You Can Drive a Porsche
Philip Raby
Published by Find A Porsche at Smashwords
Copyright Philip Raby 2010
ISBN 978-1-4523-1700-7
Introduction
Thanks for buying this little book. There have been countless other books written about Porsches, but most are aimed at enthusiasts and go into great detail about the history of the cars, the minute differences between different models and the mechanical specifications.
This book is different, though. It’s aimed at the newcomer to the marque – someone who’s always wanted a Porsche but knows nothing about them. It gives a gentle introduction to Porsche and guides you through the minefield of various different models.
Many people think that you have to be rich to drive a Porsche, yet they unwittingly waste money driving a mundane car when, in fact, they could own the Porsche of their dreams for less long-term outlay.
This book will change the way you think about car ownership and includes the following information:
• The difference between foolish and clever car buyers.
• A Porsche can be less expensive to own than a modern saloon car.
• Porsches are remarkably environmentally friendly.
• A gentle introduction to the many models of Porsche
• Which Porsches make a good first buy.
If you thought that Porsche ownership was only a dream, then it's time to think again!
I hope this book encourages you to think differently about how you buy and run your cars, and unleashes you to realise your dream. It may even make you think differently about how you organise your finances in general!
You’ll discover that owning a Porsche is a lot of fun and something anyone can afford to do.
Philip Raby
West Sussex 2010
www.findaporsche.com
Chapter one
Realising the dream
Children are great, aren’t they? They’ve not had time to become brainwashed into limiting their potential. Ask a child what they want to do for a living when they grow up and, so long as they’re not in a ‘dunno’ mood, they’ll regale you with plans of being a rock star, racing driver, actor, astronaut, airline pilot, or something else just as exciting. They’ll tell you about the amazing house they’ll live in, with 20 bedrooms, ensuite Jacuzzis and high-definition televisions in each of the many toilets. And, of course, they’ll drive a very cool car.
Be honest, now, you probably had similar dreams when you were a child. Sadly, though, over the years those dreams were bashed out of you by parents, teachers, friends and, well, the realities of life. Maybe that’s inevitable; after all, there are rather more openings in life for accountants than there are for astronauts.
Now, there are countless books available that promise to tell you how to realise your full potential and become the multimillionaire you always wanted to be; so long as you retrain your inner self, take up meditation, talk to your hamster in a certain way, or sell lots of washing powder. This book, however, has a rather more modest – and a much more achievable – aim. It will show you how you can afford to drive the car of your dreams. And the good news is, you don’t need to earn any more money than you do today. In fact, you may end up saving money!
What was your dream car when you were a child? A Ferrari? Lamborghini? Porsche? I’m betting it was a Porsche, for the simple reason you’re reading this book. And I also bet that it was a Porsche 911, because that’s the model everyone aspires to owning. In fact, you may well have had a poster of a 911 Turbo on your bedroom wall!
Now, look outside and see what’s parked on your drive? I bet it’s not a Porsche – if it was, you wouldn’t need this book. I reckon it’s something mundane, like a Ford Mondeo or Vauxhall Astra, isn’t it? Oh dear, hardly the stuff of your childhood dreams, is it?
Why isn’t there a Porsche sitting out there, then? You’re going to tell me it’s because you can’t afford to buy and run a Porsche, aren’t you? Well, I’m going to tell you that there’s a good chance that the mundane saloon car parked on your drive is costing you more than a Porsche 911 would.
Of course, you may well drive a more impressive car, maybe a BMW or a brand new sportscar. Very nice, but you could still be driving a Porsche 911 that would cost you less money in the long term.
Foolish Car Buyers
Let’s meet Mark. Mark’s a schoolteacher and a thoroughly sensible chap with his money. He knows exactly how much he earns and how much he has to spend each month. He puts a modest amount into his pension and sets some money aside for a rainy day (or, more likely, for the day the boiler blows up). He never goes overdrawn and he pays off his credit card bill in full each month. Like I said, he’s sensible with his money. So why does he get it all so wrong with his cars?
