In Response:
Balanced Payments(Variable Lease Purchase)
Pro's:
1/ No front loaded interest.
2/ No fixed terms, i.e. no early repayment exit/penalties
3/ Allows bulk payments to be paid into the deal.
4/ Balloons are based on Glass'/Cap guides, so are relatively realisting future values and balloons are higher then on PCP agreements where they are guaranteed therefore less monthlies.
5/ Monthlies stay the same, so no immediate effect of rising rates (in today's market).
6/ For people who change cars frequently, lets you have ur cake and eat it.. i.e. lower monthlies, spread over 5 years, but you can change your car every year if you plan it right.
7/ As there is no front loaded interest, you pay off capital borrowing from month 1, therefore keep up with depreciation on your car quicker then on any other payment agreement.
Against:
1/ Rising interest rates : balloon will increase at the end.
However counter argument is: Rates are cheaper to begin with anyway, and you can refinance whenever you want, so make the savings while you can!
PCP agreements are best for business users/people who follow strict changing patterns governed by jobs/payments etc.. but if you want to change ur car regularly, you're set for a sting on PCP. GFV aren't really that much benefit with performance/luxury cars where residuals are relatively predictable, and if the balloons are set sensibly you can stay in positive equity.
Not a lot of clients i know of do go with Hand back option, as their car holds equity as they planted a signficant deposit into the deal at the beggining, so want that cash back. Some fleet operators offer equity back if the car is sold for more when it goes back to them, but no guarantees of this, so i would rather be in control myself.
Any questions/queries relating specifically to your case:
kam@mhasnain.co.uk
Marcus, personally i would keep the cash and drip feed the car (its what i do myself on my own cars..) i don't even place a deposit in!
"Also Kam, if you have cash for a TT but not a Vantage/R8 I dont see any benefit in getting a large loan to buy something you cant afford right now." and Philr, not wishing to engage in any specific argument, i think its best to just admitt: we sit on different sides on this argument, its a personal/circumstantial opinion, and all depends on what alternatives you have to spend your money on. And to answer that statement, if you have to cash for a TT, i would rather an AMV8 myself, but only if my monthly income would allow. Loans on cars, as long as planned correctly and paid off correctly, i.e. sensible balloon, high enough monthlies to not leave u in neg equity, the loan itself can be paid off easy enough using the car itself, as cars don't generally at the point where our clients buy them, have a £0 scrap value at the end of their use (i.e. 1-3 years typical) so the car will cover the loan left, not leaving the client in a mess.
The benefit i see in taking the loan, is you can have the AMV8 or other expensive car now, and not have to wait! You only live once and all that, but thats my personal opinion.
I don't personally put a penny into my cars now as i find alternative vehicles of investment, which at least will return me the 7.5 odd % im paying out per annum on my car. We're in the BTL property game ourselves, but there are plenty of other vehicles of investment which are preferable compared to cash trap assets such as cars.. any IFA would beable to advise you accordingly.
I invest cash abroad/in the UK in bricks and motar/land and most of our clients, being of the asian origin do the same also, and i can tell you, don't do too bad out of it thank you very much.
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