[Stormbitch]

I have a 2011 F10 530D M Sport with pro nav, camera, lights, it does not have paddles nor adaptive suspension.

I have done 41000 miles - 22000 purchased last year. Thus covering 21000 miles. No, I don't actually go anywhere its amazing how it tots up.

"We buy any car" have valued it at £20,000 - which is bollocks and so I estimate my car will sell at £26000 minimum private. So here is the rub.

This time next year I estimate that if the car had the same miles on it it might be worth nearly the same money or around £24000 however if I carry on driving it it will be worth more like £19000 or less.

So, do I

a. Cut my losses now and change, sell privately. Cost £32,890 a year ago, so a loss of around £6000 ( which I can live with )

b. Keep the car as it is amazing and purchase something else that has miles on it already that has done most of its devaluation, 1 Series, 3 Coupe, or Mini. And buy doing this reduce the speed of the devaluation curve of the F10

c. Keep the F10, keep driving it, suck up the greater losses as that will always be less than running two cars. ( I need proof of this arguement I am not convinced )

Love your thoughts.

As you can tell I have been studying finances recently.

What would you do?

Love you in advance.

[xs2man]

Back at the beginning of the year I was in a similar dilemma.

I had put around 15k in one year on my 335d, and it had dropped by around £6-7k in value from when I bought it. That was based on a private sale, I was around £3k in neg. equilty at the time for a trade in).

I do roughly 20k a year (although my PCP is based on 10k, I had 2 cars to split the miles over). I did have 2 cars at the time, but with the other being a V8 Range Rover, it wasn't quite as good on the fuel as the 335d (14mpg, albeit on LPG mind you).

Anyway, as I was doing at least 100 mile round trip every day to work at the time, I decided to get a cheaper motor for the commute, keep the miles off the 335d, and see what happens.

So I bought a £400 2000 plate Polo SDI. And ran it on 50% veg oil. It ran fine, and well enough, but was painfully slow, especially as most of my miles were motorway miles. But it did return something like 47 mpg (instead of 37 in the 335d), and with an equivalent cost per litre of £1.10 (due to the veg oil use), it was pretty cheap to run at around 10p per mile instead of 16p per mile in the 335d. It wasn't going to take too long to make back the £400 outlay, just in fuel costs.

A few months later, however, my mother desperately needed a motor. So I gave her the Polo, and bought myself a Passat (2003, 1.9TDI PD130). It's a much nicer motor, much faster, and returns better fuel consumption than the Polo (50 vs 47 mpg, not much, but MUCH better comfort for driving). Although this car cost me £1k. But it still will pay for itself with fuel costs alone.

So, ok, the Passat isn't as nice to drive as the 335d, but it is still a pretty decent drive, and keeps the miles off the 335, and makes it feel more special when I drive it (the 335).

Now to throw a spanner in the works, 5-6 months further down the line, I got a trade-in on the 335d that was equal to my settlement figure. This was a combination of factors, some good negotiation, an increase in trade-in value (for some reason?), and a reduction in settlement figure due to the extra payments. So I jumped at the chance to get out of the 335d (as nice as it was), and am now awaiting delivery of my LCI 530d. But this is the result of simply waiting a few months, and the cars value increasing, bizarrely, despite extra mileage and age on it.

I'm not sure if it's cheaper to have this extra car though. I mean by the time you take into consideration insurance, tax, MOT's etc... there will no doubt be extra expense involved, never mind the initial purchase price. However, it did put the spark back into the 335d for me, as it felt more special when I did drive it. There is value in that, although not monetary obviously. But the BMW is, and always will be, the wifes daily driver though. She isn't interested in the Passat. Although she did enjoy the occasional buzz to the shops in the Polo? Go figure.

For me, I would go b. But on a MUCH lesser car than your considering. MUCH lesser.

[Stormbitch]

What a brilliant and engaging post -

Yes buying a £500 hilarious car might actually be a good idea... however the cost of a single repair might throw the numbers well out.

In a years time if I managed to keep my 530D off the 50K mark I think I would recoup £24 but at the moment I am loosing around £600 a month.

Note about PCP - they will always over value, get you out of a deal, they can work wonders. And I don't need to tell you why and how, as you have good cars you are not stupid.

For people with low mileage and like the OPM - other peoples money concept - you can do well but be aware that you are paying

£x a month interest and capital
PLUS
£x a month devaluation.