Mark always buys a brand-new hatchback every three years. “I like the reassurance of a manufacturer’s warranty because, once a car’s out of warranty, things start to go wrong,” he explains. Umm, that’s a shaky argument – today’s cars are, on the whole, thoroughly reliable. I know someone who drives a ten-year-old Nissan and, despite having covered over 100,000 miles and rarely gets any love or attention, the old rice-burner has never, ever let him down. In fact, a brand-new car is more likely to suffer from teething problems.
You may think that Mark is, as is his nature, being cautious and sensible, but let’s just look at the facts.
His latest hatchback had a showroom price of around £15,000. The car’s nothing fancy, but it is all shiny and new, has that lovely new-car smell inside, was sold to him by a nice man in a suit and, of course, comes with that all important warranty that Mark is so keen on. Sounds perfect until you realise that, in fact, the car is going to cost him not £15,000 but actually – wait for it – £25,500, plus servicing and maintenance. Gosh, what’s happened to Mark’s sensible approach to life?
Well, Mark is a classic example of a Foolish Car Buyer. To find out why he is, we have to do some maths but don’t worry, it’s nothing too arduous.
First of all, Mark is on a modest teacher’s salary, he’s by no means poor but he just doesn’t have £15,000 hidden under the pillow to pay for his new car. So he takes out a loan from the bank – being the steady fellow he is, he’d rather deal with his own bank than get involved in finance deals. Now, at the time of writing, a typical car loan from a UK bank would attract an interest rate of about 6.5 percent APR, which means that, over three years, Mark would pay about £1500 in interest. To be fair, that isn’t a bad deal in itself, but it does take the cost of the car to £16,500 (I’m rounding these figures off, by the way, to keep things neat).
Now, although that’s not great news, it’s realistic to assume that not many of us are in the happy position to fork out £15,000 or so in hard cash, so we can’t really criticise Mark for borrowing the money, can we?
Where things really began to go wrong for our hapless teacher, though, is when he proudly drove his shiny new hatchback out of the showroom. As the suited salesman started thinking about how to spend his bonus, Mark immediately started to lose money. Big time. Why? Because his new car had suddenly become a second-hand car, and second-hand (or ‘pre-owned’ in dealerspeak) cars are worth less than new ones. If Mark had tried to sell his car the very next day he probably would have lost a couple of thousand on it.
And the drop in value – or depreciation to use the technical term for this evil – continued. A typical car like Mark’s will lose about 40 percent of its value in its first year of life alone, which means it would be worth about £9000 within 12 months. Ouch! By the end of the second year, the car would have dropped in value by over 50 percent and, by the time Mark’s precious three-year warranty has expired, his car would have lost 60 percent of its new value. In other words, it would now be worth just £6000. Great news for the person who buys it off him, but bad news for Mark. If you learn nothing else from this book, just remember that you’re better off buying a three-year old car than a brand-new one!
Factor in the interest on the loan and Mark’s mundane hatchback has actually cost him a total of £25,500, plus the usual servicing and maintenance. Wow, now you can see why he’s a Foolish Car Buyer. Mark will, of course, point out that the car still has some value – around £6000 – so it’s not rally cost him that much. Fair point, until you realise that he’s about to trade the car in for a lower figure than that and repeat the whole fruitless exercise. Oh, and for the record, Mark is an economics teacher…
Don’t think that this madness is limited to teachers, though; most car buyers follow the same cycle. Take the case of James, a successful solicitor who likes to spend money and enjoy life to the full while, at the same time, investing carefully in shares and property to build a secure future for himself. James drives a rather nice BMW 5 Series and he feels pleased with himself because it’s one of the UK’s slowest depreciating cars, losing just 25 percent of its value in the first year. Indeed, being a bright fellow, this was one of the reasons he chose the car.
The trouble is, the car’s showroom price was £27,000 and he then added a hefty £5000 of options – it’s all too easy to get away ticking boxes when you’re ordering a new car – and these made very little difference to the second-hand (sorry, pre-owned) value. So, after a year, the BMW had dropped in value by a quarter of £27,000 plus the £5000 option bill. In other words, the car James had spent £32,000 on was now worth less than £19,000.
