As some of you know I have been looking a my next car purchase. I have about £55,000 to spend. Problem is that the local business manager at my BMW dealer is kinda like a friend now. And she says whatever car I buy I would be better to lease it and not use my own cash...and use cash elsewhere (on what I don't know!)

So what are views on this. Better to spend cash if I have it or do a PCP.

Any views appreciated

Thanks

i have the same question currently. Remember they will earn (literally) thousands if you buy it on finance rather than with cash. Not suggesting that affects impartiality!

I would prefer to buy it and then forget about it....but the depreciation whatever way youlook at it comes out of your money and nobody else's....

I would jump on the 60/40 deal if it came up this summer. On maybe save some £££ and buy a year old one this summer at early 40's.....

I just don't want to be paying £600 a month on a PCP, when the balance 30k will just dwindle away in my bank account....

I just bought an iPad 2 when I had a perfectly fine iPad too....I have too much time to think about wasting money...

Nick,
Company car or private?
New or 2nd hand?
Makes a big difference,I was in the same position and was going to buy 2nd hand and fund by mileage charge back but couldn't find the right car at the right price so after taking advice decided to have a new one and contract hire it.
The big advantage is getting half the VAT back on the payments and of course no VAT on the purchase price,also the lease company is taking the risk on the depreciation which could be a huge factor if fuel prices continue to rise at the current rates.
Also when we did the calculations on return on mileage rates the overpayment we would have to make per mile to cover all the costs with fuel costing £100 every 350 miles (ish) it leaves very little to pay for insurance at £1K,RFL,tyres,servicing and repairs out of 45p/mile never mind when it drops to the lower value and this situation can only get worse.
So on balance if it is a company car keep the cash in the bank for a rainy day and contact hire it.I pay for my private mileage out of the daily subsistance allowance which is tax free at 18p/mile.

If it's a private car no idea but would guess buying cash 2nd hand would be best bet to save the high interest charges,lowest I could negotiate was 9% APR which is scandalous !!! MY2011 HSE Santorini/Ivory/Piano Black/Privacy Glass/TV .Sadly gone.
Audi A5 Sportback Black Edition 3.0 tdi quattro S Line

The way I look at it is this,if you can afford to buy outright do it.Its done and dusted,what else are you going to do with it apart from as you say dwindle it away,I buy everything outright and the way I look at if I ever need to raise some cash I'll just sell something,stick it a couple of grand under book and it will sell Its certanly not going to do anything in the bank for you.

Thanks guys. Am thinking cash is the way to go.....so will do!

But think will go 12 month old....and hopefull first year 10K saving will make me happy

I do this 'equipment' replacement CAPEX and financial planning stuff for a living using major computer programmes to do the work. As I only work for companies I can't advise private individuals.

For a private person it virtually always comes down to whether you have the money or need to get from somewhere else and pay the price for using their cash rather than your own - just see the Bank's profits and the small print on manufacturer's finance deals to see who underwrites the loan and supplies the capital.

You will find, if you do your sums correctly, it is always best to use your own capital. Income tax benefits are ALLOWANCES so don't be fooled by the 'accountants advice' that you'll save money by buying via the comany car route. A £55 grand motor is over the maximum value for the HMRC's annual depreciation allowances etc.

Simply buy the car at the lowest price from wherever you can source it for the spec ification you want and charge your company the maximum allowable mileage charge for ANY legitimate mile that is remotely connected to work. (Best way is to buy one that's 6 months old unless you absolutely want or have to have a brand new one)

The interest rate you get for your investments (unless you have a really good stockbroker) who can generate upwards of 8-10% pa) will be less than the finance charges from the supplier becaus ethey only do it to make money they are not a charity. If its is your own business use your capital in it as that will give you the bset RoI


If you happen to have a business and can create a subsidiary company that is its 'transport' arm which has certain, relatively complex VAT breaks - under these conditions being able to mess about with the annual write off allowances, maintenance charges etc and the 20% VAT then this can change the economics.

If your company is international and can adjusts its profit in the UK by taking teh CAPEX etc off-shore then this can alos change the balance.

If you really want to get into the detail send me a PM and if there's time I'll give the numbers a quick once over and set out the main differences.

Thanks for the advice guys. All good stuff to take in, and surely yes it seems better to use my own money and not anyone else's.

