[E92Dan]

Bit late as he's bought a car

[SteveC]

These debates are always interesting as they help you revisit some ideas and recheck their validity.

The nice thing about this forum is that things generally stay good natured and polite, which I really appreciate after the flames of certain hi-fi forums

[misterS3]

Originally Posted by SteveC

What does age have to do with it? if you can't make payments, you can't make payments...at any age. Forty year olds lose jobs.

What happens to your house if you lose your job and don't get another within a reasonable period? You can't make your mortgage payments and your house is repossessed. So no difference....debt is debt.

I've had a lifetime of buying and selling houses. I've made money and I've lost money. Over a long period I've made a lot more money with carefully made investments and with half the hassle.

• Houses need maintenance, sometimes lots of it
• They need tenants, which is a pain
• The income is taxable, at your marginal rate
• You need a large loan to buy it, with relatively high interest if you don't have equity
• Its costly to buy, with fees, duties etc.
• Its costly to sell with fees etc.
• Its a fixed asset and extremely difficult to liquidate funds
• Its subject to the vagaries of council planning
• The overall returns are quite low vs. the risk
• Its mainly a leveraged investment (i.e you borrow money to invest)
• If something happens to the market and you want out, you join the queue of the other million buy-to-let sellers
• If a Labour Government gets in and they introduce rent controls, who knows what happens to BTL, since Labour are not interested in the Landlord's position
• The ONLY advantage is that you make gains on the leveraged portion but by the same token you own ALL the loses the property may take, which can be substantial.

If you want to participate in the housing market, but avoid all the hassle listed above, invest in a fund of buy-to-let properties, something like TM Hearthstone UK Residential Property Fund. These funds are built around a portfolio of buy-to-let properties, spreading your risk and if you place your investment under a Personal Pension tax blanket, you get 20% or 40% tax refund on your investment (put in £1000, your investment is instantly worth £1400). Your gains are tax free until you actually take the pension and free of Inheritance Tax as long as it stays in the pension. You can invest gradually and have no huge 'sword of Damocles (mortgage loan) hanging over your head. You have no tenants to deal with, no buying and selling properties and no maintenance hassles.

Disclaimer
I am not a tax or investment advisor and the above is neither investment nor tax advice, simply my opinion of comments in this thread.

That's a very good post. Thanks.

I've used up my Nisa for this year and have a few k to invest so will look into this for next year, so i can diversify investments (currently using Vanguard Funds tracking US (S&P 500), UK (FTSE 100) and World (FTSE World))

[doughboy]

Originally Posted by SteveC

something like TM Hearthstone UK Residential Property Fund.

I have 10% of my SIPP portfolio in that very fund.

Investing in property the easy way

[doughboy]

Originally Posted by cupraraj

i wouldnt buy a car on finance so young if i didnt have the money to buy it outright.

..... hence why buying cars outright is the best way tbh.

Buying a car outright is not always a good idea IMO.

I've always borrowed to buy cars, even my first £1000, 8 year old 100k miler Mk1 XR2 in 1989 (when I was earning £39.50 a week, YTS + £10, - 25 weeks wages!), even now I'm older and I have the cash to buy them I still wouldn't. (well maybe a project car or a keeper).

For me now, cash buying is tying up a lot of cash that could be earning you more in other pretty safe investments. More than the interest you'd pay on the car deal for sure. If your money is in a ISA or pension investments then even better.

Especially with the crazy new-car deals about the actual cost of finance can be very low indeed.

If you buy it cash you've got (uncertain) depreciation + loss of investment income as your cost of ownership.

The E63 i've leased cost me TWENTY TWO THOUSAND pounds LESS to lease it for 2 years that it would have cost me to buy it outright from savings and sell it after 2 years, taking cash costs and forecast depreciation into account (assuming list price purchase)

No brainer?

At the end of the day it's all about £/month, that's all. However you fund it.

[dy63]

Originally Posted by doughboy

Buying a car outright is not always a good idea IMO.