Looking at my case, my F10 was £32,850 last year. I traded in a Mercedes and changed for around £8,000.

So far I have lost that £8000. Its gone. Devaluation. Boom. Well £6350.

Or £453 a month. ( I have owned it for 14 months )

If I had financed the car on a PCP the car would have cost £780 per month. PLUS I still would have lost the depreciation.

So £780 plus £453 = £1233 a month.

Are these accurate or am I missing something.

Not that PCP is bad - for my friends they have changed 3 times had 3 new cars Z4, Coupe, and 118d in the last 3 years, same dealer NO deposit!!! For them, who cant really afford the car but have a steady monthly job and can allow for a payment they seem to be quids in.

However looking at what they have paid in is quite scary.
Car 1 - Purchased on HP
Car 1 - Deposit £12000 ( their two cars value ) Plus £2000 cash PCP
Car 1 - Monthly payment £400 for 18 Months - £7200 PCP
Car 2 - No deposit £480 for 14 months - £6720 PCP
Car 3 - No deposit £360 for 3 months so far. - £1080 PCP

Effectively their total spend has been - £17000 in actual cash or

£29,000 in actual cash including their trade in value. This seems an argument for or against PCP but to them they love the idea of no deposit magic figures man and new toys when ever they feel like it. Even though they are never at their allowed PCP get out, they always get out!!!!! Its a Dealer in Brighton.

In my case - my actual cash is going to erode at X amount per year and so what I seem to be loosing is the deposit or "price to change" each time I change. So for example

2006 - Purchased a 5 Series for 29,995 cash.
2009 - Sold 5 Series for 10995 - Loss of 19,000 or £527.00
2009 - Purchased 330d Convertible for £27995
2010 - Sold 330d for £23500 Loss of £642.00 a month ( not bad for the laugh )
2010 - Purchased MB E350 CDI for £33,500 added £10,000 deposit
2012 - Sold MB E350 for £26,000 loss £7000 plus deposit £10,000
2012 - Purchased F10 for £32,850 with £7000 deposit

Looking at my losses which you are welcome to calculate - PCP would most surely have been my best option.

I suppose what you might advise next is DO NOT CHANGE FOR A LONG TIME NOW!!!!!

Changing = paying the margin on the car that you are buying - BEFORE you consider market value and devaluation costs.

Agree? Any thoughts?

Yes - I am addicted ! But I am learning doing exercises like this.

I bet there is an ecomomist reading this laughing thinking that although these deposits help levy against self employed profits that I am mad and should have done something else.

[Texaz3]

For real? Jut enjoy the car if you like it. Or sell it and get what you will enjoy if you don't like it. Money is just paper. I'd put your efforts into earning more of the paper, rather than what you are doing.

[Stormbitch]

I Love That!!!!!!!!!!!

[xs2man]

Yeah, if you love your car, just keep it.

But your thoughts on pcp are a bit skewed. The monthly payments include the depreciation and are not ontop of the depreciation. So the 780 per month includes the depreciation of 453. The deposit should be what keeps you ahead of the dealer mark up ideally.

So you buy a second hand car from the dealer at £30k. He is probably making about £4k on that car. You put in a £4k deposit, so when you pay your monthly payments, you are paying depreciation, interest and capital on the remaining £26k of the loan. But your monthly payments dont pay off the car fully as you have offset the future value of the car, say the last £10k (the future minimum value after the period).

So at the end of the term, your still owed this £10k. And have paid the interest on this 10k throughout. But this shows you have paid the depreciation. You are not now still liable for the £20k the car has depreciated by. It has already been paid.

My pcp deal (the latest one), I pay interest at 4.9%. But leaving my money in my offset account essentially pays me at 7.2%, so I am a coule pc better off on pcp than buying outright. But only because im not mortgage free.

[HighlandPete]

Originally Posted by xs2man

Yeah, if you love your car, just keep it.

But your thoughts on pcp are a bit skewed. The monthly payments include the depreciation and are not ontop of the depreciation. So the 780 per month includes the depreciation of 453. The deposit should be what keeps you ahead of the dealer mark up ideally.

So you buy a second hand car from the dealer at £30k. He is probably making about £4k on that car. You put in a £4k deposit, so when you pay your monthly payments, you are paying depreciation, interest and capital on the remaining £26k of the loan. But your monthly payments dont pay off the car fully as you have offset the future value of the car, say the last £10k (the future minimum value after the period).

