Porsche Finance-sounds like a rip off

[shahedz]

I am intending to Buy a Boxster for around £22,000.

I intend to put down £12,000 and put £10,000 on finance.

I was probably going to put the £10,000 on a personal bank loan.

Porsche have given me a quote as follows based on a £24,450 car and a £ 4890 deposit

Finance Example

Product: BHP

Monthly payment: £338.69

Total cash price: £24,450

Deposit: £4,890.00

Term: 37 Months

Annual mileage: 10,000 m

Final payment: £12,235

Guaranteed future value: £

APR: 10.5 %

Total amount payable: £29,393

if the car is £24,450 minus deposit £4890 minus the final payment £ 12,235 = which means i am really borrowing £7325 over 37 months on which i am paying £4943 interest!!

Sounds expensive!!!

[trev]

You pay interest on the £12235 even though you don't pay the balloon.

you are in effect borrowing 19,560 but deferring payment on the amount of 12235 and just paying the interest on it.

surprised the salesman didn't make this clear..

[teknow]

I am intending to Buy a Boxster for around £22,000.

I intend to put down £12,000 and put £10,000 on finance.

I was probably going to put the £10,000 on a personal bank loan.

Porsche have given me a quote as follows based on a £24,450 car and a £ 4890 deposit

Finance Example

Product: BHP

Monthly payment: £338.69

Total cash price: £24,450

Deposit: £4,890.00

Term: 37 Months

Annual mileage: 10,000 m

Final payment: £12,235

Guaranteed future value: £

APR: 10.5 %

Total amount payable: £29,393

if the car is £24,450 minus deposit £4890 minus the final payment £ 12,235 = which means i am really borrowing £7325 over 37 months on which i am paying £4943 interest!!

Sounds expensive!!!

Depends on how you "play" the loan.

For example consider that you can keep more money in your bank account in the interim - perhaps not a bad idea in uncertain times.

If you regularly change your car then PCP may be a good way to purchase. Even if you blow the 10,000 miles they typically charge so much per mile but this only comes off the guaranteed value of the car, so you may not lose out much if you (say) go 2-3000 miles over.

If you plan on keeping the car it is irrelevant, because when that final payment of £12,235 is due, you can refinance it over a few more years.

Meanwhile, in a recession, the thought of keeping an extra 7k in your bank account as the Porsche plan only requires a 5k deposit, may be a good thing.

If you are unable to make your payments you will a) have the 7k there which will tide you over for a good few months or hand the keys back to the dealer as it is a HP agreement and walk away (out of pocket but without worrying about the baliff).

Also if you crash the car, it gets straightened out under insurance and you can offload it at the end of the period to the dealer by giving the key back. (check the T&Cs here - they may not honour the final value if the car has been subject to accident).

Don't forget that personal loans are secured against you. This is against the car as it is HP. You will have a better chance of obtaining more credit if you have a car on HP rather than a 12k personal loan against your credit rating.

Also personal loans have gone up in cost, and when they say 7.9%APR you have to have a pretty shyate hot credit rating to qualify at those rates. Quite often they will make you an offer at 13% upwards - where as with Porsche it is easy.

I actually think it is a good deal and a very cheap way of owning a Porsche. You've got me thinking now ..... my Peugeot would be worth £7k in a p/x!

Good luck.

[teknow]

Final thoughts

You probably have to pay for OPC servicing I imagine?

You are paying over the odds for the car in the first place.

Take that into consideration too.

[shahedz]

That's a good point i didn't factor in the interest for the deffered £12k.

I need to shop around for a good finance loan, For the points you raised above i don't want to buy the car out right so would prefer the £10,000 on finance. The reason i preffered a loan was that i intend to pay it off within 18 months and a loan allows big payments., where as the Porsche finance allows you to pay early but not extra payments,

I will most likely buy private now as i think buying from Porsche will be too expensive.

PS what's CPC?

[teknow]

PCP stands for Personal Contract Plan.

A personal lease in effect, limited mileage with a final balloon payment.

