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Question About FINANCE. Better off with More Expensive Car?

JayK

Well-known member
Joined
29 Jul 2007
Messages
119
SOmething I have been thinking about.

Example

So a car is £55k with say a £25k residual after four years.

And another car is £45k with a £15k residual after same period.

At the end of the day the depreciation is the same over the term, they both lose £30k and if I'm not keeping the car and settling the full value of the vehicle off, am I just better off going for a more expensive car?

Does it mean the £55k one wont be that much different in costs even though it's ten grand dearer? (Apart from the Deposit)

Any input much appreciated

JayK
 
The true cost of a car is it's depreciation not what you paid for it. that is the simple answer to your question. If you use finance with depreiation matched profile I.e. final balloon then it is also true in a practicle / cashflow sense
 
Thanks Jamie.

Will be in touch when I am closer to buying, and then we can hopefully work something out and you can further advise me :D
 
Jamie said:
The true cost of a car is it's depreciation not what you paid for it. that is the simple answer to your question.

Surely only true if you don't have to borrow the capital to buy.

Can't see how borrowing 250K with balloon at 220K could be the same overall cost as borrowing 50K with ballon at 20K.

Both depreciate 30K but the capital for the first must cost more to borrow.

Happy to be proved wrong as I can think of few cars at 250K wouldn't mind owning :)

Ian.
 
I suppose the beauty of buying a car via finance in terms of 'true cost' is you are paying for the deprecation over 3 yrs, rather than all up front as you do if you pay cash. So if you buy a pricey car with low depreciation you might end up quids in. Finding £30k up front in addition to the deposit might be a tall order, £625 pcm may not be.

The only downside is that you also pay interest.

This logic has seen Chris Harris at Autocar etc in some v tasty kit via finance.
 
So I guess my next question is, what kind of 996 is best to get in terms of finance, GFV etc?

I know its a rather broad question but even if anyone has any rough ideas?

Thanks
 
ian_uk said:
Jamie said:
The true cost of a car is it's depreciation not what you paid for it. that is the simple answer to your question.

Surely only true if you don't have to borrow the capital to buy.

Can't see how borrowing 250K with balloon at 220K could be the same overall cost as borrowing 50K with ballon at 20K.

Both depreciate 30K but the capital for the first must cost more to borrow.

Happy to be proved wrong as I can think of few cars at 250K wouldn't mind owning :)

Ian.

You are quite right by quoting two extreme examples. However in that sense irrelevent whether financing or cash as you would otherwise earn interest at bank.

My logic is aside from cost of borrowing / real time value of money.

It was meant in the context of the question posed.
 
Main difference is the cost of borrowing (or opportunity cost of the money invested if using cash) of the residual value itself.

e.g. a £50,000 residual value will cost you twice as much in interest (spent or earned) as a car with a £25,000 residual value - regardless of the depreciation itself (which may well be the same). At 5% per annum, that's £7,500 over 3 years on the more expensive car, or just over £200 per month!

However, if your more expensive car is a GT3, it may well have £7,500 less depreciation than say a Carrera 2, so you would be well up on the deal at the end... :D :D :D :D
 
Jamie (From your website)

Is this then why for a 2005 M5 costing £50,000 it only costs £600 Per month with £0 down

Whereas for a Porsche 911 (996) GT3 costing £54,000 its £10,000 down and £550 per month

Considering both cars cost very similar (£50k v £54k, it would appear that the M5 is so much more affordable. Is this because the M5 has better residuals/resale value?
 
That has to be a typo about the M5, surely?

Can't believe an M5 has a better RV than a GT3... :shock:
 
Not at all - the gt3 has better depreciation. some of those examples are matched to depreciation some not and over different terms. they are not typical deals but actual deals.
 
Jamie, out of curiosity, what term in the M5 over then? You can reply via PM if you prefer. It seems a cracking deal

Thanks
 
It was a very aggresive deal. Maybe not a sensible one - suited that particular client and show that is possible.
 
Does that mean there was a massive baloon at the end, with the risk of being in negative equity at that point?
 
Sounds as if he'll struggle to get out of it if he does too many miles or wants to get out early!

I know what that feels like unfortunately... :(
 

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