I've always borrowed to buy cars, even my first £1000, 8 year old 100k miler Mk1 XR2 in 1989 (when I was earning £39.50 a week, YTS + £10, - 25 weeks wages!), even now I'm older and I have the cash to buy them I still wouldn't. (well maybe a project car or a keeper).

For me now, cash buying is tying up a lot of cash that could be earning you more in other pretty safe investments. More than the interest you'd pay on the car deal for sure. If your money is in a ISA or pension investments then even better.

Especially with the crazy new-car deals about the actual cost of finance can be very low indeed.

If you buy it cash you've got (uncertain) depreciation + loss of investment income as your cost of ownership.

The E63 i've leased cost me TWENTY TWO THOUSAND pounds LESS to lease it for 2 years that it would have cost me to buy it outright and sell it after 2 years, taking cash costs and forecast depreciation into account (assuming list price purchase)

No brainer?

At the end of the day it's all about £/month, that's all. However you fund it.

it makes sense obviously. isnt leasing different to buying on finance or taking loan out?

problem these days is too many people stunting in financed cars they cant really afford to buy

[doughboy]

Yes lease / contract hire means you're just renting the car for a set period 1/2/3/4 years etc, whereas the others you are borrowing money to buy the car. But lease / pcp / HP / PCH / Cash, they're all different ways to get to the same end - i.e. getting that car on your drive for a set time.

But like I said before, each one boils down to a cold cost per month of ownership. Add it all up and divide by the months you want to keep it and there you go. That should be the figure you look at.

Lease / PCP are similar in that you just pay your monthly payments and then give it back, easy, no risk, financially easy to plan for. As long as you do your research and get a good deal you're laughing really.

Our neighbour is a multi millionaire business owner, loaded, he's got a 599 Fiorano (in a carpeted garage viewable from the kitchen), a RR Vogue V8, Panamera Hybrid S (tax fiddle), a Evoque, 2 minis and a 03 Defender. All but the defender are financed, he says ne never wants to "waste good cash on cars". You don't get rich buy giving it away

[gangzoom]

Originally Posted by doughboy

The E63 i've leased cost me TWENTY TWO THOUSAND pounds LESS to lease it for 2 years that it would have cost me to buy it outright from savings and sell it after 2 years, taking cash costs and forecast depreciation into account (assuming list price purchase)

No brainer?

At the end of the day it's all about /month, that's all. However you fund it.

Ofcourse the most sensible thing to do was not to lease a E63 in the first place

I've only ever financed one car, and wouldn't be doing that ever again. I work by the philosophy if I cannot afford to buy it outright than I cannot afford it, and need to work harder/save more.

It's a philosophy that's worked well so far. Just bought a brand new Lexus IS300h for the wife (cash buy) and still on track to be mortgage free before the age of 35, at which point we'll have no debts to any one at all, and still have a decent amount in savings in ISAs to keep gaining interest.

Yes I'll still be driving the 335i for the next few years and let's face it, that's not really a hardship....and once the mortgage is paid off, I'll have a substantial amount of £££ per months added to our disposable income....Though my wife is eyeing up a bigger house already (it's going to cost more than double what our current house is worth), so all of that money will be going into a savings account, aiming for a 50% deposit on the next house.

[doughboy]

That's good sound financial planning mate. The kind of sensible way I'm trying to teach our daughter..

Of course not having the E63 would be the cheapest option, my point was that it was much cheaper to get it on finance than to spend your hard earned savings on it.

But I just don't like spending savings! We've got enough to nearly pay the mortgage off and buy a few cars. But it makes no sense to spend the cash.

The mortgage interest is only 1.7% whereas the savings money is earning 5-10% in investments, even 2% or so in cash saving accounts. So we're deliberately not paying down the mortgage at present. And keeping the mortgage keeps the credit rating up so you can get the. best deals.

It would cost us a fortune to spend savings instead of borrowing, but have to keep an eye on interest rates...