Exactly what you were quoted on.

I just had a nose and for a £5k deposit, £380/month and a final £7.5k payment I could bag an 06 Cayenne "for the family".

Never get past the "finance committee" that one.

My Boxster is 2000 registered and I bought it for £10,750 cash. I intend on keeping it till death do us part.

Family cars though - I've never had the need to own them. I prefer to finance a reasonably new one for a few years and move on. Primarily because I know how shyatee I am at looking after them!

The only thing that would (personally) put me off the Porsche deals is the servicing and warranty costs on a used vehicle. Everything else ticks the boxes for me.

[r1flyguy]

OPC finance deals are a rip off!

With paying the interest on the balloon payment and the over priced car to start with you are not getting as good deal however you paint it as to a 'good way of getting into a Porsche'

Shop around, put as much deposit as you can so you are paying less interest on the lower amount you are borrowing, but if you wish to have a comfortable buffer keep back a couple of grand for any unexpected issues unless you buy from an OPC and finance externally.

Think Long & hard before you go down the OPC finance route, you will lose out.

[teknow]

If the APR is 10.9% and they will give you that it isn't too bad a deal, considering other loans out there.

The "average" credit rating would probably get 12.9% or there abouts in my experience on the high street. This would cost you £2,500 interest over 3 years on 12.5k. So with Porsche you end up paying twice as much interest, but you are lending more. So in real terms, of course it is more expensive because you are borrowing more, but you get to keep your cash in the bank and have that flexibility to ditch the car at the end of term quickly and easily.

You could always try negotiating the rate down with them too. They should be desperate to finance you, so you might get a discount if you play it right. I did this with Mercedes once.

[Ben_]

The BHP example quoted above is not GMFV - so the balloon is not guaranteed - so if, at the end of the term, if your car is worth less than the balloon, you can't just hand the keys back and walk away without making up the difference.

PCP is the GMFV version of BHP - usually the interest rate on PCP is higher than 10.9% APR. I'm not sure what it is at the moment with Porsche Finance though!

[shahedz]

Final thoughts

You probably have to pay for OPC servicing I imagine?

You are paying over the odds for the car in the first place.

Take that into consideration too.

i want to put down at least £10,000 so may put the rest on a credit card that offers 0% for 18 months, I know Virgin were doing it for a while.

[teknow]

Yeah - that Virgin deal was good. We did it. £20,000 onto a card. Just don't forget to make your payments, one false move and they cancel the 0% and put you on a standard rate.

Ultimately you are dealing with MBNA and IMHO they are shocking to deal with.

MIne are all payed off now - debt free.

Oh, apart from the Pug which I still owe £5k on.

[jmpower1974]

you said you were intending on paying it all out within 18 months of initial purchase. perhaps exercising some restraint now and saving your cash to buy the car you want outright in 12 months time is a better option? Car value goes down, bank account goes up. Gives you a lot more time to hunt down a bargain and the 'right car for you'. In the very least if you must go with porsche finance, every month you delay in looking for the right car increases your financial position and therefore your credit and bargaining power.

the cheapest way to own a car is outright with cash, financing options always cost more in the end and i wont even go into the concept of opportunity cost or capturing the true cost of the motoring - MOT, servicing, mileage, depreciation, tyres.

with all the interest you will pay on your financing options you would save at least 3 months at a guess in getting to your goal of total ownership without debt if you just abstain. i know its not want you want to hear - you want a porsche NOW, learning to delay will be more gratifying in the end. You will save a shed load more cash in the worst case scenario of just bought porsche on HP, got fired... thats a nightmare and the break contract costs will hurt a lot at at time your most vulnerable.

why dont you go for an older one and pay cash for it, learn to maintain it yourself, take your time and find the right car. A 10000 quid boxster is just as much fun as a 25000 quid one I assure you, and the smile you get from knowing you bloody own it outright is priceless.

[teknow]

Actually. the previous point is a good one.

