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yes they are. rich people get loans to buy expensive things instead of giving up the cash, often collateralized by their other toys/stock/trust fund/whatever.

yes they are. rich people get loans to buy expensive things instead of giving up the cash, often collateralized by their other toys/stock/trust fund/whatever. rich people also overspend, over-leverage, and overindulge just like everyone else. the difference is they call up their banker and accountant instead of filling out a form at the dealership. if you're expecting an asset like a 918 or 911RS or R to go up in price, you'd be stupid to not leverage your cash at a low interest rate and put the rest of it to work somewhere else. at this point it becomes a business move, not a trip to the mall. it's like financing a construction project. do you think they buy jets and yachts and big homes in cash also? of course not. they setup holding companies and finance the purchases, and then charter or rent the asset out to make some of the money back and to pay the crew of people that run these types of properties. that's why you can rent an amazing vacation home for $1k a night, or spend a few days on that yacht with a bunch of friends for $5k, or rent a ferrari for a few hundred bucks. rich people are exceptionally good at monetizing and leveraging facets of their life that look like giant expenditures to you or i. poor people try to emulate this behavior, and meet their financial ruin, because they aren't savvy or rich enough to make it work.

selectodude 9y ago
I'm plenty of aware of how people with assets are able to use them as collateral to borrow money, but this article has nothing to do with that kind of financing. It's about 72mo high interest loans on cheaper downmarket cars marketed to people who used to buy old junkers.
- DanBC 9y ago
  From the article: > Graham Hill, of the National Association of Commercial Finance Brokers, told the FT recently that using a PCP, drivers could pay less for a new BMW or Mercedes than for a second-hand Ford Focus. Or, as Bob the Dinosaur might put it, “they just make you sign papers!” People don't tend to think of BMW or Mercedes as cheaper down markets cars.
  - vonmoltke 9y ago
    Perhaps not in the UK, but in many parts of the US the leased (low-end) 3-series or C200 is the car if the so-called $30,000 millionaire (i.e., people living a lifestyle they can't actually afford by renting all the trappings).
    - to3m 9y ago
      The lower end BMWs are not fancy cars in the UK either. I don't know if they'd class as "cheaper" or "downmarket", but the typical example probably isn't exactly the opposite either. There are a lot of 3-/4-cylinder 1-4 series on the road, and the 520d is common too. Something similar applies to Mercedes and Audi as well. (see, e.g., https://www.whatcar.com/news/the-10-most-popular-cars-in-the-uk-right-now/ https://www.whatcar.com/news/the-10-most-popular-cars-in-the...)
      - sugarrush 9y ago
        Interestingly, lesser cylinders is spreading up the range of BMW (and other marques) and no longer an indicator of a cheap model. The 2017 330i is equipped with a 2.0-liter turbocharged four-cylinder...
pedrocr 9y ago
>if you're expecting an asset like a 918 or 911RS or R to go up in price, you'd be stupid to not leverage your cash at a low interest rate and put the rest of it to work somewhere else This only makes sense if your bank thinks it will go up in price and will lend you the money at low rates based on the car itself as collateral. If you're getting the money at low rates based on other collateral (like you suggest above) it makes no difference if the car value goes up or down. If you think you can make more return on your other investments than the loan rate you leverage, the rise or fall of the value of the car is irrelevant.
- cynicalbastard 9y ago
  uh, no, the bank will loan you the money no matter what, as long as they think you can pay it back or you can put up collateral to forfeit in case of default. they're not in the speculation game, they're in the loan making game.
  - TrickyRick 9y ago
    But the interest is lower the more stable the leveraged assets. I get a lower interest if I mortgage my house compared to if I borrow with stocks as leverage, which in turn is lower than a car loan which in turn has lower interest than a loan with no leverage, even if I have a solid income and a stable employment. Banks are actually very much in the speculation game, which is why different people get different interest rates for the same loan, they speculate that the person with the lower interest has a better chance of paying back the loan. See also the financial crisis of '08
  - pedrocr 9y ago
    You're arguing that the price of the car going up or down makes a difference for the decision if you should use a loan or not to buy it. That only makes sense if the loan is based on the car value. If the loan is based on other collateral the price fluctuations of the car are irrelevant to the price of the loan and don't enter the decision at all.
    - 9y ago

selectodude 9y ago

I'm plenty of aware of how people with assets are able to use them as collateral to borrow money, but this article has nothing to do with that kind of financing. It's about 72mo high interest loans on cheaper downmarket cars marketed to people who used to buy old junkers.

DanBC 9y ago
From the article: > Graham Hill, of the National Association of Commercial Finance Brokers, told the FT recently that using a PCP, drivers could pay less for a new BMW or Mercedes than for a second-hand Ford Focus. Or, as Bob the Dinosaur might put it, “they just make you sign papers!” People don't tend to think of BMW or Mercedes as cheaper down markets cars.
- vonmoltke 9y ago
  Perhaps not in the UK, but in many parts of the US the leased (low-end) 3-series or C200 is the car if the so-called $30,000 millionaire (i.e., people living a lifestyle they can't actually afford by renting all the trappings).
  - to3m 9y ago
    The lower end BMWs are not fancy cars in the UK either. I don't know if they'd class as "cheaper" or "downmarket", but the typical example probably isn't exactly the opposite either. There are a lot of 3-/4-cylinder 1-4 series on the road, and the 520d is common too. Something similar applies to Mercedes and Audi as well. (see, e.g., https://www.whatcar.com/news/the-10-most-popular-cars-in-the-uk-right-now/ https://www.whatcar.com/news/the-10-most-popular-cars-in-the...)
    - sugarrush 9y ago
      Interestingly, lesser cylinders is spreading up the range of BMW (and other marques) and no longer an indicator of a cheap model. The 2017 330i is equipped with a 2.0-liter turbocharged four-cylinder...

pedrocr 9y ago

>if you're expecting an asset like a 918 or 911RS or R to go up in price, you'd be stupid to not leverage your cash at a low interest rate and put the rest of it to work somewhere else This only makes sense if your bank thinks it will go up in price and will lend you the money at low rates based on the car itself as collateral. If you're getting the money at low rates based on other collateral (like you suggest above) it makes no difference if the car value goes up or down. If you think you can make more return on your other investments than the loan rate you leverage, the rise or fall of the value of the car is irrelevant.

cynicalbastard 9y ago
uh, no, the bank will loan you the money no matter what, as long as they think you can pay it back or you can put up collateral to forfeit in case of default. they're not in the speculation game, they're in the loan making game.
- TrickyRick 9y ago
  But the interest is lower the more stable the leveraged assets. I get a lower interest if I mortgage my house compared to if I borrow with stocks as leverage, which in turn is lower than a car loan which in turn has lower interest than a loan with no leverage, even if I have a solid income and a stable employment. Banks are actually very much in the speculation game, which is why different people get different interest rates for the same loan, they speculate that the person with the lower interest has a better chance of paying back the loan. See also the financial crisis of '08
- pedrocr 9y ago
  You're arguing that the price of the car going up or down makes a difference for the decision if you should use a loan or not to buy it. That only makes sense if the loan is based on the car value. If the loan is based on other collateral the price fluctuations of the car are irrelevant to the price of the loan and don't enter the decision at all.
  - 9y ago