Jump to content

How long before next trade-in


UBM
 Share

Recommended Posts

Sensible question - bought the current motor new in march. I realise the biggest depreciation is over the first 12 months, then less so. Is the current feeling to keep new motors for three years until warranty expires? What do people think makes the most sense? ECLIPSe.gif

Link to comment
Share on other sites

[ QUOTE ]

What do people think makes the most sense?

[/ QUOTE ]

You're on a car enthusiast forum and you expect people to talk sense about the objects of their desire???

IMHO what probably makes most sense of all is not to buy new cars at all but buy the 12 month old (or even younger) car you've already mentioned and let somebody else cop the majority of the depreciation and put enough miles on the clock to rule out most major faults. Then flog it after a couple of years.

But then of course, you might be like me and find it hard to resist the pleasure of a brand spanking new car, which noone else has had a chance to make dirty or ding. In which case 3 years is probably the best option.

Finally there's the route that I suspect a lot of us take, which is to hang on to any car for as long as it takes to find the money to buy the next on your list of "cars I absolutely have to own".

Link to comment
Share on other sites

[ QUOTE ]

[ QUOTE ]

Finally there's the route that I suspect a lot of us take, which is to hang on to any car for as long as it takes to find the money to buy the next on your list of "cars I absolutely have to own".

[/ QUOTE ]

That reminds me of someone?? oh yeah me smile.gif

[/ QUOTE ]

Are you sure? I think thats me grin.gif

and quite possibly 1/2 the members on this forum wink.gif

Link to comment
Share on other sites

[ QUOTE ]

Sensible question - bought the current motor new in march. I realise the biggest depreciation is over the first 12 months, then less so. Is the current feeling to keep new motors for three years until warranty expires? What do people think makes the most sense?

[/ QUOTE ]

Mmm I've been through these thoughts recently, having always bought cars outright using a personal loan from the bank. The gutting thing is that you take the loan, (assuming a reasonable deposit) and the car depreciates as fast as you can pay the loan off and that now seems a tad stupid.

A former colleague with a retail motor industry background like myself (though I haven't been in the trade for about 18 years now) offered this advice:

Give up the idea of trying to own a car outright - the numbers will never stack up, ever. Just accept that you need to pay 'X' amount a month and drive the car you want, do an agreement for say three years and change at 12-18 months and roll everything into the next vehicle. In that time you may need a service and a couple of tyres and years RFL and that'll be it. If you don't believe me, check the dealers used car web sites and see how many 1-2 year old cars have 5,10,15,000 miles on - these are most likely ex PCP or Personal Lease cars.

I must admit I hadn't ever really thought about it, so did some more investigation and discovered that either the PCP or personal lease purchase methods of funding a vehicle are actually more common than you would think.

The PCP (Personal Contract Plan) method has a high APR though with a GMFV (Guaranteed Minimum Future Value). Effectively the vehicle is aggressively written down over the period of the agreement and hopefully the difference between the GMFV and the real trade-in value of the car will be the deposit on the next vehicle, the negative to the PCP is the higher APR and you are 'locked in' for at least half the agreement period.

The personal lease purchase has no GMFV, so the risk is yours and a lower APR - so the advice was choose a car with a low depreciation (that'll be an Audi Cab for me then!) and you can get out of the agreement at anytime. Talking to a couple of the dealers it evidently does happen - people lose their jobs, TT owners start a family smashfreakB.gif etc

So I have abandoned the idea of trying to own a car outright and now the brain has adjusted, feel very comfortable with it. smile.gif

Link to comment
Share on other sites

Completely agree, have lost a lot of money paying cash for my 'dream car' and then realised 2 years down the road I no longer wanted it. PCP for me all the way. Really any car purchase is just a rental, the only sums to do are how much a month do you want to pay for the 'privelige' of driving a particular car. I tend to do 2 year or 30 month agreements so I can sell the car with some factory warranty left and halfway between major services.

Link to comment
Share on other sites

Sorry, got to disagree! smile.gif

If a third party (ie the PCP company) is able to make a profit from funding your car in this way then for them to do so there must be more cost to you than normal depriciation, otherwise the numbers would not stack up.

