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      06-08-2012, 08:43 AM   #1
Buttons
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How do you finance?

Please excuse the personal element of question but who better to ask than fellow enthusiasts right?

I've always wondered how people buy their cars..... there are so many people around now-a-days driving new cars it makes me think i'm missing a trick
Surely everyone isnt earning big salaries and are splashing their cash on cars??
Ive always bought 2-3 year old cars so have no experience buying new.
Ive read of people negotiating discounts with dealers - does this mean the are paying cash??!

so: lease, outright purchase, finaced purchase, PCP with baloon.... aaagggghhhh!
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      06-08-2012, 09:36 AM   #2
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Caveat: I've never bought a new car before. Actually, the newest car I've ever bought was 6 years old.

Don't worry about the idiots. There are some people who legitimately have a lot of money. There are others who spend money they don't have trying to look like someone with money. Don't stress about them. Just do what's right for you. Don't spend more on a car than you can reasonably afford.

That said, you can get financing lined up ahead of time if you care to go that route, or you can use BMW financing if it's a better deal. In all cases, you can still negotiate price. In fact, they make money on financing, so they're often happy to deal with someone who finances thru BMW. Cash is not necessarily king.
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      06-08-2012, 10:49 AM   #3
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This is a really good question, I've always wondered that.

I earn what I class as a very good salary but when I do the figures on various new models the number is silly with regards to APR that you would be a fool to go with it.
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      06-08-2012, 11:41 AM   #4
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After going a bit crazy with the spec list for my F30 M Sport I think I have finally settled on everything and the total comes out at a shade under 42k.

Originally when I went in to order my car I was offered no discount and an APR of 11.9% which was crazy and so the haggling began. Managed to get the APR down to 5.9% and a discount of 6% off the list price. I'm putting down a 10k deposit and the payments are still reasonable per month. I've gone for the 3 year PCP scheme with a final payment of approx 18k.

All in all I was very happy with the price. I dare say I could have pushed them a bit further but sometimes I think it's best to quit whilst you're ahead!
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      06-08-2012, 04:23 PM   #5
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For myself, I've bought cars in different ways. A lot depends on what resources I've had available, and which method is most cost effective at the time. Part of the criteria... is borrowing expensive, or is saving worth while?

If you don't have assets, then it is likely to be expensive which ever way. The more a car costs, the worse the hit is going to be in most cases.

I've bought outright, passed a cheque across the desk for a new car on two occasions. Saving interest rates were not good at the time, so cheapest way was to pay for the cars. Current car I went for lease purchase, as if the car was any good I could buy it at the end of the lease. Was the cheapest way at the time, as my investments were earning good money and made the car a cheaper purchase. But when the financial system went pear shaped, about the time the lease was up, rather than upgrade, I extended the lease arrangement, but after a few months decided to keep the car and clear it with a final payment, as saving rates were low again and not about to change.

I'm hoping to get a new F31 later this year, not sure which way to go at present. I could buy it outright, but I'm tempted to share it out a bit, use some assets that are not earning much, along with a smaller loan. May lease again, if the rates are really competitive and keep the cash for the balloon payment.

If I wasn't in this position, where I have options and some control, I'd be looking at a cheaper, or used car.

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      06-14-2012, 11:30 AM   #6
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Quote:
Originally Posted by HighlandPete View Post
For myself, I've bought cars in different ways. A lot depends on what resources I've had available, and which method is most cost effective at the time. Part of the criteria... is borrowing expensive, or is saving worth while?

If you don't have assets, then it is likely to be expensive which ever way. The more a car costs, the worse the hit is going to be in most cases.

I've bought outright, passed a cheque across the desk for a new car on two occasions. Saving interest rates were not good at the time, so cheapest way was to pay for the cars. Current car I went for lease purchase, as if the car was any good I could buy it at the end of the lease. Was the cheapest way at the time, as my investments were earning good money and made the car a cheaper purchase. But when the financial system went pear shaped, about the time the lease was up, rather than upgrade, I extended the lease arrangement, but after a few months decided to keep the car and clear it with a final payment, as saving rates were low again and not about to change.