So at the end of the term, your still owed this £10k. And have paid the interest on this 10k throughout. But this shows you have paid the depreciation. You are not now still liable for the £20k the car has depreciated by. It has already been paid.

My pcp deal (the latest one), I pay interest at 4.9%. But leaving my money in my offset account essentially pays me at 7.2%, so I am a coule pc better off on pcp than buying outright. But only because im not mortgage free.

Agree with your comments, and the better the deal you can get with a PCP, lease, or other agreements with balloon payments, the closer you get to just financing the depreciation using someone else's money to do so.

As to the broader issue of changing a car because the mileage is climbing fast. Hardly ever the case of buying 'new on new' is cheaper than running a longer term. Mileage costs money, however we look at it, amortised over a longer period in one car, is typically cheaper than keep purchasing new.

To Stormbitch, what is your cost ppm? (pence per mile), the real cost of motoring. Do the math for a new car vs. long term ownership of the current car. A year old car is far too new to get the cheapest motoring as depreciation is steeper the first year, flattens out for the next 3-years even with higher mileage. Trade-in values are not the key to assessing motoring cost, although more critical the newer the car. Cost of change is what you really need to know, to work out ppm.

Remember you can but cars a year old from BMW with 33 - 40% off the new price, so running a car for just a year or two distorts 'best' running costs.

IMO, better to buy a low mileage car at about a year old and save a big hit on depreciation.

HighlandPete

[Stormbitch]

This is getting good.

Firstly I did purchase this at the year over mark so this was a 2011 car with 22k miles on it - at the time most of the others were around £36ish and new they were , well you know.

My first admission and I do this a HELL OF A LOT - is that I have made a grave error!!!! My idiot of an economist mate, told me that PCP is a mugs game. Now because I feel part of the Lease Purchase campaigner team that eventually led to the "banning" of lease purchase under the financial services authority ruling, I have misunderstood PCP completely.

My "friend" who works with figures always tells me that the cheapest way to purchase a depreciating asset was cash, if you have it handy. His theory is that the banks cannot earn you any money and so finance the depreciation yourself without also paying someone else for the privilege.

The second thing that occurs to me, is the body language and gut feeling I get from the slimy business managers who always ask me why I am not financing any of the balance.

Before the new BMW genius idea came along, which will revolutionise the purchase process. I was introduced to this annoying sharp tongued moron at the end of the sales process on my most recent purchase.

The salesman, who had nutured and closed the sale actually had to get out of his chair to let this new man, who I had not met, and had an unnervingly too firm handshake, sit in his chair and start tapping away on his screen.

He was so hell bent on selling me the tyre insurance, what they call "product" and so one ( which is how btw the individual sales men earn any cash ) and the finance, that I was actually put off the idea instinctively.

When I said to him that I want to own the car and handle my own money he insisted in running the numbers anyway and showed me that whilst my money was sitting in the bank earning 1% I could simply take out the finance and pay £720 a month for the car instead.

I then asked him two questions.

1. Are you being paid if I take out the finance?
2. Are you a qualified financial adviser?

I actually nearly didn't complete the sale as his nature was just annoying me and I no longer was enjoying the process.

Had he or actually the salesman showed me actual bottom line advantages of financing the car on a PCP against personally financing the car as a loan to myself from my business! And maybe illustrated that PCP absorbs and controls the devaluation, I may have looked at it another way.

Instead someone who is not being paid has taught me something I didn't know. But this is where the confusion arises.

I have found my car - at the same dealer for a similar price based on 20000 miles per year. But this is straight HP.


Term of Agreement: 48
47 monthly payments £639.00
On the road price: £31,950.00
Total deposit: £6,390.00
Total amount of credit: £25,560.00
Credit arrangement fee*: £314.00
Option to purchase fee**: £10.00
Total amount payable: £37,386.00
Rate of interest: 9.64%
Representative APR: 10.3%

We can all agree this is daft right?

So what about PCP here is an illustration.

Cost - £36604
Deposit - £4343
Balance - £32261
Term - 48
Miles - 20000
Monthly - £541.31
GFV - £11794
Total - £42119
Rate - 6.2%

Now, Although the interest is £10k odd which seems a lot. I see that £541 seems to be eroding both debt and the devaluation curve. But I am still not getting it.