I bought my 2000 from a well reputed dealer for £10,750 with 3 month warranty etc. He reckons the car would have been £13k before the slump.

So, if you buy a really good £10k Boxster and don't have to spend much on it, you won't lose out or won't lose much anyhow. Much less than the interest you'll be paying on loans, while you save up the rest.

Must admit, I have no temptation to replace mine. Am hoping it will be in the garage for at least another 10 years or so.

[r1flyguy]

Also

If you maintain a second hand Sub £12k car in good condition, in a year or two that is still a hefty deposit on a new porker should you decide to trade up!

You will have the experience and knowledge of owning a porker without the huge residual loss.

[shahedz]

To be honest i just prefer the interior and styling of the 987. I could buy the car out right but then that would clear a large portion of my savings. With the current economic climate i would prefer to have the cash in my account should i need it rather than have to refinance.

I get bonuses so should be able to repay the car very quickly- my head says i should wait. As my neighbour always says you buy a Porsche with your heart and not your head and now i have the bug i really want one!

Really appreciate the advice here, especially from Teknow who has gone to a lot of effort to answer my questions - I didn't realise if you financed via Porsche you had to use their service centres etc- that's a huge cost! I would much prefer the independent specialist which i think is more economical espeically on a Car over 3 years when it comes to resale.

[Ben_]

I didn't realise if you financed via Porsche you had to use their service centres etc- that's a huge cost! I would much prefer the independent specialist which i think is more economical espeically on a Car over 3 years when it comes to resale.

Em, no - not the correct way of looking at it - if you finance via Porsche Financial Services, that means you will have to buy a car off an OPC, with an official Porsche extended warranty - the T&Cs of the warranty are that you have to service and repair your Porsche at OPC franchised dealerships to maintain the conditions of their extended warranty. The financing of the car is not the condition upon which you are bound to servicing and repairing your car within OPCs, it is because of the extended warranty that OPCs issue with their used cars that dictate where you must service and repair your car.

[shahedz]

I didn't realise if you financed via Porsche you had to use their service centres etc- that's a huge cost! I would much prefer the independent specialist which i think is more economical espeically on a Car over 3 years when it comes to resale.

Em, no - not the correct way of looking at it - if you finance via Porsche Financial Services, that means you will have to buy a car off an OPC, with an official Porsche extended warranty - the T&Cs of the warranty are that you have to service and repair your Porsche at OPC franchised dealerships to maintain the conditions of their extended warranty. The financing of the car is not the condition upon which you are bound to servicing and repairing your car within OPCs, it is because of the extended warranty that OPCs issue with their used cars that dictate where you must service and repair your car.

Thanks for explaining the above. That's cleared things up.

[teknow]

I disagree with your neighbour. You buy a Porsche with your head. The heart bit follows.

If you don't use your head immediately, you end up with a lemon. One that has been crashed and repaired or has mechanical defects. Don't think that your friendly OPC is selling you a perfect car!

Take advice, get buyers guides, have an inspection done - do everything. The car should have stamps, paperwork supporting them etc etc.

If you rush, you will increase your chances of a mare. It took me 12 months - granted I was after an older example, but hey.

I don't know one end of a spanner from the other, which made my task all the worse. When I met Adrian, I commented on a nice 911 he had. It had no plates on it. Turns out it was a complete "tree job" that had been badly straightened out and was unfit for the track, never mind the road. He was havng the engine and gearbox from it. He gave me a guided tour of what to look for and I have to say it was frightening.

[shahedz]

sorry what i meant by buying with you heart and not your head is buying one now, puttiing £10,000 down and rest on the finance.

I like you don't know one endof a spanner from the other, it's why i am here trying to find out as much info as possible. I found the OPC sales man a bit too pushy for liking.

I just want to make sure i am getting one with all the bits on it i want and one that isn't a lemon so will continue to browse along here picking up hints and tips along the way.

I will get an inspection done, before i buy the car i have decided- is there anyone you would recommend that covers mainland UK? Or London should i buy from there?