I'm hoping to get a new F31 later this year, not sure which way to go at present. I could buy it outright, but I'm tempted to share it out a bit, use some assets that are not earning much, along with a smaller loan. May lease again, if the rates are really competitive and keep the cash for the balloon payment.

If I wasn't in this position, where I have options and some control, I'd be looking at a cheaper, or used car.

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      06-14-2012, 05:14 PM   #7
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I get where you are coming from, I do the same every time I buy a car and have ended up with different approaches.

Historically, I've tended to go one of three ways:

1) Personal Contract Purchase (PCP) with a dealer, usually with around a 10% deposit and typically over 36 months. Rates vary and I'll only go with the dealer rate if they are competitive with what I can get elsewhere. I often don't keep the car for the full three years - once it gets 1000 or so in equity I'll chop it in for something else.

2) Lease Purchase, or a similar finance deal with a balloon payment, with dealer or a third party finance house (Lombard last time though I'm not sure they still do finance for private individuals). Only real difference to a PCP is that the balloon figure is not a guaranteed future value, so you accept a level of risk that your car is worth more than the balloon when you want to change it. Advantage is you can tune the size of the balloon and often get a slightly better APR. You also don't have to worry quite as much about mileage as you are taking the risk on depreciation.

3) Bank loan, normally over a longer period than I'll own the car, with the term tuned so that what I owe when I expect to change the car is less than the car's value. Advantage is that you own the car from day 1, but if you've cocked up your calculations over residual values you could end up stuck with it for longer than you planned. My Mini is bought this way and just over two years into the deal it is worth about what I owe on it if I sold it privately or got a good part-ex value.

A fourth option I've not yet done but am considering this time is an operating lease, where you effectively 'rent' the car for a period and then hand it back. On some cars, like Mercs at the moment, you can get lower monthly payments than a PCP or bank loan for a given car, but the downside is you'll never own it and never have any equity towards the next one, though of course depreciation is no longer your problem, as providing the car is in good nick and you haven't exceeded the agreed mileage there is nothing more to pay.

To put this in context, I went to look at a new C-Class the other day. My local dealer were pushing me towards a PCP and a basic C180 Exec SE auto saloon was coming out at 395 per month over 32 months with a 3.5k deposit (and 2k discount), plus a GFV of about 12k or something. I got back home thinking 'okay, but not great' - though the APR of 5.9% was good.

Then I went onto what appeared to be a fairly reputable leasing site, and they were offering a C220CDI Coupe auto for 370 per month on a 3+23 lease, so about 1100 deposit. I spoke to the company and challenged them a bit to ascertain if the quote was real or an unobtainable 'sold out' ruse to suck punters in, and it appears genuine. Both deals were 10k miles per year.

So, the lease is a lot cheaper, if I don't mind the fact that I have to keep the car for the whole period and will get nothing back at the end.

Whatever route I take I always give the dealer the chance to match the best deal I can obtain elsewhere, as they make a lot of money on finance and will discount the car more if you finance it with them.

Finally, timing is important. Dealers typically work in quarters and have sales targets for quarters and years, with manufacturer bonuses attached. If you go in right at the end of a quarter or year you can get more discount if they are close to target. For example, I once bought a car on 31st December and the dealer offered 2k over book for my part-ex and a good discount on the car. In fact, the deal was so good that the dealer principal tried to back out of the deal when I came to collect it. I don't think he realised his salesman had bumped the part-ex value and discounted the car!
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      06-14-2012, 05:34 PM   #8
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blimey... how much are you earning a year!? im joking, you dont have to answer that of course... impressive all the same
Successful business returns... (after years of blood, sweat and tears). But it hasn't always been the easy way. I've had my old cars, with all my own servicing and repairs. And a bank loan to buy the old things as well.

To be honest, if I couldn't afford to finance a car myself, I wouldn't be buying such an expensive car these days. But as I said, I may choose a different way to buy it, if it makes more financial sense and is a cheaper way to use resources.

BTW, I have no problem in leasing and not owning the car. We are really paying for depreciation anyway, what ever way we finance and use a car, unless it is an older car.

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      01-13-2013, 04:15 AM   #9
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Quote:
Originally Posted by mgarvey View Post
I get where you are coming from, I do the same every time I buy a car and have ended up with different approaches.

