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Cash VS Finance

Discussion in 'A3/S3/Sportback (8P Chassis)' started by sjahS3, Apr 22, 2008.

?

Cash OR Finance?

Poll closed Apr 25, 2008.
  1. Cash

    14 vote(s)
    46.7%
  2. Finance

    16 vote(s)
    53.3%
  1. rich164h
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    rich164h Member

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    You could do it this way, but you'd have to ensure that what you're investing in has a return that is higher than the value of the loan that you're taking out to pay for the other 15k in the mean time. That would also have to include the deductions for putting your money in and out of the investment as well as any tax (as mentioned above). i.e. to cover the 9% loan you'd need a minimum return of say ~18%

    If you can find regular investments with that sort of return then I'd say that there's no point in even contemplating doing things in this way as you'd be rolling in cash before too long so you should wait and pay with cash and still have plenty to invest elsewhere. Unfortunately I don't think they exist regularly or predictably enough to be able to base a long term income on.
    #41
  2. sleep envy
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    sleep envy Member

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    Invest the £30k to make sure it returns a sufficient amount to pay for the £30k loan on the car incl the interest payments PLUS a profit
    #42
  3. newbiecrg
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    newbiecrg windsurfer

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    I know where you coming from and understand it... my example was just a way to say I won't cash big bucks on a volatile asset.... I would prefer if I had to to take a loan for the remainder and invest the other bit of money today instead of next year...

    Also in terms of paying the loan that is not a problem because my normal job pays it... so the investment would be something extra...

    Pedro
    #43
  4. marriedblonde
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    marriedblonde Moderator

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    I'm comparing what makes more financial sense. The interest on a 30K loan will be a couple of grand a year, reducing your mortgage with the money will reduce the term by a couple of years. Which will be about 3 times the amount the loan will cost you. Obviously it depends on the size of your mortgage (and the cost of your car...)

    J.
    #44
  5. Spin140
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    Spin140 Active Member

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    In the past I would have voted personal loan rather than dealership finance due to the cost savings but I do generally have a large deposit from the PX.

    For my latest change I put the £3K difference on a credit card which will be paid off at 0% over 12 months, so I guess my vote is cash sort of ?!?

    I think I would only consider the balloon payment option if considering something like a tax group G car which may be subject to a degree of un-certainty ref depreciation, whilst recently looking at the Porsche Cayman this was my preferred option.

    Horses for courses I guess.
    #45
  6. rich164h
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    rich164h Member

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    I guess this comes down more to how often people change their cars. As for a one off purchase of a car to last the length of a mortgage, paying off a car loan in three years would clearly be cheaper than spreading the same borrowing over 25 years. I agree with that, but the reality is that cars do depreciate, and people don't keep their cars for 25 years. I'd guess that most people will change their car every couple of years perhaps and always need (i.e. want) to keep with a similar priced car rather than getting a cheaper one (which menas finding extra cash), this means that they will constantly have some level of borrowing against the car they are driving. i.e. they will always have for example repayments against a £20k loan (over the life of many cars) for the same period as a mortgage. Therefore a loan would not be the cheaper option.

    This's what I was trying to get at (albeit not particularly clearly!).
    #46
  7. marriedblonde
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    marriedblonde Moderator

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    Ah ok right I see your point yes if you have finance out on a car for the same amount f time as a mortgage then I agree.

    I am kinda hoping that I'll stop changing my cars at every given opportunity as I get older...

    J.
    #47
  8. bacardi
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    bacardi Active Member

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    one thing having a company car this time around has "trained" my mind into - I wasn't allowed to change :)
    #48
  9. PaulAr
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    PaulAr S3 (8P)

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    Its all well and good saying you should invest or save your cash and then buy your car on HP, however this often puts the monthly repayments beyond peoples reach, particularly when youre being a 30K+ AUDI.

    I put a large cash payement down on the S3 and covered the rest with a personal loan at 6.9.
    If I hadnt, then the monthly payments to make a 25K purchase soley on HP then I wouldnt have been able to have an S3, simple as that.

    As for purchases made with HP, mu local AUDI dealer didnt even try to get me decent rate and bluntly told me to "go to the bank as they wouldnt get close to 6.9....blah..."

    my 2p

    cheers
    #49
  10. sjahS3
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    sjahS3 Member

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    That sums it up in a nutshell. All depends on the individual and their circumstances :)

    Personally, I went for a part finance / part cash deal which suited my situation. I'd never have been able to put down ~18k cash (taking into account my p/ex) down for my S3 just because I wouldn't want it all going to a depreciating asset :think: .

    I know I can get out of the deal at any time.. be it day 1 or day 100, so I'm not tied in to any strict conditions although looking at what proportion of the monthly goes in interest, I'd probably go the personal loan route next time.. :thumbsup:

    -Sal-
    #50
  11. Crisis
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    Crisis Member

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    Interesting debate! Didn't expect this much!

    I agree on the point 100% Finance is just silly. In someways a PCP (another can of worms) can be tempting BUT:

    a) Never own it
    b) Can't modify it as you don't owe it
    c) Deposit up front
    d) Big pay up at the end where you give the car back

    Essentially you 'loose' your deposit and you are in a worse situation than before, as you don't have a deposit such as previous car to help you. But alot of people seem to do it and can buy more expensive cars for this option, for a limited time then its game over. Thats the way I see it anyway.
    #51
  12. marriedblonde
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    marriedblonde Moderator

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    Not if you buy it on one of these balloon payment schemes, thats the whole point of them!
    #52
  13. N8
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    N8 Kowalski Details

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    I could never pay £27k cash for a car! That is ridiculous
    #53
  14. sat1983
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    sat1983 Member

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    So what is the best way to buy a car for the average buyer?
    #54
  15. TrickyLad
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    TrickyLad is loving his new A3

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    I would like to think i am the average buyer.

    for Joe Bloggs best way is to get a decent lump sum payment and pay the rest on HP for 3-4 years
    #55
  16. PaulAr
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    PaulAr S3 (8P)

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    I like to own the car at the end of the term, so it still means you have to make the monthly payment AND squirrel away enough each month to settle the balloon payment at the end.

    Either way, your monthly obligation is still significant and in some peoples cases, prohibitive.

    The other option is NOT to make the balloon payment and to trade the car back to the dealer, meaning you cant sell the car privately as you dont own it.
    And in my recent experience, trading you car in at an AUDI dealer aint ideal, I acheived 3K!! more selling privately versus p/x.
    Therefore I went into my next car with a 10K loan instead of 13K.

    Cheers
    Paul
    #56
  17. Amchlolor
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    Amchlolor Active Member

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    Assuming you have the cash, it's quite simple.
    If the interest payable on the HP/loan is more than you would earn in interest, use the cash.
    #57

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