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Buying an A3 using a PCP

Discussion in 'A3/S3/Sportback (8P Chassis)' started by h5djr, Oct 6, 2008.

  1. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 6, 2008]
    I sure some of you guys are much more familiar with PCPs than I am.

    When I come to change my current A3 for a new one what, if any, are the advantages of using a PCP such as Audi Solutions (currently 7.8%) over using cash from my savings. I can obviously use the value of my current A3 as the initial payment. As things stand at the moment I tend to change my car every 3 years and, even though I am now retired, I hope to be able to continue to do this.

    Any views would be much appreciated.
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  3. davemk
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    davemk Member

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    [Oct 6, 2008]
    Hi Dave.

    I'm looking into PCP deals at the moment. The only disadvantage that I can see is that any deposit you put down will lower your monthly repayment but the GFV will remain the same. Therefore, it seems to me that any equity in your p/x will be eaten away over the PCP period, if you see what I mean?

    7.8% is low though - is that for PCP deals? And is that flat rate or the APR? I've just been told, by a dealer, that PCP deals are normally between 10% and 12%.

    Incidentally, if you're interested, I've been looking at a broker who has given very good figures. Substantially cheaper than Audi although Audi have said they'll look into their quote for me. If you want the broker's site let me know and I'll PM you.

    Dave.
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  4. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 6, 2008]
    Hi Dave
    The 7.8% is APR and is quoted in an example on the Audi UK website.

    Yes I would be interested in the broker if the are quoting good rates.

    As you say the value of the current car will be losted if I use it for the initial payment and when I come to change a second time I assume I will either have to use savings for the initial payment or pay a much higher monthly amount.
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  5. davemk
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    davemk Member

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    [Oct 6, 2008]
    PM sent Dave.

    Yes, if you have no equity in your car at changeover time, then you would need to pay a new deposit or a higher monthly amount. To me, that's the down side to PCP - surely a dealer will only give you the GFV (ie you've lost any initial deposit / equity) at the end of the period so you're effectively starting from afresh every 36 months.
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  6. davemk
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    davemk Member

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    [Oct 6, 2008]
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  7. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 6, 2008]
    I see that the example quoted is for a 2.0TDI-140. I have just phoned my contact at my dealers and he says that the rate applies to all A3s except the S3 so it looks very interesting.

    I may be buying a new CR-170 earlier than I thought!!!
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  8. davemk
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    davemk Member

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    [Oct 6, 2008]
    Crikey, at 6% I could be persuaded too! That's a superb rate.
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  9. samuelt
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    samuelt Member

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    [Oct 6, 2008]
    i missed out the PCP and went for a lease Deal (2year old 170Q via VAG finance, VW garage), the payments were slighly higher but the final payment was less, therfore i should be able to sell the car and get some of my deposit/payments back to use as a deposit on my next car. IF i had taken the PCP i would most likely have had to hand the car back as i would have only got back a very small amount after i sold.
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  10. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 6, 2008]
    PCP's are the car equivalent of a copier contract. Steer well clear unless it's the only deal you can do. Why would you go for finance if you have the money sitting in a savings account? It's not rocket science......
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  11. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 6, 2008]
    The only time it would seem a good idea is if the rate of interest on the PCP is lower than the rate of interest you are getting on your savings. With Audi offering 6% on some A3s this is just such a case.

    The only other advantage seems to be the Guaranteed Value for the car at the end of the contract period. In these un-certain times than can be an advantage as well.
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  12. Amchlolor
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    Amchlolor Active Member

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    [Oct 6, 2008]
    David, apologies for not replying to the PM.
    Anyhoo, have you considered PCH, rather than PCP?
    I can't see when I'd ever want the option of buying a three year old car, so PCH is the one I'd go for.
    With PCH, they pay the roadtax every year too.
    No problem putting a private plate on a PCH car either, if that's a concern to you.
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  13. Amchlolor
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    Amchlolor Active Member