Historically, I've tended to go one of three ways:

1) Personal Contract Purchase (PCP) with a dealer, usually with around a 10% deposit and typically over 36 months. Rates vary and I'll only go with the dealer rate if they are competitive with what I can get elsewhere. I often don't keep the car for the full three years - once it gets 1000 or so in equity I'll chop it in for something else.

2) Lease Purchase, or a similar finance deal with a balloon payment, with dealer or a third party finance house (Lombard last time though I'm not sure they still do finance for private individuals). Only real difference to a PCP is that the balloon figure is not a guaranteed future value, so you accept a level of risk that your car is worth more than the balloon when you want to change it. Advantage is you can tune the size of the balloon and often get a slightly better APR. You also don't have to worry quite as much about mileage as you are taking the risk on depreciation.

3) Bank loan, normally over a longer period than I'll own the car, with the term tuned so that what I owe when I expect to change the car is less than the car's value. Advantage is that you own the car from day 1, but if you've cocked up your calculations over residual values you could end up stuck with it for longer than you planned. My Mini is bought this way and just over two years into the deal it is worth about what I owe on it if I sold it privately or got a good part-ex value.

A fourth option I've not yet done but am considering this time is an operating lease, where you effectively 'rent' the car for a period and then hand it back. On some cars, like Mercs at the moment, you can get lower monthly payments than a PCP or bank loan for a given car, but the downside is you'll never own it and never have any equity towards the next one, though of course depreciation is no longer your problem, as providing the car is in good nick and you haven't exceeded the agreed mileage there is nothing more to pay.

To put this in context, I went to look at a new C-Class the other day. My local dealer were pushing me towards a PCP and a basic C180 Exec SE auto saloon was coming out at 395 per month over 32 months with a 3.5k deposit (and 2k discount), plus a GFV of about 12k or something. I got back home thinking 'okay, but not great' - though the APR of 5.9% was good.

Then I went onto what appeared to be a fairly reputable leasing site, and they were offering a C220CDI Coupe auto for 370 per month on a 3+23 lease, so about 1100 deposit. I spoke to the company and challenged them a bit to ascertain if the quote was real or an unobtainable 'sold out' ruse to suck punters in, and it appears genuine. Both deals were 10k miles per year.

So, the lease is a lot cheaper, if I don't mind the fact that I have to keep the car for the whole period and will get nothing back at the end.

Whatever route I take I always give the dealer the chance to match the best deal I can obtain elsewhere, as they make a lot of money on finance and will discount the car more if you finance it with them.

Finally, timing is important. Dealers typically work in quarters and have sales targets for quarters and years, with manufacturer bonuses attached. If you go in right at the end of a quarter or year you can get more discount if they are close to target. For example, I once bought a car on 31st December and the dealer offered 2k over book for my part-ex and a good discount on the car. In fact, the deal was so good that the dealer principal tried to back out of the deal when I came to collect it. I don't think he realised his salesman had bumped the part-ex value and discounted the car!
Very helpful - thank you.
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      01-13-2013, 05:04 AM   #10
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For me it was low deposit (1500), good discount and low APR over 3 years which gave a reasonable monthly payment. At the end I'll happily hand it back. Any equity towards another car is just a bonus.

I've been doing this for 10+ years since giving up a company car, normally I aim for 2 years if I can. I've also had cars on personal contract hire and really have no preference between the two. PCP gives more flexibility.
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      01-13-2013, 05:06 AM   #11
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Quote:
Originally Posted by mgarvey View Post
Finally, timing is important. Dealers typically work in quarters and have sales targets for quarters and years, with manufacturer bonuses attached. If you go in right at the end of a quarter or year you can get more discount if they are close to target.
That doesn't really work well for factory order cars though. Their commission and targets are based on when the car is registered not ordered.
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      01-13-2013, 05:42 AM   #12
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Quote:
Originally Posted by Buttons View Post
Please excuse the personal element of question but who better to ask than fellow enthusiasts right?

