get where you're coming from, but I think it's a little flawed and old fashioned.

Don't get me wrong, frivolously using credit (and indeed issuing it) deserves many a kick right in the crotch to any and all individuals involved, but I'm not sure it makes sense to say "afford" has to equate to a shoebox of cash under the mattress. I think "afford" is more a question of requirements, circumstance and priorities than some balance of cash values.

A car is effectively a service more than anything else. Yes it's a product you can own, but you don't buy a car to own, you buy it to use, and that's to get from A to B. Let's consider an individual that doesn't drive and uses public transport for everything, it would be entirely feasible to spend £3000+/yr on trains, busses, taxis etc. What about the person that then chooses to lease a car for the same £3000/yr (let's say £200/month plus running costs), even if they can't afford to buy it outright - same result really.

And just because you can pay cash for something, doesn't mean you're able to afford it. I used to have a neighbour who was very proud of his shiny new-ish car when he bought it, and proudly claimed to anyone that would listen that he paid cash for it, around £15k to be precise. His business slowed down and he had to flog it around a year later - I'd argue he couldn't afford it, whereas perhaps he could have better afforded to finance it £350/month, or certainly be able to tolerate fluctuations in his business far better.

 

Cash, all the time.
Haven't had a finance in my life.
Haven't had a new car ever though.
I did buy some of the motorcycles new.

The problem with PCP / Leasing here in Germany is that the monthly amount is calculated by monthly cost and depreciation based on "Minimum Guaranteed Future Value".
The problem is, it's not as guaranteed as you think it is.

Leasing companies have a tendency adjust the value at the end of the contract, due to "exceptional" wear n' tear, so you end up paying the balloon anyway even if you never planned to.
With company lease cars they are very lenient...don't know why.

Anyway, these are the cars I tend to buy, 1-3 year old ones, that have had ~50% depreciation already, but still come with two years warranty.

 

For me, the near 50% depreciation in the first year is something I can't justify, I'd much rather get a car which is a year or two old (on a modern car that's practically new anyway) and not have to pay as much.
As PCP doesn't tend to be available for those types of cars, then cash or low rate HP makes sense.

 

Interesting read.

I've always paid cash and my last car was bit over £10k. Advise from my dad was buy 3 years old, sell at 6, which I've pretty much stuck to. For me it hits a reasonable sweet spot between the heavy depreciation in the early years, but still something quite new and nice.

I'm not against PCP/HP or other methods, i spent quite a while looking at the TCO and the premium isn't really that much. + it gets harder to resist when there are some great deals on things like fleetprices etc.

 

I've used all sorts of methods to finance my cars, depending on deals about, often doesn't make sense to pay for a car cash unless its cheap <5k, with more expensive car purchases I tend to go PCP or loan with the view that my cash can be used for investments offsetting interest and depreciation, most of the time it works for me, I rarely loose a lot, generally gain over the 5 yrs I keep a car and don't need to worry about my cars value to purchase next one as I have had growth on my investments, whereas if I bought the car cash the depreciation is a total loss I can't recover from.

I'd also rather have new rather than someone elses cast off/problem vehicle.

 

The thing however is that a car is usually a consumable, not an investment or a business tool (although it can be of course). As general rule, buying consumables on credit is a bad idea.

If that £200/month is for the cheapest possible car then yes, I agree with you. But that's not the case.

In the example above, if a £3000/yr car can replace a £3000 train ticket then nothing is lost. But I bet that you could do the same with a used car for £500-1000, it would be a bit crap and smelly, but it would do the trick to replace the train ticket. Anything above that is a luxury, especially if you have to take credit for it.

 

A-to-B is the primary requirement, but a whole bunch of secondary requirements could mean that a £500 car isn't palatable: e.g. not being crap and smelly for starters, emissions, fuel efficiency, comfort etc.

"Luxury" is a bit of a loaded word to use here IMO - you're using it to describe anything above the absolute bare minimum, but in common usage that's not typically the connotation.

Just as you could play games on a £50 PC from ebay, but you've chosen to go for watercooling, triple GPUs and a 1200w power supply. Playing games is the primary requirement, playing recent 3D games secondary, as is higher res, detail levels and frame rates.

You pay your money, you make your choice

The method one chooses to pay for a car (or any form of transport, or anything else for that matter) the requirements and rationale for selecting said car (or again, anything else) are entirely separate discussions for the most part, unless of course the methods available for paying for something form part of the rationale for selecting said something.

 

I agree that "luxury" is not the most appropriate term. It's still a consumable/optional good. That's what I was referring to.

I am not against buying and enjoying luxuries, far from it. I am just giving a crude rule of thumb to determine whether you can "afford" an expense or not. Being "able" to buy it doesn't mean you can afford it. If you "have to" (not if chose to) use credit to buy a consumable, then doing so is probably very silly. Of course, I will not force anyone not to be silly, I am just pointing it out.

As for my PC, it was paid cash I promise...