So..
Looking to get my wife a new car.
Her current car is financed with Alphera (BMW) at 5.99% and is due in February.
Want to buy a new BMW (2016 demo) and finance it as follows:
Total cost $60K
Deposit $5K
Financed amount $55K
Term 4 or 5 years
Balloon repayment 60 or 50% (depending on the term)
Anyone have insights into good car finance deals at the moment?
Thanks!
bmw's tend to hold their value. and i usually move it on after the warranty is over. have never had to pay a cent more than payout figure over the last 3 cars I've had.
Comes down to the changeover. Just because you're getting a good deal on the trade, doesn't mean you're getting a good deal on the new car ;)
nah i always sell privately.
tend to usually get a "good deal"
So you cover the balloon payment during that time it's advertised, or just hope noone does a revs check?
Always honest mate. I tend to list above balloon, then negotiate to at balloon and pay it off. Usually costs me about $500pm in depreciation.
is due in February.
So, when are you buying the 'new' car? Now, or closer to Feb?
need to buy before Feb.
so i was hoping to get finance pre approval and then go "shopping"
Anything less than $80k only buys you a plain Jane BMW that's comparable to other makes in the $40k to $60k mark.
M2 is the BMW to buy if you stretch the budget
Got a fully loaded demo 320i m-sport, hud, etc in March for $55k. 5 year 80k service thrown in. Actually quite a decent drive for a "base model".
The 3 series are quite well equipped (lots of options have now become standard) given the current model (F30) is in the latter part of its life cycle and design is a bit behind the competitors who have recently updated their models. 320i is a bit slow though although drives well!
Still has plastic seats
Why not buy a car you can afford instead of getting a loan, and buying a base model BMW just for badge value?
On $300k a year, I could afford most cars but don't want to pay more than $6k a year for one. And I find even the base model German cars so much nicer to drive than the Japanese, Aust or Korean ones.
If you're making that kind of coin, shouldn't you be smarter with your money? The best way to buy a car is cash. The overall cost of ownership is almost always lower. i highly doubt most people who make $300k a year would consider themselves being able to afford most cars, after life expenses are taken out.
People usually offset finance costs against tax. If you earn a decent amount, it is worth running an enterprise of some kind, let alone an investment vehicle, etc. All these entities can claim deductions every year.
Far more important to give some people concessions and let others go without healthcare, an education or a bookcase (though we invested quite highly in the Brandis' bookcases IIRC).
Don't think paying cash for a depreciating asset is a good idea. I prefer to offset the interest payments against my tax and put the cash in my home loan.
@bkx3virgin: I have never seen a spreadsheet that has shown you are better off getting a car loan rather than paying cash. Every single permitation regardless of the tax concessions still puts the cash buyer ahead. Even a salary sacrificed novated lease (as far as I can tell the cheapest loan for a vehicle), still works out more expensive than paying cash. People may talk about the cost of opportunity, and I'm guessing that is the only valid argument for a loan, butbyou are assuming reasonably high risk if you are shooting for over 5% in this climate.
You don't really need a spreadsheet. It's simple.
Take the following example: $60k at a business loan of 5% pa. The interest repayments is tax deductible. Compare that to $60k cash, which I put in my home loan offset account, I save 4% pa interest. The difference of 1% is more than made up for by the tax deduction, given my taxable income.
@bkx3virgin: Tax deductible doesn't mean you get all of it back? You are still behind, even at the highest provisional tax rate.
Exactly. I know people who buy property because of negative gearing and they get into massive debt to reduce tax. Crazy but at least capital growth is in their favour at the moment
The tax deduction on the interest payment means I save 30-40% on the 5% interest, bringing it down to effectively under 4%. Putting $60k in my home loan offset saves me 4% on my home loan interest repayments, which is not tax deductible.
Not sure why you're not getting the math.
@bkx3virgin: Because I don't think your maths is correct. Also, if you are paying 30-40% tax, you need a more creative accountant. I haven't seen a single feasible financial plan where it puts you ahead getting a loan on a car.
Ok mate.
Thanks for all the great financial advice. Based on all your posts on this site, it seems you're pretty good at giving advice.
This thread was really started for people that had recent experience with getting car loans, and maybe being pointed in the direction of an institution that offered good car loan products.
Hoping to get this thread back on track.
@thorton82: It's not just about the cost of the finance, you have to look at all the costs. So let's say it costs you half of the payment to drive a lease than bought car. Buying something else costs money, plus often there are maintenance costs and higher fuel bills.
You are both kinda right, its just that the right math involves more than the outlay itself.