I've always wondered how people buy their cars..... there are so many people around now-a-days driving new cars it makes me think i'm missing a trick
Surely everyone isnt earning big salaries and are splashing their cash on cars??
Ive always bought 2-3 year old cars so have no experience buying new.
Ive read of people negotiating discounts with dealers - does this mean the are paying cash??!

so: lease, outright purchase, finaced purchase, PCP with baloon.... aaagggghhhh!
Cash + PX every car.
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      01-13-2013, 06:53 AM   #13
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I buy my cars outright and got 14% off the car (with or without finance), I almost did the 50/50 0% deal but I would of lost 4% discount as the dealer had to give some back to BMW finance and over the 2 year term and I wouldn't of made the difference in savings so that idea was binned.

Missus and I don't like the idea of debt and are in the lucky position of not having any
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      01-13-2013, 07:18 AM   #14
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I buy my cars outright and got 14% off the car (with or without finance), I almost did the 50/50 0% deal but I would of lost 4% discount as the dealer had to give some back to BMW finance and over the 2 year term and I wouldn't of made the difference in savings so that idea was binned.

Missus and I don't like the idea of debt and are in the lucky position of not having any
Yep we are lucky but I have not always been so. It takes hard work over many years.
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      01-13-2013, 08:57 AM   #15
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That doesn't really work well for factory order cars though. Their commission and targets are based on when the car is registered not ordered.
For me the timing aspect worked as early Nov meant they were looking at registering the car before 31 Dec so seemed very keen!

Wrt the OP's question, I'm on PCP as the APR was a good as I could get anywhere else.
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      01-13-2013, 10:44 AM   #16
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Cash + part exchange. I usually try to find what I'm after as a used car (6-12 months old). If not (and I'm desperate to change my car), I'll buy new.

At the moment, I feel that the list price of the F30 is relatively high for what you get (particularly in 4 cylinder diesel form) and it has certainly made me think twice before changing to one (given the level of depreciation the BMWs experience these days). Maybe I'm not as easily impressed as I used to be though!

Looking at a 9 month old F30 this week mind you to see if I can do a deal on it.
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      01-13-2013, 11:12 AM   #17
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I own the car and put a 15% deposit down but my car allowance from my job covers the monthly payments
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      01-13-2013, 11:56 AM   #18
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Cash + PX every car.
+1
Bought an ex BMW UK car. 2700 miles, saved 13000 approx !
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      01-13-2013, 01:24 PM   #19
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+1
Bought an ex BMW UK car. 2700 miles, saved 13000 approx !
That's what I'm aiming for too, the one I'm looking at has 1300 miles on it and is roughly 13k under the new price. Hopefully it's in good order!
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      01-13-2013, 02:18 PM   #20
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Quote:
Originally Posted by Buttons View Post
Please excuse the personal element of question but who better to ask than fellow enthusiasts right?

I've always wondered how people buy their cars..... there are so many people around now-a-days driving new cars it makes me think i'm missing a trick
Surely everyone isnt earning big salaries and are splashing their cash on cars??
Ive always bought 2-3 year old cars so have no experience buying new.
Ive read of people negotiating discounts with dealers - does this mean the are paying cash??!

so: lease, outright purchase, finaced purchase, PCP with baloon.... aaagggghhhh!
Just some anecdotal evidence here.

When I was purchasing my last BMW, the salesman told me that less than 5% of their sales were cash sales. I don't know how true this is or whether it was an attempt to make me take the finance. But have you noticed how difficult it is to find the list price of a car in most adverts these days? You have to wade through all the different finance options before you eventually see the list price in the small print somewhere at the bottom.

On a different note, from the very few extremely rich and successful people I know well, only one drives what could be considered an expensive car (a Lexus RX), the others drive either quite old (>6 years) german cars (Mercs,BMWs, Audis etc.) or reasonably new Fords,VWs,Renaults etc. So I have long lost any association between wealth and what type of car you drive in my mind.

Drive what you can afford and what you enjoy would be my advice.
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      01-13-2013, 02:32 PM   #21
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For my wife's car (Touran) low monthly payments were the be all and end all. Luckily we had a sizeable deposit and went PCP. And actually we like it that much we might keep it when the finance ends in October.

My cars have been on business contract hire for years and as one of four partners it works well for us. The commercial vehicles we have are on CH too.
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      01-14-2013, 05:38 PM   #22
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Trade in + bank loan for nearly new. Loss of options (unless you're lucky) but that's my compromise.
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