After three years, the BMW was worth just £13,000, so James had lost an eye-watering £20,000 in that time – and that’s just in depreciation.
The story only gets worse, mind. Like Mark, James didn’t have the money to pay cash for his new car – in fact, very few car buyers do – and personal loans only go up to £25,000, so he choose to put down £8000 cash from the same of his old car and borrow the balance. The interest on that amount over three years added £2600 to the cost of James’ car so, in the end, the BMW cost a staggering £55,600! Being a solicitor, he should know when he’s being ripped off. Sadly, though, he just proved himself to be yet another Foolish Car Buyer – this time with bells on. As with Mark, James could have sold the car at the end of the period and recouped £13,000 but he’d still be £42,000 down on the deal and, having an image to maintain, he would have to go out and buy another, probably even more expensive, car, thus repeating the cycle.
It seems crazy that most people are prepared to go through life throwing money away like this. After all, they wouldn’t dream of buying a house in this way – quite the opposite, in fact – sensible house buyers always consider carefully whether or not their purchase will be a good, long-term investment. The difference is, people expect their homes to go up in value, or appreciate, while they accept that their cars will drop in value – the dreaded depreciation. However, few actually realise – or are too scared to face up to – just how much money they lose on their cars. Foolish Car Buyers, the lot of them!
Clever Car Buyers
Let’s go back to houses. If you’re smart, you’ll think carefully when you buy a home, choosing somewhere in a good district and perhaps with potential for improvement, so that you can be confident that, when the time comes, you’ll be able to sell it easily. You certainly won’t expect to lose money on the deal but, ideally, you’d hope to make a few bob.
However, even if you don’t worry too much about making money on your home, the chances are you will. That’s because houses are considered to be assets – a long-lasting product that, so long as it’s well maintained, should outlast you. A house, then, is considered to be an investment, which is one reason when banks charge less for mortgages than for other loans – they know they can get the money back by repossessing the property if you are unable to pay.
Wouldn’t it be great if cars could be like this? Well, while most cars are never going to be a rock-solid investment in the same way as property has in the UK since the Second World War (despite dips, values have steadily risen over the long-tem), Clever Car Buyers do consider their car purchases in a similar way to their property deals.
Take Carl as an example. Carl lives in a smart, five-bedroomed house; it’s nothing too fancy but it’s larger than most of his friends’ and – here’s the key – he’s only got a relatively small mortgage compared to the value of the property. How has he managed this? By buying smart and moving up the property ladder, starting with a tiny two-bedroomed cottage. He’s always bought houses in good areas and has been prepared to roll up his sleeves and get his hands dirty improving his homes. Over 15 years he has moved six times, gradually working his way up to his present home and, not surprisingly, he’s planning his next move soon.
Carl works as a manager in a local retail store and is an enigma to his friends and neighbours. They know he doesn’t earn a large salary yet, not only does he live in a decent home, he also drives a Porsche 911. Not because he’s flash – far from it – but because he loves the shape of the cars and the way they drive. Like many of us, he dreamt of owning a 911 since he was a child and finally realised his dream.
However, there is another reason that Carl drives a 911. And that’s because he views his car like his home – as a durable item that he gets repaired on the odd occasion it goes wrong, and something that won’t cost him a lot of money.
Let’s look at the figures. Carl bought his 1991 Porsche three years ago for £15,000 – the same price as Mark’s hatchback. Unlike Mark, though, he didn’t have to borrow the money because he’d previously been driving an older car with little value (a beat-up Volvo estate that was ideal for lugging building materials around) and his mortgage is small, so he was able to save up each month.
That was three years ago, and do you know what Carl’s Porsche is worth today? About £15,000! That’s because the car has done most of its depreciating and values are relatively stable. People want to buy 911s, so there’s a healthy market for them, especially good, well-maintained examples like Carl’s.