Year 1 - Car has cost £6492 + £4243 = £10835

Year 2 - £6492

Year 3 - £6492

Year 4 - £6492

Or - £30311

Now the GFV of the car is £11700 but there wont be another deposit in that for me so essentially have I not just rented a car for £30311 for 4 years? I cannot sell this car to get £11700 back because I do not own it. Right? Or do they write you a cheque for £11700 and so your actual payment will equate to £30311 minus £11700 you get back = £18611?? ( now paying £18611 seems fair for a car that costs £36k )

Don't get angry I genuinely have issue with figures.

Just tell me what I am missing? In my head I see it this way. All cars will devalue at rate X but owning the asset at the end of the term retains some proportion of your original investment, whereas PCP allows the seller to control the asset. No?

[Stormbitch]

Really sorry that I am not getting it... so sorry about this. I failed CSE Maths in 1988 - Yes FAILED - CSE MATHS !!!!!!!! A rabbit can take a CSE

[xs2man]

No, what happens is that the guaranteed future value of the car, in this case £11794.

So you will have paid the full price of £42119 (List price + Interest) minus the GFV of £11794 which is £30325. Pretty much what you have said.

So at the end of the 48 months, you still owe £11794 to buy the car outright. You can refinance this, or just pay it. Or you can sell it and pay off the £11794 and pocket any difference. Or you can hand the car back and walk away. Or you can trade it in, and use any difference between the px price and the GFV to fund (or part fund) the deposit on the next vehicle.

Now you can do this at any stage in the process though. Except the return the car and walk away. So you can sell the car at 6 months, or at 46 months, it doesn't matter, so long as the finance is settled.

To be honest though, in my experience it is rarely worth doing a PCP on a car only a year old. 2 years old seems to work out, or when new. But at a year old, you will likely find that you could be cheaper with a brand new car. The reasons for this are that with a new car, you can negotiate a better discount. The dealer contributions can be very persuasive, and you will most likely get a better APR. As well as the dealer getting extra contribution for selling you a finance package.

For example, my next purchase is a new build 2013 530d M-Sport (paying only marginally more per month than your example, and less deposit), whereby totaling the discounts, I managed to get around 20% off the list price. And a reasonable 4.9% APR (I should have maybe tried to push this side more). This should basically cover year ones depreciation. Meaning that, with the lower APR, I should pay less on the brand new vehicle, than I would on a year old vehicle.

Of course, if I was a cash buyer, it makes perfect sense for me to buy the older vehicle, as it is less money. However, as long as your money does better than the APR rate you can get, then it's better there. So for me at least, as long as my APR is less than 7.2% on a car, I'm better financing the car.

[Stormbitch]

That is very helpful indeed, I am sure other figures-smiths will interject.

Appreciate it.... Really good food for thought. Maybe I will finance a toy in a PCP way like a 340BHP Z4 that pops and growls.

You are a smarter dude than me. I work in media so its creative brained non pragmatic brained.

In the old days I always Lease Purchased probably had 9 odd until i ended up the wrong side by 9500 and was not earning... so ended up refinancing and driving a punto worth 17k!!!! Lesson learned.

[HighlandPete]

This time around I bought my car outright, as I had resources available that were not earning a decent interest without reinvestment. So was for me, the cheapest way to self-finance a nearly new car.

Last time, (2006) I was also going to buy nearly new, but as the 330d touring was a new model, there weren't many good examples around, and those well specified were basically just too expensive. I found one example and the cost reflected just over 5-months depreciation (virtually equal to the monthly payments on a PCP type agreement for a new car). It was cheaper to buy new with a discount, cheaper finance on a new car vs. used car, plus 3-years full warranty, rather than 30-months on the used car. Along with good residual values back in 2006, made the math work in favour of the new car.

I went for a lease type agreement with a balloon option, to buy at the end of the lease, if I so wanted. My own investments at the time were earning more than the cost of borrowing 'cheap' money, so another obvious advantage.

Things were different in 2009, residual values were radically readjusted, due to financial climate, and PCP type agreements were much higher on the same car, over £100 per month more. So I refinanced the car for the balloon payment and stalled on car replacement, to see how the car market developed.

So not always the same method of car ownership is the best, in my experience, changes with personal circumstances and financial situation/market at the time of change for me.

HighlandPete

[Stormbitch]

Love it ... forum rocks