I'm not saying PCP is wrong, and no doubt it works for a lot of people, but don't be fooled into thinking its a cheaper way to run a car, someone has to pay these guys profit, and that someone is you.

Link to comment
Share on other sites

[ QUOTE ]

hopefully the difference between the GMFV and the real trade-in value of the car will be the deposit on the next vehicle

[/ QUOTE ]

For me this is the fundamental problem with PCPs. After 3 years you still don't own anything unless you're willing to pay a sizeable sum or accept a weak GMFV. I would take the personal loan route over a PCP. Best of all, cobble any loan on to your mortgage if you have one and if you can. If you've done your homework on your mortgage, you'll be paying a significantly lower interest rate and the car will be yours from day one.

As always this is just MO.

Link to comment
Share on other sites

I would never buy a car outright.

But I do usually buy it with a loan over 60 months.(not with the intention of keeping it though)

That means that after a year I owe pretty much what is remaining on the loan, after 2 years I owe what is remaining on the loan plus a deposit and if I were to keep it for 3 years I would be able to sell the car and have a very good deposit for the next. If you keep it for 4 or 5 years then... well that will never happen.

I always try and buy a car that is 6 months to a year old too, means I can get somthing much better for the same price, and then can get an agreament with a balloon.

Example

In January I bought and ML270cdi Inspiration that was 7 months old and had 8,000 miles on it, The price of the car new was £38k and he had it re-mapped and privacy glass fitted allround costing another £1200.

I paid £32k for that car and put in a £3k deposit, the finance company based the residual on the new price of the car, which meant after 30 months the balloon would be £18k.

This meant that the monthly payments were only £453, not bad for £40k worth of car?

The fact that the car was less enjoyable than a transit van to drive is besides the point, I kept it 5 months and sold it through ebay. In fact Sytner bought it from me for £31,750, so I only lost £250 on the car and a £200 admin fee for the finance. But if I had bought it new it would be 18 months before I could have even chopped it in without having to pay money to get out of it.

Link to comment
Share on other sites

MMMM!

This is turning into a very important discussion, it's one I have agonised over too.

Are there any experts out there that can give the forum some specialist and maybe difinitive advice.

Once we have reached agreement on the best way forward we could cut out the stealers and open our own virtual dealership we will all trade in our cabs and we'll all aquire new ones perhaps all S4 Cab's and give ourselves the very best deal... JOB DONE THEN... SMOKE6.GIF

Link to comment
Share on other sites

I once got totally ripped off by a BMW PCP. Never again. However, I'm an absolute advocate of Personal Lease Purchase which is basically HP with a baloon payment - no uplifts for GFV or anything else. Done it on 3 cars so far and have been very happy. I take them out on a 4 year term and look to changing the car after 2.5 to 3 years. By then, the initial depreciation has gone and the loans upfront interest is eatne into so you end up making in orads into the captial repayment. I've always been able to maintain my initial deposit, even though I've driven the cars well above average mileage.

Absolutely agree to the comment on never owning a car outright, I get bored of them after 3 and want a change anyway. So as long as the monthly payments stay the same and I keep rolling a deposit forward, I get a new car every 3 years.

Link to comment
Share on other sites

There are different ways of doing this - Ari is right in that someone somewhere is making a profit - even if it is the bank that funds the personal loan, thats the nature of business and the customer pays the profit margin.

The balance questions are over risk.

I got made redundant last year, nice big payoff etc etc, I had a £25k bank loan for yet another of my beloved Saabs at the time - no job you still have to make that payment come what may.

Eventually I px/d the Saab for a cheaper one, to clear one of the two bank loans outstanding. It would have been much simpler to be able to return the car and exchange it for a cheque or a cheaper car - finance cleared.

For me it came down to a case of the job ain't ultra perfect so alternate funding methods needed to be considered and once you have grasped that you never, ever want to own the car the rest is easier - just balancing those risks.

Even if I won the lottery I'd still do it this way, buying something that's worth nothing in the end is just plain dumb - you might as well 'rent the pleasure' - as Richy says the Personal Lease is the way to go.