[gangzoom]

PM me what your earning 5-10% interest on!!

One of the reasons we've bought a new car is because at the moment cash ISA rates are so low it's almost pointless putting in large deposits...but a 5-10% product would be impossible to resist!!

I would love to be in your position in a few year, with enough savings to pay off the mortgage, house in a good neighbourhood (I assume, given your neighbours)...but most importantly been able to run cars like the AMG

[BMB063]

Originally Posted by gangzoom

PM me what your earning 5-10% interest on!!

One of the reasons we've bought a new car is because at the moment cash ISA rates are so low it's almost pointless putting in large deposits...but a 5-10% product would be impossible to resist!!

I would love to be in your position in a few year, with enough savings to pay off the mortgage, house in a good neighbourhood (I assume, given your neighbours)...but most importantly been able to run cars like the AMG

I assume he was referring to investments in the stock market. Last year the S&P was up 13% and the year before was 33%. Although this year it's down a couple percent, on average you'll get 8/9%. Sorry to whip out this market language (my job), but I guess I figured I would chime in.

[SteveC]

If we're talking returns, you've got to look at BOTH a well diversified portfolio of for example equities (stocks and shares), fixed income, property and cash AND the creative use of tax blankets to protect your returns.

Annually you can invest £15,000 in an ISA, which gives tax free returns and £40,000 in a Personal Pension, which locks up your money but gives a tax rebate of 20%, 40%, 60% (max £20K) or 45% depending on your marginal rate.

If you're investing money, the tax system is where you look for your biggest gains! With a well planned investment strategy its possible for a couple to earn £100.000+ p.a entirely tax free, equivalent to a return of >30% but you've got to start early and be prepared to tie up some cash

Some examples

• ISA £15.000 per person....gains tax free
• Personal Pension £40.000 per person.....investment tax free; 25% lump sum tax free, free of IHT
• Capital Gains £11,000 per person ...profits tax free
• Insurance bond......5% of invested capital p.a tax free
• £10,000 income per person.....tax free

As you can see from the above, highly leveraged investments like buy-to-let involve a lot of hassle (servicing your investment), risks as big or bigger that the rewards, and very average returns. I doubt many people with capital who go to an IFA would come away with the advice to go BtL. Just too much work, risk and uncertainty

Imagine a well chosen portfolio of shares that pays 3% dividends p.a. With enough capital invested you could either re-invest the dividends to increase growth or draw £22,000 per annum tax free without worrying about the share price. The stock market could crash and you'd still be drawing your income and wouldn't need to participate in the meltdown. Over the long term capital would grow at a reasonable ca. 6% p.a

Disclaimer: This is neither investment nor tax advice, neither of which I am qualified to give. This is simply my opinion on the above thread. If you want advice, find a qualified advisor

[gangzoom]

Originally Posted by SteveC

If we're talking returns, you've got to look at BOTH a well diversified portfolio of for example equities (stocks and shares), fixed income, property and cash AND the creative use of tax blankets to protect your returns.

Annually you can invest £15,000 in an ISA, which gives tax free returns and £40,000 in a Personal Pension, which locks up your money but gives a tax rebate of 20%, 40%, 60% (max £20K) or 45% depending on your marginal rate.

If you're investing money, the tax system is where you look for your biggest gains! With a well planned investment strategy its possible for a couple to earn £100.000+ p.a entirely tax free, equivalent to a return of >30% but you've got to start early and be prepared to tie up some cash

Some examples

• ISA £15.000 per person....gains tax free
• Personal Pension £40.000 per person.....investment tax free; 25% lump sum tax free, free of IHT
• Capital Gains £11,000 per person ...profits tax free
• Insurance bond......5% of invested capital p.a tax free
• £10,000 income per person.....tax free

As you can see from the above, highly leveraged investments like buy-to-let involve a lot of hassle (servicing your investment), risks as big or bigger that the rewards, and very average returns. I doubt many people with capital who go to an IFA would come away with the advice to go BtL. Just too much work, risk and uncertainty