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    [Oct 6, 2008]
    If you do that, you're putting your hard-earned into a rapidly depreciating item.
    Sod that.
    Keep your dosh earning money, use someone else's for the depreciating item.
    If you go PCH, its future value is of zero concern to you.
    No advertising costs, no tyre-kickers, no agencies, no hassle.
    Just hand the fecker back with a cheery wave and move on.:salute:
    It means you can have the car you want, rather than being driven by worries about resale.
    So go for the bright yellow paint and red leather interior.
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  14. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 6, 2008]
    Ahh now I understand, silly me. Pay more interest on a rapidly depreciating item, and earn less interest on your savings, makes perfect sense.
    #13
  15. Booster
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    [Oct 6, 2008]
    PCP finance agreements are the work of the devil. The most expensive method of financing a car and the best way of a dealer ensuring you come back time and time again to be stitched up. Be vary careful about rates quoted on websites and the figures you actually get. There will be a caveat on the website about rates my vary according to your personal circumstances etc. Irrespective of how good your credit rating is, very few people are getting the quoted rates at the moment (even though legally 66% of people are supposed to get that rate for them to quote it as a typical example).

    I would recommend using some savings for a decent deposit and taking out a conventional HP agreement and screwing the best rate out of the dealer.
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  16. davemk
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    davemk Member

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    [Oct 6, 2008]
    A quick question with regards to the end of the PCP term - if, for example, you have an Audi on PCP and, at the end of the term, you want to p/x it for another car.....do you HAVE to have another Audi or could you go to another brand?
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  17. Booster
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    [Oct 6, 2008]
    If the deal has an agreed future value (which it will) then you will be tied to the dealer / brand that have agreed the GFV figure.
    #16
  18. marriedblonde
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    marriedblonde Moderator

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    [Oct 6, 2008]
    Well if you take your audi to BM they will just go to audi to off load it and vice versa so it's not a problem.

    J.
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  19. Booster
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    [Oct 7, 2008]
    The best way to compare finance agreements is to look at the Total Amount Repayable (TAR) figure. A PCP won't look anywhere near as attractive once you do this!!
    #18
  20. VRStu
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    VRStu Just Looking VCDS Map User

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    [Oct 7, 2008]
    Been doing some looking at this thing myself and it can appear a confusing choice.

    IMHO PCP was always mainly designed to get people into a car they couldn't afford by effectively splitting the loan amount into two parts, one part being repayment and one interest only to be redeemed at the end of the term.

    It had the secondary advantage of getting the customer back into the garage at some point for a PX.

    Figures are quite rough -

    The figures I've been recently quoted are showing the PCP over 3 years/12 miles to be the same monthly cost as a traditional HP over 5 years.

    If you then look at the total amount payable over the term the PCP comes out at around £2.5k more expensive than the HP.

    If you then probe a little deaper and work out what would be owed at the 36 month point on the HP it is around £1800 less than GFV or option to purchase price of the PCP. So you've paid the same amount of money to VWFS but you are still £1800 worse off if you want to buy the car, if you don't then fine you can walk away but you'll not have much to show for it. If you planned to upgrade at the 36 month point then you'll still be £1800 better of as your settlement should be lower than the the PX value. I don't think VWFS make a habit of over estimating their GFV's so that fact that you owe less on the HP than the quoted equivelant PCP GFV must be a good thing.

    Just my thoughts and I hope I didn't confuse you.
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  21. Amchlolor
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    Amchlolor Active Member

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    [Oct 7, 2008]
    Another reason I'd go for PCH over PCP.
    Just hand the car back to whomever you leased it from, then shop around for another one.

    I can't see me ever buying my wife's car by 'traditional' methods again.
    Selling cars does my head in.
    Potentially, weeks or months of uncertainty and hassle.
    Or you bite the bullet and take a derisory trade-in offer, especially just now (and the forseeable future).
    With regard to her current car, it costs me around £220 per month, using a traditional loan (which is a good bit lower than the current market rates).
    I can PCH the same car for £150 a month, and they pay the roadtax every year.
    No contest.
    I really don't care that the car is never 'mine', I have no interest in that.
    I am quite happy to pay a monthly sum, ad finitum, to keep her in a new car with a warranty.:thumbsup:
    #20
  22. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 7, 2008]
    PCP's were originally designed as an alternative to a company car. i.e. when a lot of big employers first offered their staff the choice of company car or opting out with a car allowance. PCP's enabled a previous company car user to opt out of the comapany car scheme, use their nett car allowance to basically switch to a similar or better spec vehicle with little/no deposit and be no worse or better off than when they had a company car. Unfortunately they never really took off as it doesn't take a rocket scientist to work out:
    1. Apart from buying the car on a credit card, you'd be far better off financing a car some other way.
    2. The less stupid customers realised replacing a company car with a brand new equivalent was really missing the point and they could actually make money by buying secondhand & running it into the ground.
    Either way PCP's do not make any sort of financial sense when you do the maths, and are so restrictive in terms of mileage and opting out early etc. Don't just read the small print, make sure you read it and actually understand it.
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  23. marriedblonde
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    marriedblonde Moderator

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    [Oct 7, 2008]
    Personally I choose PCP over PCH. If I went for contract hire I would be stcuk with the car for the full term, with PCP I can return it whenever I want. I've just returned my current car after 19months.