I grew up as I guess many of us did being taught that HP type finance is bad, you don't own it outright until the final payment etc etc. Once you have your head around the fact cars are an incredibly poor investment and having an escape route if you get bored or your fortunes change then the approach is actually pretty bright. cool.gifcool.gifcool.gif

Link to comment
Share on other sites

Yeah; must agree. Those of us who have a self-employed element to our income (private practice in my case) even get tax allowances if the car is used for work, and a three yearly cycle fits quite well with this (to answer the original question). So I'll look forward to a new car in 2006 (dating from my first, 03 cab), partly at the expense of Gordon Brown grin.gif.

There may be advantages to taking out a loan and owning the car yourself, vs. leasing (e.g. not sure what view a leasing company would take of mods or tuning...) but either way, doing it on some form of borrowed money has to be the way to go.

Oddly enough this seems to tie into owner satisfaction as well - everyone has problems with every brand and Audi dealers don't help, but the unhappiest comments I've seen on here seem to be from those who've sunk all their own money into a premium car (perhaps with some hidden self-doubts about it) and are getting less than perfection in return for tying up a large chunk of their capital. This isn't a personal comment on anyone in particular, just a pattern I've noticed.

I bought mine on a lease plan (not quite a PCP because I wanted to pay half of it upfront as a huge deposit, which doesn't fit in), and I'm very happy with the car as well as the finance - I have had niggles with my car too, and have even changed it once - but although I'm paying interest etc. I seem to feel more relaxed about any faults than some of those who bought theirs with their own cash and are watching it depreciate without bringing them nirvana. As I say, it's partly psychology I think... I feel like I own the car, but I don't feel guilty about locking away so much money in it because at the end of the day, I haven't. Audi Finance only charge 2 months interest as penalty for early repayment so if worst comes to worst I can sell the car whenever I want and to whoever I want.

Link to comment
Share on other sites

I think there's pretty much a concensus of opinion, but linked to the original question, although Audi finance only charge 2 months interest as a penalty, the profile of interest vs captial on each monthly payment in the first 12 - 18 months is geared to interest. So if you tried to cash in the loan within that period, the settlement figure would appear artificially high as you wouldn't have eaten into enough of the capital you're trying to borrow.

So in a long winded way, in order to ensure the settlement figure reflects a decent reduction in the capital amount you're trying to borrow, I'd suggest you'd need to be at least 50% into the loan period.

Link to comment
Share on other sites

another thing....

getting a PCP/finance plan from a dealer gives the dealer a bigger margin when negotiating reducing the price of the car , as they profit from the finance.

if you have a bank loan you are effectively buying in cash from the dealers point of view, and they make more money if its on finance. buying things "cash" is not a good argument for getting a discount these days.

Link to comment
Share on other sites

[ QUOTE ]

buying things "cash" is not a good argument for getting a discount these days

[/ QUOTE ]

This is why I am always vague about how I intend to finance a car until I have negotiated the price. If you haven't managed to achieve the price you were aiming for, you can then offer to finance through the dealer and let them know that you know they make money through it. This can give some extra bargaining clout. But I'd walk away immediately if they didn't bite.

I you have reached (or bettered) your aim, then you can offer them the finance deal but only if they can match the best monthly payment you can find elsewhere - it's funny how often they can. I say this because I think it can be useful to say you have a dealer loan when you come to negotiating the next car as they see a little carrot dangling before their hungry eyes.

Link to comment
Share on other sites

Why buy new unless the residuals are set in stone? PCPs are evil. Financing a new 318 every two years from BMW direct will cost more than a 330d every five bought yourself outright. At the moment I have no intention of a car on finance like many of my similarly young work mates have done. Rather buy something a few years old with a few miles outright than suffer heavy loan rates/finance and heavy depreciation just have drive a newer plate. Then again I am a bit of a control freak and hate debts - or hate the thought of being in debt as I never am, bar a bit of student loan that is all wedged in my ISA for emergencies. Like to be on top of things.

Ian C

Link to comment
Share on other sites

[ QUOTE ]

Why buy new unless the residuals are set in stone?

