RS4 Finance, good deal....?

[markwm]

I'm trying to sort out my finance deal for a new B7 saloon:

Been thrown lots of figures atm:

£53k car(list). £30k to finance.

3 years @ £340, baloon of £24k.

or 3 years @ £389/month, baloon of £22k

or 2 years @ £271/month, baloon of £28k.

Do these sound like good deals? Finance ain't my strong point not sure how long I plan on keeping the car. I would imagine 18 months ish. The deal allows me to change cars fairly easily.

What do you think?...

[Thorny]

That's not bad, doing the same thing myself at the moment - Audi figures were: 28.5k down, 36 x 352, balloon of 26k. Other figures I've had were 22k down, 36 x 358, 27.5k balloon and 28k down, 36 x 210 and 28k balloon... All based on roughly 56k car value.

[david7m]

I think once you are 'sucked' into these finance deals you never escape

Your clearly putting in a lot of wedge, £23k. But, can you really find another £22-28k in 2/3 years time? I doubt it (nothing personal), therefore you will have to permenantly keep swopping around and never own one of these cars, plus your £23k capital is going to deteroriate like a mother over time as you down grade/swop

The below excludes the baloon payment, and treats the payments as a loan (not strictly correct I know!).

Your first deal means you have paid £12,240 (36*£340) for a £6k loan.
Second deal, £14,004 for a £8k loan.
Third, £6,504 for a £2k loan.

These dont sound good to me, maybe a £23k plus loan motor (£30k in total) is a better option

Personally, those kinda rates would break me

Good luck

£0.02

Dave

[Thorny]

You are right, it isn't a cheap way of doing it but the bonus is that it lets you keep some liquidity for other things (such as investing in stocks, shares, ISAs, whatever). Also you have to really include the balloon as you are technically borrowing that money.
With the 2nd example (£210 per month) if you put the same amount of money in ING's 6% saver account you would only be paying £68 extra after the interest you make) per month to borrow the money...

Also i never keep my cars for that long anyway so this makes it very easy just to keep 'rolling' my cars...

Although I may well just be selling it to myself!

[david7m]

If you can afford £210 to Lease company and £210 to ING, surely this would be better spent giving the Lease company £420, with either a smaller baloon or a shorter period

Dave

[Thorny]

Sorry, I phrased that badly. I meant that if you took the same amount of money that you are finacing then the interest you would earn on it would pay for your payments less £68.

[donuts]

Sorry, I phrased that badly. I meant that if you took the same amount of money that you are finacing then the interest you would earn on it would pay for your payments less £68.

What about putting diddly squat down and doing a pure lease?

On www.lvl.co.uk you can lease an rs4 with a few toys for £900 a month - ok so after 18 months you'll have paid £16k and have nothing to show for it, but seems madness to put down £23k of capital and then a monthly payment and then hope that residual prices give you a meaningful sum of money back at the end of the term....

just my tuppence though, not a critisism

[david7m]

Sorry, I phrased that badly. I meant that if you took the same amount of money that you are finacing then the interest you would earn on it would pay for your payments less £68.

I think I understand what you are saying, but dont see why you would want to do that/I dont understand the comparison

Dave

[david7m]

Do you mean that you can invest the £210 each month in an ING 6% account and you have saved £7,492, or you can pay £7,560 in lease payments, which is only £68 more? But, at the end of the ING you have the money

Dave

[david7m]

Sorry, I phrased that badly. I meant that if you took the same amount of money that you are finacing then the interest you would earn on it would pay for your payments less £68.

What about putting diddly squat down and doing a pure lease?

On www.lvl.co.uk you can lease an rs4 with a few toys for £900 a month - ok so after 18 months you'll have paid £16k and have nothing to show for it, but seems madness to put down £23k of capital and then a monthly payment and then hope that residual prices give you a meaningful sum of money back at the end of the term....

just my tuppence though, not a critisism

I'm not trying to spoil the fun either!

Dave

[Dom81]

Oh my God - I've just understood finance at last (not that I've been really trying...)

To me it actually seems quite a good deal, and I was all for cash up front with my next (and first) purchase

On the second example, there's a £6,004 interest charge over three years, which you can offset by investment of the £30k. Crappy 5% rate and 40% tax still gives about £2,800 on the £30k, so the cost of additional liquidity is some £1,070 p/a max

Please stop me if I'm missing something major, but surely it boils down to what you do with the £30k? Stick in in the bank and you'd be a bit worse off, but a very small house and you'd be laughing, buy another car and you'd be stupid...

[markwm]

I think once you are 'sucked' into these finance deals you never escape

Your clearly putting in a lot of wedge, £23k. But, can you really find another £22-28k in 2/3 years time? I doubt it (nothing personal), therefore you will have to permenantly keep swopping around and never own one of these cars

Why would I want to own a highly expensive asset that loses so much value so quickly?

This is one of the reasons I'm going with finance deal. I have no intention buying a car out right again(unless I win the lottery). I bought my last car in full £24k and don't like a)having to find the cash to buy outright and b)it sitting in a car.

Most of my 20k deposit is made up from the sale of that car. I run a company so I have a lot of cash in that, getting at it means a 25% income tax bill on the dividend. Another reason why I'm not buying out right. A £30k dividend yeilds £7.5k income tax(assuming you're in the high tax bracket already).

Therefore, a rolling finance arrangement rather suits me. Reasonable deposit, low monthly payments, ability to change car rather easily, I can leave my 30k in the business doing other things(ie, investing).

The below excludes the baloon payment, and treats the payments as a loan (not strictly correct I know!).

Your first deal means you have paid £12,240 (36*£340) for a £6k loan.
Second deal, £14,004 for a £8k loan.
Third, £6,504 for a £2k loan.

The above assumes the lender is giving me the value of the baloon for free.

Is your POV based on the fact that you think I'm biting off more than I can chew? I was more interested in the figures in relation to other types of deals.

[Thorny]

Ok - what I mean is: On putting 28k with a final payment of 28k, your monthly payments are in effect the interest on the 28k loan (as it is a £56k car), with that final payment of 28k (assuming you have it in cash) you can put it in a high interest account @ 6% thus making £5040 over a 3 year period, your interest costs would be £210 x 36 = £7560 therefore 2520 extra over 3 yrs or £840 per year or £70 per month. Of course you do pay tax on this! If you can find a higher return than 6% then happy days - free car! Sort of.

[Dom81]

Why would I want to own a highly expensive asset that loses so much value so quickly?

Maybe I don't understand after all - it sounds like you're somehow avoiding the depreciation

What happens if you have a rolling arrangement rather than pay the balloon and own outright? I was assuming that the car would be "sold" and the balance goes to you, less the value of the balloon, but that way you have (quite quickly) lost value

[Thorny]

depreciation affects finance arrangements the same way as if you own it outright - there really is no difference, it all just really boils down to where you want to put your money... And yes the balance goes to you less the value of the balloon (or whatever you owe at that time if you settle it early). The cheapest way of doing it (apart from buying outright) is putting it on yuor mortgage.