I am going to look for a 12 month old car with hopeful 10k for about 45,000 and save some of that depreciation. Or buy an 18 month old car for 40k maybe and if I keep it past the 3 year old Mark, then pay the £1000 for the LR warranty....

The Evoque is a consideration but I am going back to an RRS (maybe) to get back into that big car ride and not a mini SUV, that feels more like a saloon car.

Still going to keep the Z4 because I think it's a lovely looking piece of kit...and a newer RRS will be a great car alongside it. But if used values of Panameras keep dropping, then it will be one of those or the Maser GT

Lifes tough

Simple - you keep the cash and earn 3 maybe 4% pre tax if you invest it very wisely? OR pay BMW the finance fees typical on cars - 8/9% range post tax?

It makes total sense for them to try and convince you to lease! Ignoring of course any other 'benefits' of leasing - servicing?

Not quite as simple as that as they would take any hit on any excess unexpected depreciation which COULD swamp any finance interest charges.
I'm only funding the difference on what THEY negotiated on the car with huge buying power with no VAT and the price they EXPECT to get for it 3 years down the line,this way my costs are 100% fixed and I've still got cash in the bank for an unexpected rainy day.
LR finance would not give me a GFV only an indication which I think was around £10K so they aren't very confident going forward long term.
Very roughly if my car is worth less than ~£21K in 3 years I'm in pocket and that is without taking into account the VAT I've saved (half back) and any interest earned on my cash sat in the bank (Fook Hall). MY2011 HSE Santorini/Ivory/Piano Black/Privacy Glass/TV .Sadly gone.
Audi A5 Sportback Black Edition 3.0 tdi quattro S Line

So ChrisP what are you saying mate...head into a lease? PCP will give me a GFV whereas a straightforward lease will just give me a balloon figure.

For sure it has to be better to just buy a car outright. Even if it is a used one.....

I have no cash in my car. It is effectively my company car. But, I am able to claim 22% per year depreciation, interest payments on the first $57000 of value (car bought for around $90k). Basically it reduces my taxable income AND with interest rates here, I can get 6.5% on deposit for my cash instead.

So, I think it all depends how you use it and how you can structure the finance as to whether you put cash in or finance the purchase. Gone - 2008 Stornoway Grey RRS 2.7 TDV6
Gone - 2009 Buckingham Blue RRS 2.7 TDV6
Gone - 2010 Alaska White RRS 5.0 V8 Aspirated
Gone - 2017 Chawton White RRS 5.0 V8 Supercharged
Current - 2010 Java Black RRS 5.0 V8 Aspirated
Current- 2024 RRS P400 SE Dynamic

Nick

I am considering changing my sport for a FFRR 3.6TDV8 Vogue SE and am seeing if I can get the finance to my satisfaction (if I can't then I am keeping my sport!).

Looking to finance as unlike you I don't have 55K to drop on a car and even if I did I would think that in the current financial climate it would be wiser to retain the majority of your capital to cover unforeseen expenses in the future. There is a trade off for this flexibility in that you have to pay for the use of someone else's money but it does allow you extricate yourself from the agreement if you need to. As the long as the payments are reasonable and can be easily serviced by your retained capital/current earnings I would think that the flexibility is worth having.

That said I am about to talk to my accountant and he may tell me I am a gibbering idiot

Nick,
I was only offered a PCP without a GFV so I wasn't prepared to take the risk given that they wouldn't, why would I?
I don't want to make any recommendation to you just expaining why I did what I did in similar circumstances after taking advice I went for a 3 year contract hire again and at the price I negotiated it made sense to me from a personall taxation point of view as the current IR mileage rates would leave me with a potentially unknown huge liability if diesel continues to increase and with the risk of having a high mileage thirsty V8 with little residual value in 3 years.
Also in my case it wasn't my tax paid cash so I would have had to pay interest to my company on the £40K "loan" at BR + to avoid a BIC charge.
The fact that I couldn't find either a 58 V8 Sport or FF at the right price due to rising winter premium prices decided it for me in the end as they were all £42K+ with no negotiations so a new 2011 V6 at a great price clinched it.

Looks like they are coming down again now so figures could start to make sense paying cash if you've got plenty spare  MY2011 HSE Santorini/Ivory/Piano Black/Privacy Glass/TV .Sadly gone.
Audi A5 Sportback Black Edition 3.0 tdi quattro S Line