Imagine a well chosen portfolio of shares that pays 3% dividends p.a. With enough capital invested you could either re-invest the dividends to increase growth or draw £22,000 per annum tax free without worrying about the share price. The stock market could crash and you'd still be drawing your income and wouldn't need to participate in the meltdown. Over the long term capital would grow at a reasonable ca. 6% p.a

Disclaimer: This is neither investment nor tax advice, neither of which I am qualified to give. This is simply my opinion on the above thread. If you want advice, find a qualified advisor

LoL all sounds too complicated to my simple mind

I know all about is that the NHS pension is suppose to be really good, and ISA saving rates at the moment are rubbish....A couple of extra weekend shifts at work 'earns' me the same amount of income an large ISA that we fixed for 4 years at 4.1% many moons back....So I guess I'll just keep on putting the extra time in at work

[makkan00]

Originally Posted by gangzoom

LoL all sounds too complicated to my simple mind

+1


Problem of those who went into medical sector.....You talk about health or health related things and we can rock!
But cannot make most of it when it comes to investment!

[doughboy]

Originally Posted by gangzoom

PM me what your earning 5-10% interest on!!

One of the reasons we've bought a new car is because at the moment cash ISA rates are so low it's almost pointless putting in large deposits...but a 5-10% product would be impossible to resist!!

I would love to be in your position in a few year, with enough savings to pay off the mortgage, house in a good neighbourhood (I assume, given your neighbours)...but most importantly been able to run cars like the AMG

Ha, I'd love to be 30 again, and skint!

Steve C obviously knows his onions, I'm no investment expert. I just followed some advice and set up a portfolio of 'stuff' which I stick to certain percentages of each category or "asset" type. All done online in a SIPP pension and share ISA's.

I have:
55% in equities (shares and share funds of mixed types)
25% in fixed income (bond funds)
10% in property (property based fund)
5% in Gold (gold tracking ETF)
5% in cash

Overall each asset goes up and down differently all the time. Every year I put in a chunk of cash and "rebalance" it by selling some of the things that have gone up and buying the more of the things that have gone down to maintain the above percentages. The theory is what goes up comes down and vice versa, over the long term its a proven way of safe returns.

I've got burned trying to "win" on shares, i'm an engineer not a city boy, so I stick to managed funds and let the experts do it.

The key for me is following my spreadsheet strictly and not allowing any "hunches" or gut feelings to get involved, when that happens you lose out for sure.

Over the last 3 years since I got organised its made 7%, 12% and 6%. I rebalanced in late November 2014 and it's all gone up by 20% since then which is a bit crazy, but I'll sit tight see what happens.....

[SteveC]

Rebalancing is exactly the way to do it. Its really a very simple strategy.

Buy good funds in a certain ratio that matches your appetite for risk and volatility....then when certain funds go up, harvest your gains and put the money into stuff that hasn't yet hit its growth cycle. Its the simplest way to buy low, sell high.

Most investors join in when the news is good (buy high) and panic and get out or stop buying when the news is bad (sell low)

You know what they say....what do you need to be a good investor? A bad investor.

[SiKkBaSs]

No brainer mate.

I was 21 and bought a 325i with my disposable income, perks of living at home and getting a 26k graduate investment banker job in city. Rode it out a while and got myself on the property ladder.

Now I own 3 houses with considerable equity and could buy an M4 outright...but opted for the GTR instead

Nomsayin'

I'm 26 now.

[richk84]

http://www.autotrader.co.uk/classifi...cars?logcode=p

[dy63]

Originally Posted by richk84

http://www.autotrader.co.uk/classifi...cars?logcode=p

lol at the first few lines in the description

[gangzoom]

Originally Posted by richk84

http://www.autotrader.co.uk/classifi...cars?logcode=p

Must be one of the shortest ownership periods!!

At it wasn't a M4 at £600/month or something like that

[Kerr]

That's an expensive mistake.

Nobody better say I told you so.

[E92Dan]