How To Fund My McLaren
Discussion
Ok I have been looking at buying a new car for a bout 1-2 months and have. budget of around £80K,
I can stretch this to £100K if need be for the right car but ideally I would like to keep the spend at £75K or so
So the question is how to pay for it
PCP
Lease (not even sure you can lease a used car)
HP
Cash
What do you all do
May I say can we refrain form the "if you can't pay cash for it you should not even dare look at " comments.
Lets have a positive discussion on the best way to finance a car
I can stretch this to £100K if need be for the right car but ideally I would like to keep the spend at £75K or so
So the question is how to pay for it
PCP
Lease (not even sure you can lease a used car)
HP
Cash
What do you all do
May I say can we refrain form the "if you can't pay cash for it you should not even dare look at " comments.
Lets have a positive discussion on the best way to finance a car
You're not going to be able to get PCP on a Mclaren of that vintage (at the 75k level I assume you are talking about a used 12C - a great shout). In the interest environment we're in, with frothy markets (not sure where your "cash" is), I think paying cash makes a lot of sense. Unless you have a business where that 75k is going to do more good. All IMHO of course.
Mr Cod said:
You're not going to be able to get PCP on a Mclaren of that vintage (at the 75k level I assume you are talking about a used 12C - a great shout). In the interest environment we're in, with frothy markets (not sure where your "cash" is), I think paying cash makes a lot of sense. Unless you have a business where that 75k is going to do more good. All IMHO of course.
I was thinking of a 2017 570S hopefully maybe between £75 to 80K. They are out there, maybe temporarily gone up slightly but they will come down again
Mr Cod said:
You're not going to be able to get PCP on a Mclaren of that vintage (at the 75k level I assume you are talking about a used 12C - a great shout). In the interest environment we're in, with frothy markets (not sure where your "cash" is), I think paying cash makes a lot of sense. Unless you have a business where that 75k is going to do more good. All IMHO of course.
You may not be able to get a PCP, however you will be able to get something that still has a deposit, monthly payment and final balloon (although this is not a guaranteed future value). There are many places that do these such as Oracle, JBR Capital, Magnitude Finance, etc. If you go on the Magnitude Finance website, there is a calculator which allows you to plug in the car details and it will give you a guide on what different finance options will look like.Like you, I could have paid cash when I bought my last car, however I preferred to use finance as I'm in the process of buying another house, and so want to use more cash for that purchase (gotta love stamp duty !!).
Also, depending on how big you want your deposit to be and how long you are intending to keep the car, a 5 year HP deal may be worth exploring ?
EvoSid said:
Is it still wise to pay cash for a depreciating asset or is it just for vanity / pub bragging rights ?
Happy to pay cash if to has any advantages.
You are not going to get any GFV on a a car like you are contemplating (or if you do it will be derisory for an early sports series). Therefore you are likely going to bear the entire amount of any depreciation. The question is whether on top of that you also make a finance company nice and rich. With cash, there's depreciation, with finance there is depreciation and financing costs. With most banks you're not going to earning more than 50bps on a cash balance at the moment, so the opportunity cost of deploying that capital into a vehicle is nearly non-existent.Happy to pay cash if to has any advantages.
Can someone explain to me why many people who finance cars think they are somehow avoiding the depreciation component?
With finance you pay interest AND depreciation.
Surely you finance for some or all of these reasons:
1) You expect to outperform the interest rate charge with other investments in your portfolio.
/) You frequently swap a new car every 2/3 years and a PCP gives you a “put option” on depreciation and potentially reduces bid/offer spread when you trade to another car.
3) Liquidating an investment to release cash would potentially be inefficient and create unnecessary tax liabilities.
4) Keeping more cash In your overall portfolio gives you a liquidity “safety” net that could protect you from forced selling of other assets in difficult times. This has implied value.
5) You simply don’t have the cash and it’s the only way of buying the car. That’s fine too. It’s a personal choice. But if it’s this option then it’s the most expensive from an overall portfolio perspective. You are leveraging a depreciating asset. Period.
With finance you pay interest AND depreciation.
Surely you finance for some or all of these reasons:
1) You expect to outperform the interest rate charge with other investments in your portfolio.
/) You frequently swap a new car every 2/3 years and a PCP gives you a “put option” on depreciation and potentially reduces bid/offer spread when you trade to another car.
3) Liquidating an investment to release cash would potentially be inefficient and create unnecessary tax liabilities.
4) Keeping more cash In your overall portfolio gives you a liquidity “safety” net that could protect you from forced selling of other assets in difficult times. This has implied value.
5) You simply don’t have the cash and it’s the only way of buying the car. That’s fine too. It’s a personal choice. But if it’s this option then it’s the most expensive from an overall portfolio perspective. You are leveraging a depreciating asset. Period.
JBR capital used to underwrite Mclaren finance so understand the product better than most finance companies and will offer the most sensible balloon IMHO.