    I don't want to buy an older car and I don't want to tie up all my cash in a depreciating asset. I put in a small deposit and then effectively pay monthly to drive the car of my choice. Being self employed I claim mileage each month so the tax man effectively covers the monthlys on the car.

    I don't think I am stupid because I don't drive an older cheaper car.

    J.
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  24. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 7, 2008]
    Married, you're self employed, probably the only situation where a PCP makes sense.
    Whatever you do, don't work out exactly how much those 19 months cost you, it'll be frightening, expecially if you calculate it per mile.
    Unless you can't get credit any other way there are far better methods to buy a new car. But if you're happy haemoraging cash on a PCP unnecessarily for an easy life then each to their own.
    #23
  25. marriedblonde
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    marriedblonde Moderator

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    [Oct 7, 2008]
    On a car costing £32K over 3 years the difference is approximately £1600 or £44 a month

    But it means that I would only be paying out £550 a month opposed to £911

    So to me it makes sense.

    Also if I stick £360 a month into a bank account to earn interest that would then negate about £1000 of the £1600 difference. Which means it costs £600 a month more to PCP or £16 a month.

    Oh and I got the figures from www.car-finance.net
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  26. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 7, 2008]
    Yes slightly misleading, surely you mean £550 a month to hire the car, or £911 a month to own it. Even if it's only worth £16k after 3 years that's £444 a month back into your bank account albeit 3 years later, but you have to start somewhere and at least then you have £16k as a deposit for your new motor, so only having to finance 50%.
    Just like renting a house, with a PCP you end up never getting your foot on the ladder, you're back to square one every 3 years.
    #25
  27. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 7, 2008]
    That's the position I've been in for a number of years. I purchase a new car approximately every 3 years with the trade-in value of my existing car plus some cash. Usually it's about 50-50 after 3 years. My own part of the finance comes from savings and costs me what I would loose in interest if I left the money in the bank.

    Over the last 10 or so years I've always been given a 'reasonable' trade-in value plus around 9-10% off the new car. At the end of 3 years I own a car that is worth approimatedy half of the cost of a new one. All very simple and hassle free. Drive to the garage in the old car and drive away in the new one. The only strange thing is, because I have a personal plate, there are two cars at the garage with the same registration number!
    #26
  28. marriedblonde
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    marriedblonde Moderator

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    [Oct 7, 2008]
    I'm merely pointing out that PCP is not the expensive option you are making out. The total amount repayable over 36 months only differs by £1600 which I don't think is haemoraging cash.
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  29. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 7, 2008]
    What would you call haemoraging then? Look at the backlash we had when road tax went up just £200 a year, and you're talking about over £500 a year.
    It's not just the additional expense for very little (if any) benefit, it's the fact you will be doing it forever. It's renting just tarted up. Do you still rent your TV from Radio Rentals?
    IF you're self employed then I understand as you can offset the VAT etc etc. But for most people it makes no sense at all.
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  30. marriedblonde
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    marriedblonde Moderator

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    [Oct 7, 2008]
    If you stick the additional payments in a savings account (you can get 6.5% from ING) the difference is less than £200 a year! That is not a lot of money and it's hardly a massive difference. £600 difference on a £30K loan is only 2%!
    #29
  31. marriedblonde
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    marriedblonde Moderator

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    [Oct 7, 2008]
    And I don't buy my car through my company, it's a personal purchase as it is more cost effective. I'm also on the flat rate VAT scheme so gave up the right to claim VAT back on company purchases.

    J.
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  32. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 7, 2008]
    Sorry but paying interest on something you're never going to own makes no sense to me and if you have savings (earning less interest than the interest you're paying) then I can't see any upside to this arrangement. It's like an interest only mortgage but worse (don't tell me you have one of those as well!)
    #31
  33. davemk
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    davemk Member

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    [Oct 7, 2008]
    I don't think you can claim the VAT back on a PCP anyway (assuming it's a dual use vehicle, ie used for commercial and private mileage).