But when it comes to it, keeping it on the money involves a little restraint. There area a lot of people out there leasing top-end cars that are nowhere near efficient enough to justify the choice.
Running the math on a Tesla would make an interesting comparison :-)
I can only contribute with this: If you or your wife have a registered ABN and even just a bit of business income that you can prove on Business Activity Statements or tax returns, then you should be eligible for business finance/loan set up in this structure - It just might take a while (up to days/weeks instead of hours) to get approval confirmed.
The benefit - simply a lower interest rate; don't quote me on this but you could get between 4-5% instead of 5.99% and usually no sneaky hidden fees (ask for any application, monthly or 'registration' fees).
EDIT: meant to say that this is applicable for the banks - NAB, ANZ, CBA, St George, Westpac, Bendigo Bank etc etc
Thank you.
That's good advice.
Also credit unions have cheaper finance for cars - pretty much always. Also, remember to negotiate the price of the car, and agree on a price. Then when you go to arrange payment, you advise that they will be paid by your chosen finance company. Otherwise you will either get a car at a more standard price with a 'very low interest rate' on finance, or a low price on the car with a high rate on finance. They will even it out in their if they find a way
Yeah I've never gotten finance from the same place I get the car. I always negotiate across multiple dealers and really just go for the lower priced one. But it's nice to have pre-approval so I can push on and complete the sale without any complicating issues.
Any credit unions you have in mind or have used in the past and have had a good experience? I've pretty much used Alphera, which is BMW's finance division. Getting around 5% now but hoping for closer to 4%, hence the thread.
55k financed, youre crazy
buy a commodore for half the price
A Commodore is not the Ultimate Driving Machine though :P Might be a better car for burnouts though.
But then OP can't relish in the fact that they have 2 beemers in the garage…. that the finance company owns
that the finance company will always own
fixed
That's almost like saying someone has three houses that the banks own. Not all debt is bad!
Financing or leasing a car can be quite cost effective if you get a reasonable rate. And it frees up cash for other purposes.
This. Plus the finance company don't technically own the car, they just have it registered as a security on the PPSR. Same thing in practice but just a technical thing I wanted to point out.
For people who really want these new, fancy cars, and have the cashflow to support a low rate finance plan; then go for it.
I personally would rather stick to older used cars that I can buy with cash and then stick to 3rd party insurance with fire and theft -Maybe later in life I'll finance a nice, expensive car :)
As far as financing goes, try financiers who have an affiliation with the car manufacturers you want to buy from. They often have pre negotiated prices which can be closer to trade prices. I think Sutton finance has a deal with BMW. If you know someone who is a CPA, the CPAs have an affiliate deal with BMW. If you're a member of a professional association that relates to your work (like the CPA one I just mentioned), many now have affiliations with various car companies, so check that out too.
With financing, if you can pay cash for the car, then you're much better off.
Eg. Finance $100k car at 5% = $5,000 per year interest cost. If your tax rate is the top rate, say 47% (incl. medicare) then you still have to fork out $2,650 of your hard earned for an asset that loses money - especially in the first three years. The calculation is that you receive a tax deduction of $5,000 x 47% (your tax rate) = $2,350. The other 53% of the interest bill is paid by you out of your hard earned = $2,650. In addition, you'll never see the $2,350 in cash as that is always offset against what you owe the tax office on your earnings.
When you claim a deduction for the interest you only ever receive an amount equal to the amount of tax you pay (your nominal tax rate).
If you put $100K into your mortgage offset account and it reduces your mortgage by 4%, that is $4,000 less interest you have to pay each year for which there is no tax deduction, however you're $4,000 better off and your loan term will be shorter as the amount of interest you pay off your P&I is less than you would have otherwise paid.
If you still want a BMW, consider a second hand one about 2-3 years old when most of the depreciation has been taken out of the car. The prices are often a lot less and given that BMWs are now like fleet cars, you can probably find one that someone drove short distances from home to work and not much else - low mileage and still in good nick.
However, all the common sense in the world from a tax perspective is not the only consideration. The other consideration is also lifestyle. Often people will go to extreme ends to claim a tax deduction at the cost of sacrificing their lifestyle. If a BMW at $60K makes your wife happy then that may be worth more than the interest cost you have to pay.
Hmmmm, what's that saying… "Happy wife, happy life…"
Lets not forget you have to be able to justify business use to claim interest/depreciation or repayments against your income.
I've spent 10 years being related to business finance, the higher the income the more propensity for the owner to lie about deductibility
Ouch, 50% balloon after 5yrs? But the car will be worth less than 50% after 5yrs…