BMW Finance - Blindingly expensive !

[JohnnyBoxer]

A good bunfight going on here between our resident 'salesmen'. Very entertaining. Easy with those handbags fellas, all that financial cock waving is getting us nowhere !!

I guess the bottom line is that any form of finance/credit costs and no one (even the experts here) can agree on how much it is or how it is calculated. How reassuring is that for us trusting punters??

I'll be sticking to my usual purchasing methodology (as taught to me from a young age by my Dad, God rest his soul): Only spend what you can afford, and it's not what you have that is important, it's what you owe. Better keep the old 1200 for a few more years yet until I can pay for the Adventure version.

It's all this borrowing more that you can afford that got the world into this financial nightmare in the first place!! I don't see why I should now be made to suffer for other peoples selfish irresponsibility towards their personal finances and spending habits.

Hallelujah

Here speaks the voice of reason

I work in the Finance Industry, but guess what

I always pay cash for what I want to buy

Go figure

 

[Paul Wakefield]

+1

Cash or near cash.

 

[tw99]

I've been on the receiving end of a very misleading finance illustration from a BMW car dealer (trying to show me how I would "save money" by buying on finance at 5% over 2 years rather than just paying cash).

I'm still not sure if it was something he'd made up himself, or he was just going through the BMW Financial Services playbook. I suspect the latter, tbh.

But it made it very clear to me never to trust anything they say about finance, always do the sums yourself and work it out (or get someone trustworthy to do it for you, if you can't do it).

 

[alby]

There are some other advantages to HP ( Select and similar PCP's I believe) as opposed to a loan. Thirds and halfs, you can drop kick a dead loss if you owe more than its worth if you've paid more than 50% of total deal (as I understand it, read all the small print ).eg buy at £10000 at 2years its worth £3000 ( some bikes are ) you've paid £5000 (deposit and monthly payments ), give bike back and walk away.( no CCJ.)
With a personal Loan same figures apply you sell bike and still owe £2000 and the monthly payments continue.

Oversimplistic I know ( its late ) but in times like these ( might be a song in that ) it helps to cover all angles.
( Please note I am not a financial advisor, I sold cars many many moons ago , and that's how it was explained to me, as in all things read the small print)

 

[WindyChuffer]

When I started this thread I had no idea it would turn into something as amusing as this.

General confusion reigns for sure.

Its one thing trusting a motor-trade salesman with the vehicle you are buying (difficult, but you have to do it if you are going to buy).

Its clear to me that it is blindingly impossible to contemplate believing anything they tell you about finance!

 

[Blackal]

Or you could be like me.

I'm looking at getting a new GSA with a £10k loan. Now I could afford to pay cash for it but....

I'm self employed. I have in my bank enough cash to let me last about a year and a bit with no work on current expenditure levels.

If I were to buy the bike cash then I would get around 6 months of that taken off and be to sub 1 year.

Now taking the loan means £200 a month on the payments which means I can pay myself less and not go into the 40% tax bracket (leave the rest of the money in the company instead of paying £4000 in extra tax on the £10k more than the £2500 interest charges) and also leave myself with more money/time to look for work if/when it dries up.

So a loan is not always the worst option if you have reasons for doing it that way. Yes if you can't afford it then save/buy cheaper but if you can loans can help you end up with more money if used properly.

I would have thought that in order to take out a loan for a bike, to save yourself personal tax burden - would require the loan to be taken out only for a business vehicle.

If you buy a bike (non-company owned) then any payment for that bike (in full, or by way of a loan) has to be serviced by funds net of personal tax.

Or have I misread the post?

Al

 

[GSmonkey]

save up - you'll enjoy the bike more if its yours.

 

[Pukmeister]

There are some other advantages to HP ( Select and similar PCP's I believe) as opposed to a loan.

Those 'have now, pay off later or chop in for a new one' deals mean that you get a reasonable rate because you are only financing half the bike. The remainder of the cost (covered by the financiers) has to be paid on the final day of the agreement unless you enter into the (easier) deal of taking on another new vehicle on finance for another agreed term with yet more endless finance. It's a great way for the manufacturers to tie you into lengthy brand loyalty through finance (they win both ways). This is all subject to a trade-in value based on agreed mileage limits etc. If you do a couple of long european tours each year, you may find you exceed the 'agreed' mileage and the trade-in value becomes a lot less, which gives the dealer more power to persuade you to take a new bike when the payment date arrives.

 

[Andy_E]

Those 'have now, pay off later or chop in for a new one' deals mean that you get a reasonable rate because you are only financing half the bike.

Having looked at a couple of these in the past it was the case that although you're only repaying (say) half the capital you're paying interest on the full amount financed. Yes, it drops the payments but isn't as competitive as it appears at first glance.

IMO these deals make more sense if you're definitely going to chop the bike in in 2 or 3 years but if you're contemplating buying it outright at the end of the term then other deals may be a better bet.

 

[Owen Snell]

.......then any payment for that bike (in full, or by way of a loan) has to be serviced by funds net of personal tax.