    I've recently asked my accountant that very question!
    #32
  34. Booster
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    [Oct 7, 2008]
    Not sure on a PCP but you can claim 50% of the VAT on CH if the agreement is in the company name.
    #33
  35. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [Oct 7, 2008]
    My wife currents has a 5 year old VW Polo and we have also looked at changing this. She current only does around 5000 a year.Looking at the VW Solutions scheme for this car it does seem quite good, especially as the cash we would use to purchase it is in IceSave and at the moment we cannot get access to it.

    The figures for the Polo are £2800 trade-in plus £760 discount on the new Polo. We have already put down a £300 deposit. So the total price for the new one is £10,760 + 350 for metallic paint - total £11,100 less the £760 discount giving £10,340. If we use the £2800+£300 as the deposit the we have to finance £7660. The solution on the VW site comes up with a monthly payment of £104.27. 35 times this plus the initial deposit addes and final payment of £4996.96 comes to a total of £11,746.41. Less the cash price of the vehicle (£10,385) means using Solutions is costing £1,361.41.

    If I was to invest the money into a bank account giving 6.5% this would yeald £1,351.37. Therefore buying it on a PCP would cost £10.04.

    No sure if this is the way we will go but it's an interesting comparision.
    #34
  36. mister.c.
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    [Oct 8, 2008]
    Dave - I recall you were not happy with the inability to get Xenon lights on any spec below S-Line and would not be entertaining purchasing the S-Line package to enable you to have the option to get Xenons. But for you (and for me) Xenon lights are essential.

    Given you may be being tempted with a new one at the moment, how have you decided how to take this forward - I'd not heard Xenons were now available below the S-Line specification.
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  37. PNH80
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    PNH80 Low life livin' the high life.

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    [Oct 8, 2008]
    Interesting thread this. I personally will only be going down the contract/lease hire route from now on.
    I just have no desire to literally own a car anymore. As much as i love cars i do only see them as a disposable commodity nowadays. Also, my downfall is that i like performance cars and it aint exactly the climate to be spending large amounts on new, fuel hungry cars. Like Bowfer said i'd much rather pay for the depreciation, drive the car for 2 years, hand it back then get a new one.
    Also, no big initial down payment or balloon payment at the end. All i have to account for is the fixed monthly sum without any worry of anything else.

    It's not for everyone as some people don't see the point in spending money on something you don't own. Then again you never actually own your car til the last penny is paid anyway.
    #36
  38. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 8, 2008]
    We own both our Audi's, every last penny paid, which I guess is one reason the credit crunch hasn't affected us in the slightest. It's just a difference in attitude I guess. If the whole of your disposable income is taken up with credit agreements & the like then it doesn't take much to push you over the edge. If you can easily afford it, then great, but I see so many people getting ready to go bankrupt with the amount of unnecessary spending they get themselves into, because these deals are so easy to secure and once down that road it's very difficult to turn it around.
    Personally, I've had company cars for 15 years and there's nothing more boring. I love actually owning a car now, far more enjoyable driving something you've worked hard for and is actually yours. Not for everyone I know, but I grew out of the need to have the latest & greatest shiny thing on the drive a long time ago. There's something a bit wierd about spending time & effort contributing to a forum like this one when you rent an Audi and everything is covered by the lease company.
    #37
  39. mister.c.
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    mister.c. Member

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    [Oct 8, 2008]
    I find it a bit weirder to like the sound of your own voice so much on the internet.
    But hey, each to their own, happy fishing! :salute:

    Dave - any clearer on the way forward?
    #38
  40. PNH80
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    PNH80 Low life livin' the high life.

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    [Oct 8, 2008]
    I don't think anyone's contribution to a forum is more or less valid depending on their financial arrangement on their car!
    I think if you removed everyone from this forum who has a company car, lease car etc.... it'd be a ghost town.
    We're all Audi drivers at the end of the day, we all 'chose' an Audi, it's just that some of us would rather concentrate on just driving it, enjoying it and not have the rest of the hassles.
    For the record i do 'own' my current car....But not my next.
    #39
  41. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Oct 8, 2008]
    Touched a bit of a nerve? Sorry....but I do love the sound of my own typing!
    #40

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