[/ QUOTE ]

The buzz from driving a brand new car on the first day of the new registration. The feeling of being the first ever owner, knowing exactly how it's been driven from day 0. The fact that you get to choose everything yourself - the colour, the trim, the spec, the options, everything down to the finest detail. It's _your_ car, not a hand-me-down from the previous owner(s). The envy of your friends, family, neighbours and colleagues. The huge grin that stays on your face for thousands of miles. The immense feeling of self satisfaction that you can only get from buying a brand new car. The list is endless! Who cares about residuals and depreciation, that all shrinks in to nothing compared to the good feelings that come from buying new.

You are on this planet once - live a little (or a lot) - have fun and go out and buy nice things smile.gif

Link to comment
Share on other sites

[ QUOTE ]

[ QUOTE ]

Why buy new unless the residuals are set in stone?

[/ QUOTE ]

The buzz from driving a brand new car on the first day of the new registration. The feeling of being the first ever owner, knowing exactly how it's been driven from day 0. The fact that you get to choose everything yourself - the colour, the trim, the spec, the options, everything down to the finest detail. It's _your_ car, not a hand-me-down from the previous owner(s). The envy of your friends, family, neighbours and colleagues. The huge grin that stays on your face for thousands of miles. The immense feeling of self satisfaction that you can only get from buying a brand new car. The list is endless! Who cares about residuals and depreciation, that all shrinks in to nothing compared to the good feelings that come from buying new.

You are on this planet once - live a little (or a lot) - have fun and go out and buy nice things smile.gif

[/ QUOTE ]

Abso-bloody-lutely !! grin.gif

Link to comment
Share on other sites

Yeah fair enough, but if money is an issue then pointless to do this every year! Rather just buy a new one every three or four and have an Elise for the weekend too with all the money you save by not paying the driving-off-forecourt depreciation.

Ian C

Link to comment
Share on other sites

[ QUOTE ]

--------------------------------------------------------------------------------

The buzz from driving a brand new car on the first day of the new registration. The feeling of being the first ever owner, knowing exactly how it's been driven from day 0. The fact that you get to choose everything yourself - the colour, the trim, the spec, the options, everything down to the finest detail. It's _your_ car, not a hand-me-down from the previous owner(s). The envy of your friends, family, neighbours and colleagues. The huge grin that stays on your face for thousands of miles. The immense feeling of self satisfaction that you can only get from buying a brand new car. The list is endless! Who cares about residuals and depreciation, that all shrinks in to nothing compared to the good feelings that come from buying new.

You are on this planet once - live a little (or a lot) - have fun and go out and buy nice things

--------------------------------------------------------------------------------

[/ QUOTE ]

[ QUOTE ]

Abso-bloody-lutely !!

[/ QUOTE ]

You guys have said it all for me, although I appreciate the logic in other opinions expressed here.

I want to know the definitive way of best obtaining a quality new car every three years.

Link to comment
Share on other sites

Well - thanks for all the responses. I actually financed my current car through a low interest loan - the best I could get at the time. By spreading the payments over five years, I am paying back more interest, but at least after three years, when I should part-ex for a new one, I can have a healthy deposit saved plus the trade in for a new car - which should mean I don't need to borrow any more. Although, the S4 is nice and the cab also, then there's the new facelift......

Link to comment
Share on other sites

Hi all

I put £20K cash and £18.5K finance on mine, haggled with Audi finance and they matched my bank loan APR (Cahoot, was about the cheapest I could find anywhere) so I went with Audi. Reading all this, and frankly not even looking into other options have I made a big mistake?

Link to comment
Share on other sites

[ QUOTE ]

have I made a big mistake?

[/ QUOTE ]

No. There is nothing worse than extended haggling and worrying to ruin the feeling of getting a new car. But a close 2nd place is worrying about things _after_ you've got your new car.

Forget the money. You have a lovely convertible Audi - think about that instead. Everytime I feel a glimmer of guilt of spending over £65k on two brand new cars recently, I just look out of the front window at the driveway and think "OH MY GOD SOME B4STARD HAS STOLEN THEM" ok not really... I look out of the window, see two lovely cars, then get in one and take for a drive, and I KNOW I have done the right thing smile.gif

Link to comment
Share on other sites

Please sign in to comment

You will be able to leave a comment after signing in



Sign In Now
 Share

×
×
  • Create New...