How best to fund for a car?

IMHO, it depends on so many factors.
What car are you looking at, & what are the residual values?
How much are you prepared to pay for the "peace of mind" of the all inclusive deals?
Cars in general aren't bought as an investment, especially not from new, anyway. But possibly, a 1yr old, or ex-demo car, with a 3 yr service package thrown in as a deal sweetener could be OK.
At this time of year, there are loads of deals to be had due to the new reg. plate coming out, & dealers clearing their present stock.
An ex-demo Honda Accord 2.2 diesel, with an inclusive service package could be all the car you'll ever need, & financially not too bad.
A mate of mine recently bought an 18 mth old Audi A8 4 ltr diesel, with a 3 yr service package as a deal sweetener, for approx £33k, IIRC. Not bad for a car which was best part of £60k new!
A contract purchase package for business users may make sense if it is a company car.
What sort of budget/car etc have you in mind?
Are there any car dealers lurking on here?
matt.

Matt

Forgot to mention, I'm a self-employed business-owner - sole trader.

Geoff

Hi Geoff, I've only ever bought cars on a personal use basis, & I'm not sure of the tax relief etc issues. Hopefully some of my previous post is relevant to you, but I'm sure there will be guys here who know more about car purchases for the self employed than I.
Regards, matt.

I'm in the same position as you Geoff. I'll be considering a new (or newish) car soon and will discuss the options with my accountant when the time comes.

Anyone?...

I'm certainly not a financial/accounts expert but I have to decide how to fund a new car that arrives next month and I came to the conclusion it's a case of working out how much it'll cost over the period you're likely to keep it for.

For example I'm buying a car, let's assume £35k.

On paper it'll be worth £25k in three years time.

I could pay outright for it so after three years I've lost £10k.

I could take out a finance package with a deposit/monthly/balloon payment scheme.

If I put down £10k I worked out I'd be paying around £500 a month with a £15k or so balloon (haven't done the sums for a while) so after three years I'll have paid approx £42k for a car that's still worth £25k, but it's offset slightly by the fact that other than the deposit the cash I could have used to buy the car outright is still earning interest - of course you still pay more in interest than you make back, but you aren't spending a huge chunk of cash.

I didn't look into rental which I believe is more common for business users, but I would assume that comes down to looking at all the leasing pimps and simple finding the one that offers the best deal, though of course you have no asset left as the car is returned.

Third option of course is a bank loan, but to me this seems pointless when the money to buy it is in the bank to begin with, hence at the moment I think it's a choice of buy it, or spread the cost but pay a bit more for the option.

As the delivery date draws nearer I'd also appreciate anybody's advice and info (private purchase not business).

cheers,
Paul

If you have the cash - the cheapest place to borrow the money is from yourself - however you have to have a realistic pay back process so that you have the cash to buy the next car at some time in the future. Any other method of financing will involve other people earning money /making a profit from you.

Hi Geoff;

If you don't have the money up front, Renault's current '4 years interest free' deal is pretty attractive, if you like their cars.

No such thing as a free lunch of course - you effectively pay for the loan in the price of the car.

I don't like leasing, as it has the tendency to tie you into the same dealer/manufacturer.

I did a straight purchase of my current Skoda Octavia.

John.

What Derek said, it's always best to use your own cash.

Beano

I bought my brand new Vauxhall Vectra 1.9 CDTi to be used as a taxi, for 12k. The list price is just under 16k, and the finance through Lombard Business works out at just under 15k over 4 years. For use as a taxi leasing is no good because they expect you to return it in near mint condition or make a big baloon payment at the end.

After 4 years the car is truly mine, but rather than run it into the ground and risk hefty bills to replace the engine/gearbox etc. I'll probably sell it for about 2k once it is paid for, and use the money for a deposit on the next car.

Hi Paul,
Which car is it you're looking at getting £25K for "on paper" after 3 years?
In reality I think you'll find you'll take a much bigger hit than that. You'll lose £5K on that value of car by the time you drive home!
You may see that car on the forcourt for that kind of price but it is most likely a long way off what you'll be offered.
A friend of mine used to work in car sales for an Audi main dealer. He told me to expect maybe half of my money back after 3 yrs. Obviously the exact make, model and spec will have a bearing on resale values but to make your car more desirable when it comes time to sell you have to make sure its loaded with features when you buy it.
My own personal experience is an example. Bought brand new a Honda Accord 2.0iES. The only car higher up the range was the Type R, so it's fully loaded feature wise. Paid £21K. Three years later offered £7.5K in px. The car was immaculate with only 24K on the clock. The exact same car, though not as clean and with double the mileage £11.5K. I know that Honda don't have the best resale values but they are respectable and far from the worst performers out there.
(This is not a current price though. My car is now 7yr old, performing perfectly and will more than likely be driven into the ground).
Regards,
Steve O.