Put £40k cash down, balloon ( not GFV ) could be £40k so monthly payments will only be interest at circa 6.9% APR.
With interest rates at all time low why blow all your cash
Put £40k cash down, balloon ( not GFV ) could be £40k so monthly payments will only be interest at circa 6.9% APR.
With interest rates at all time low why blow all your cash
Pjb2003 said:
You may want to listen to the latest Behind The Glass podcast before buying a Mclaren
And then watch the Thorney Motorsport Youtube video on 5 million miles in a Mclaren to get an insight from someone who has maintained lots of Mclaren cars over many years.These two videos will give you both sides of the Mclaren ownership coin, only you can decide whether the car and brand is for you or not.
I've watched both and I will happily get into a Mclaren as my next car.
Edited by RT964 on Tuesday 7th July 16:48
Do you have a property with significant equity?
Now, before people jump all over me on the ‘never use a mortgage to buy a car’, of course they are correct unless you use the correct repayment term and go in eyes wide open and do the maths.
I have just done the same exercise for a Ferrari I will be buying shortly. Please note I am not, and am not able to, offer Financial advice and this pertains to my thinking and personal situation only.
Borrow £100K again mortgage (assuming less than 60% loan to value on property which is my situation but maths alters the less equity you have). I have borrowed at 1.59% five year fix on five year term. Saving over dealer finance - min approx £3,000 per annum (£15K over 5 years!)
Do you have the cash in a business but, due to going over higher tax rate or £99,999 per annum, it’s better to spread over 5 * 1 year dividends at lower tax rate and use the (usually significant) saved tax to offset mortgage interest?
I am having the additional borrowing, which is obviously secured against the property NOT the vehicle, on the basis I will have also put £60K deposit into the car on top so less worried about possibility of horrendous negative equity and/or write off with no back to Invoice GAP insurance to top up an insurance claim.
The plan I won’t sell the car during the term (or maybe ever).
IF the car will have a value after 5 years (which one would assume it would) and you pay off the loan in five years you will have funded the depreciation and minimised interest payments. You are always going to lose on a car (unless you are buying a 250GTO) so going into it eyes wide open and ending up less badly off than you might have been paying more interest on the same loan and term it’s an option.
Now, before people jump all over me on the ‘never use a mortgage to buy a car’, of course they are correct unless you use the correct repayment term and go in eyes wide open and do the maths.
I have just done the same exercise for a Ferrari I will be buying shortly. Please note I am not, and am not able to, offer Financial advice and this pertains to my thinking and personal situation only.
Borrow £100K again mortgage (assuming less than 60% loan to value on property which is my situation but maths alters the less equity you have). I have borrowed at 1.59% five year fix on five year term. Saving over dealer finance - min approx £3,000 per annum (£15K over 5 years!)
Do you have the cash in a business but, due to going over higher tax rate or £99,999 per annum, it’s better to spread over 5 * 1 year dividends at lower tax rate and use the (usually significant) saved tax to offset mortgage interest?
I am having the additional borrowing, which is obviously secured against the property NOT the vehicle, on the basis I will have also put £60K deposit into the car on top so less worried about possibility of horrendous negative equity and/or write off with no back to Invoice GAP insurance to top up an insurance claim.
The plan I won’t sell the car during the term (or maybe ever).
IF the car will have a value after 5 years (which one would assume it would) and you pay off the loan in five years you will have funded the depreciation and minimised interest payments. You are always going to lose on a car (unless you are buying a 250GTO) so going into it eyes wide open and ending up less badly off than you might have been paying more interest on the same loan and term it’s an option.
Edited by RogGT-R on Tuesday 7th July 17:28
Pay cash (£75k), then put £3750 (5%) a year into a bank account titled "Mcwarranty"
You wont pay any interest for finance / pcp etc. Your warranty may or may not be needed, but by year 2 will stand at £7k (a big chunk of repairs if spent with an indie). You should aim to mitigate your first year warranty risks with a good pre buy inspection - most common faults are known and easily spotted.
If your ownership is trouble free (which in my opinion you will have a significant influence upon in the way you use & look after the car) you may even have the first £14k of depreciation covered after say 4 years,
Put another way, your residual plus any unspent savings may well leave you in a much stronger position to fund whatever you might want next. Finance costs plus depreciation would require a much bigger top up.
You wont pay any interest for finance / pcp etc. Your warranty may or may not be needed, but by year 2 will stand at £7k (a big chunk of repairs if spent with an indie). You should aim to mitigate your first year warranty risks with a good pre buy inspection - most common faults are known and easily spotted.
If your ownership is trouble free (which in my opinion you will have a significant influence upon in the way you use & look after the car) you may even have the first £14k of depreciation covered after say 4 years,
Put another way, your residual plus any unspent savings may well leave you in a much stronger position to fund whatever you might want next. Finance costs plus depreciation would require a much bigger top up.
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