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I heard an interesting fact the other day.

Only 20% of people purchasing a Porsche from an OPC (Official Porsche Centre) pay outright for their car.  The other 80% will purchase on finance, either through the dealer or via other means.

I am unsure how true these facts are, but it poses an interesting question across the rest of the car industry.....

How many people finance their new vehicle (and I mean new, not new to them), and how many purchase out right?

On another thread there has been some eye brows raised over the price of the new Fiesta.  How much of that price now revolves around the issue of finance?!?!

Impreza = Bought brand new (2001)

Legacy and Forester = Financed (2005, 2008)

I Have been selling cars for twenty years, very very few people ever pay "cash" they will take dealer finance or borrow elsewhere and apper to pay cash..

Most people are in 5 year finance deals, but swap there cars after 2-3 years, the finance keeps rolling over in to the new car, they never really own there own car! 

Although I'm not a car dealer myself two members of my family are, and they inform me that the most popular method now is lease purchase. That's the scheme where you pay a small-ish deposit, then pay a fixed monthly amount for a set number of years and at the end you can either choose to buy the car with a final payment or simply hand it back.

It makes the car seem cheaper than it really is because the monthly payments are smaller than for traditional finance; a £20k car can be only £270 a month. The catch of course is that you aren't actually buying the car because at the end it isn't yours, you are simply "hiring" it from the dealer. And when you look at it like that £250 a month, every month, for 3 years is a lot when you have nothing to show for it at the end.

 

Personally I wouldn't buy a car I couldn't buy outright, which explains why most of my cars have been at least 6 years old!

phenergn:

It makes the car seem cheaper than it really is because the monthly payments are smaller than for traditional finance; a £20k car can be only £270 a month. The catch of course is that you aren't actually buying the car because at the end it isn't yours, you are simply "hiring" it from the dealer. And when you look at it like that £250 a month, every month, for 3 years is a lot when you have nothing to show for it at the end.

 

  this is no different from a 5 year deal, people always change the car before the finance is paid off, so no one really ows there car, the finance company do....

I've only had three cars to my name:

Seicento Sporting - bought using Switch with aid of a small bank loan, paid off in 2 years, had car for another 2 before a tailgating BMW driving b'stard killed it.

Smart For Four - paid for outright with savings using Switch card. Traded in for....

MX5 - Finance, nearly bought outright but we were about £2K short.

There are three questions here :-

(1) Do you have the money to be able to afford to buy the car outright ?

(2) If yes, do you get a better rate of interest by financing it or is the money better off spent on the car ? That is to say, if the dealer is offering 0% finance then its better to take that and keep the money in the bank. I have a friend who bought a top of the range Mercedes and was offered finance at 2.9% APR finance. They CAN do it if they want to.

(3) If no, then finance may be the only way to afford the car that you want. 

Either way, and whatever finance deal you opt for, you always end up paying for the depreciation of the car. This is always the silent killer that people often forget about. Owning the car at the end of the agreement doesn't really matter if you haven't paid for any equity because you still have the money that you would have paid for the equity with, if you see what I mean ?

Long Hose:

I have a friend who bought a top of the range Mercedes and was offered finance at 2.9% APR finance. They CAN do it if they want to.

 bank base rate is 5%, Mercedes are subsidising this, not the dealer

 

I do know that my sister's Mazda CX-9 (a bigger, seven seater, 3.5l V6 version of the CX-7) is financed at 3.1% APR.

Long Hose:

...whatever finance deal you opt for, you always end up paying for the depreciation of the car. This is always the silent killer that people often forget about....

 

Yeah - that's we buy our cars with a view to keeping them until they are no longer financially viable to run. We've had the Fabia fully paid off for the last 5 years or so.

PCP type deals probably work out OK for people who like to change their car every 3 years. 

I wonder of all the cars on the road, how many are paid for on the banks money.  If you add in company cars on lease finance and the second hand ones on finance I bet its most of them.

For me I had to have 6 month loans for my last two cars to cover the shortfall in cash.  Bought my motorbike cash.  Next car purchase will be cash.  I hate monthly payments on anything.

 

 

 

 

v8:

this is no different from a 5 year deal, people always change the car before the finance is paid off, so no one really ows there car, the finance company do....

 

It's a little different, in that you can hand the car back at the end and walk away, which is what a lot of people do.