The Automibile Association web site has details of depreciation values based on Glass's Guide - it is by model - check out the carr buyers guide

Derek,
i've just used the AA site you posted and run a price on a £.0 SE Audi Quattro, cost new £30,450.
Dealer retail price is now £11,895 with a trade-in value of £9,825. No wonder my mate is no longer in the trade - he opbviously offered too much for cars in px!!!
My Accord now valued at £3,050.
Steve O.

quote:

Originally posted by Steve O:
Hi Paul,
Which car is it you're looking at getting £25K for "on paper" after 3 years?

Boxster. The guides seem to agree on around 70% residual though I'm sceptical of that, especially with the way dealers screw you hence the "on paper" comment.

At the end of the day you buy the car you want and hope you've made a sensible choice don't you it's all you can do.

Paul

Geoff

I am one of those guys that have to use cars on a daily basis for work - so I have been used to the fully expensed car - goverment approved leasing scam (sorry scheme) and now financing my own car for business - home use. In the end of the day NO ONE makes money on cars, My best advice is to choose 3 cars which suit your need - price - spec - etc = then go out into the Open market and use a dealer - lease company and internet go gather a much info and pricing as possible, IMO Car finance is very expensive and the high street is a much better APR - look out for the 50/50 deals. Leasing companies are very competative and want business - I would advise running your own car through the business and charging standard mileage - cheaper than tax at present - 40p for first 10k then 25p - however it does have an effect of home cash flow - inform the wife or partner

In summary - you have the power to bargin - these companies want your hard earned so let them work for you -

Hi Paul,
You've probably got more chance than most of us in a Boxster but I am sceptical on residual values that high.
As you say - you have to hope you've made the right choice. You can't predict the car market of three years time. Oil prices or possible taxation on less environmental friendly engines could all have an impact.
What about a Honda S2000 and 3/4's of a 552?
Regards,
Steve O

I suspect you will need to be careful when buying a Boxster to ensure you have the appropriate specification / options to maximise residual value - unfortunately you only get a small proportion of the cost of these often costly options back when you come to sell - as residuals are expressed against base list price it partly explains why a Boxster does so well. Only partly, mind!

£35K put into a used 911 may in fact provide you with a more bullet proof residual. As you are a sole trader, I'm not not sure if there are greater tax benefits to buying new.

Peter

I only went for the options I thought I'd make use of, anything else IMHO is money down the drain (£2.5k on 19" wheel anyone?!) so I went for leather sports seats, a bit better than standard stereo, climate control, parking sensors and metallic paint.

It's quite scary how much you can spend if you load one up and I don't believe you would get most of that money back.

Geoff,

If you want to buy for cash, but need to borrow money talk to your mortgage provider. Most will offer a short term loan at mortgage rates up to 95% of the value of your house.

The Abbey also will not make any "admin" charges as an aside.

Jono

quote:

(This is not a current price though. My car is now 7yr old, performing perfectly and will more than likely be driven into the ground).

That could take a while! I have a J plate Accord Aerodeck with 106,000 miles on the clock and it still drives like new!

A Boxster or 911 probably represent the safest place to put money into a car at present, with the possible exception of a BMW-mini,IMHO.
Make sure that the monthly repayment is greater than the monthly depreciation amount, to keep ahead of the curve. Remember that the in-house finance package APR rate is negotiable, & the APR on a balloon payment system will be higher than for a straight forward loam. One option may be to extend the loan over a longer period of time, say from 3 to 4 years & view the last years payments as your balloon.
From experience, I would guess that the difference between forecourt marked price, & what you'd get offered for the same car in part/ex is approx £5k at a Porsche main dealer.
There are certain extras which are pretty much a "must-have" for future re-selling, such as full leather interior, climate control, the right colour combo, & in 3 or 4 years time, I guess sat-nav will be the norm as well, so a car without now may be harder to sell in 3 or so years. Other extras, such as different wheels, carbon faced interior trim, fully electric seat adjustment doesn't make as much difference to Porsches as other cars, as a lot of people say the best Porsche is a straight forward 911 c2 without too many extras.
matt.