Yes, but it the rate of tax that is an issue here. If you take the whole amount in one go and it takes you over the 40% threshold then you are paying top rate on the full price of the bike. If you can take the money out of the company over a few years and your income stays below the threshold then you are repaying the load with basic rate tax money.

 

[Owen Snell]

Having looked at a couple of these in the past it was the case that although you're only repaying (say) half the capital you're paying interest on the full amount financed. Yes, it drops the payments but isn't as competitive as it appears at first glance.

Exactly correct. These deals are designed to make the package more 'affordable' by lowering the monthly payments, but in reality they cost more as the interest charges are bigger.

 

[Blackal]

Yes, but it the rate of tax that is an issue here. If you take the whole amount in one go and it takes you over the 40% threshold then you are paying top rate on the full price of the bike. If you can take the money out of the company over a few years and your income stays below the threshold then you are repaying the load with basic rate tax money.

Okay - but you could apply the same criteria to purchasing anything - from beer to coal, couldn't you? You are still servicing the loan with (say) £200 per month, which increases your Tax/NI by a proportional amount?

It makes no difference what you buy, be-it outright or on a loan - what you are suggesting is just financial prudence on your income/dividend payments (I think).

Al

 

[Owen Snell]

....... what you are suggesting is just financial prudence on your income/dividend payments (I think).

Al

Yes. A new bike is a big chunk of money and your circumstances may make it attractive to take that money out of your own company over several years rather than all in one go and maybe avoid paying top rate tax on the income as a result.

 

[Grizz]

Thanks to my dad getting Polio in the early 50's and being unemployed for 3 or so months, and being handed letters of demand from solicitors etc, he brought us up to only buy what we could afford, and only Cash.
Exception being a house in modern times, though he bought his houses cash as he saved until he could afford (Living in government subsidised accomodation for years clearly helped)
However, all my cars, new and 2nd hand as well as bikes have been saved for till I could afford it cash.
The savings I generated were outside of mortgage and bills costs, so commisions, and similar payouts from work always went into savings till needed.

I think as mentioned a few times in this thread and elsewhere over time, we get sucked into this whole new is good, buy now pay later culture.

Banks etc SELL money, at a PROFIT. Remember that.

Sounds ridiculous to me that you can't pay a 'mere' ten grand in cash to a vehicle dealer. If a person were buying one a week then fair enough, that is really suspicious and would surely alert the authorities to some form of money laundering. But for a one-off purchase ??? Can't you simply sign some form of 'disclaimer' at the dealership at the point of sale ?

I'm not rich BTW (actually I'm broke and unemployed at present but I'll bounce back soon enough) but I hate paying for credit. I despise paying any salesmen and bankers a commission 'fee' from my hard-earned and would rather go without and save the cash until I can afford said purchase.

No new toys for me for a while then.......

 

[ncpierce]

...only buy what we could afford, and only Cash.
Exception being a house in modern times, though he bought his houses cash

I too think in the same way if I haven't got the money I need to save up before I can buy it. The only exception is my flat. I have bought all of my BMW's with "cash" even though the salesmen seem keen for me to take the finance deal but when you look at what it costs you in the end its never cost effective. My credit cards are used in the same way as my debit card is if there's no cash to pay it off at the end of the month it doesn't get spent.

 

[ijg5]

The opposite side of the coin is that "you could be dead tomorrow" Get everything in this life as soon as you can...... and enjoy......

...only buy what we could afford, and only Cash.
Exception being a house in modern times, though he bought his houses cash

I too think in the same way if I haven't got the money I need to save up before I can buy it. The only exception is my flat. I have bought all of my BMW's with "cash" even though the salesmen seem keen for me to take the finance deal but when you look at what it costs you in the end its never cost effective. My credit cards are used in the same way as my debit card is if there's no cash to pay it off at the end of the month it doesn't get spent.

 

[digital4169]

If you want it..............GET IT now! Best reason to spend is I WANT IT. Tomorrow may be too late.

 

[sockpuppet]

I would have thought that in order to take out a loan for a bike, to save yourself personal tax burden - would require the loan to be taken out only for a business vehicle.

If you buy a bike (non-company owned) then any payment for that bike (in full, or by way of a loan) has to be serviced by funds net of personal tax.

Or have I misread the post?

Al

Missed this at the time of posting!

Sort of. Basically I pay myself each year £1 below the higher rate tax threshold. Anything left stays in the Ltd company I run as retained profit.

If I was to hit the higher rate tax threshold I end up paying tax at 46% (21% corp tax + 25% dividend tax).

So by taking a loan I'll not go into the higher rate tax bracket (which I would have done if I'd taken an extra £11k to cover the bike) which would cost me 26% of the bikes value in tax I'll have to pay to get paid that.

So even a loan at 10% over 3 years is cheaper in this instance!

 

[Brooner]

Plenty of Pikeys with brand new cars like Mercs/Beemers and Landrovers

Bet they paid cash, so explain that little one

My sister used to work for a car haulage company who took alot of cars in from Europe for them (not directly, as the haulier was employed by an import agent).
Delivery instructions usually consisted of "take this X5 to a layby at 3pm, and Jimmy will meet you there".....