How the hell do people afford cars these days?

[Niguy]

okgo said:

ACCYSTAN said:

In terms of the question, I chatted to a receptionist at a major car dealership who drives a PCP bmw X3,

Her PCP on the X3 is £559 a month over 4 years. Her apartment rent is £450 (she goes half’s with her sister) a month plus bills.

She said it’s the top of what she can afford but it’s affordable.

People find a way to manage if a nice car is high on the priority list.

All that effort to ‘look successful’ and it’s sadly still a junior SUV that nobody looks twice at. She could have just bought a Rolex!

Whilst I agree with the principles of PCPs being a generally bad choice (I’ve been stuck in the cycle myself in the past and wouldn’t do it again), maybe she’s not doing it to ‘look successful’ as such and just likes driving a nice car. People do get life satisfaction from driving something nice and it’s not always for show.

The holier than thou crowd are worse in my eyes than folk who take out PCPs, it’s their money after all.

[Earthdweller]

Fusion777 said:

An X3 is a decent car to the average person, but the idea of spending nearly £27k to have nothing to show for it after 4 years, while renting an apartment with someone else is slightly bonkers.

Probably quite a set of affairs that are quite commonplace now though.

And then rinse/repeat and 10 years on you’ve spent £100k renting a car and still flat sharing .. and still own nowt

[ACCYSTAN]

I agree although I don’t think ownership is always the answer, it’s what makes economic sense that sways my decision hence home ownership is more sensible than renting.

We all leave this world the same way we arrived, with nothing,

[SFTWend]

It's a bit of a nonsense to state that PCP is money thrown away. We all choose what we spend our money on and, if you like having a new car, there is something to be said for being able to budget on fixed monthlies.

Buy the car, instead of PCP, and you've lost a shed load in depreciation especially if sell to trade when it's time to change. Plus lost interest on savings or alternative finance costs.

I've just gone for a new car for the first time. Not PCP but a two year lease works out cheaper than the four year old model I'd intended buying and keeping for two years.

Someone very wealthy said "if it appreciates buy it and if it depreciates rent it".

[otolith]

Knowing exactly how much the car is going to cost them is worth something to many people.

[nickfrog]

Fusion777 said:

An X3 is a decent car to the average person, but the idea of spending nearly £27k to have nothing to show for it after 4 years, while renting an apartment with someone else is slightly bonkers.

Probably quite a set of affairs that are quite commonplace now though.

I don't think so.

[okgo]

Of course it is.

70% of cars are financed and most people are a single bill from debt. People are a shambles.

Edited by okgo on Sunday 5th May 17:27

[Fusion777]

SFTWend said:

It's a bit of a nonsense to state that PCP is money thrown away. We all choose what we spend our money on and, if you like having a new car, there is something to be said for being able to budget on fixed monthlies.

Buy the car, instead of PCP, and you've lost a shed load in depreciation especially if sell to trade when it's time to change. Plus lost interest on savings or alternative finance costs.

I've just gone for a new car for the first time. Not PCP but a two year lease works out cheaper than the four year old model I'd intended buying and keeping for two years.

Someone very wealthy said "if it appreciates buy it and if it depreciates rent it".

Why should everything revolve around what we most like and want? Should I have a right to everything I fancy, even if it's not really financially sensible for me to go ahead?

What happened to a bit of self control and delayed gratification? There are a multitude of car options out there, things aren't split between "buy new, lease/PCP new, go without".

I'm not berating finance, but many people seem to think they have a god given right to certain things.

[CG2020UK]

Fusion777 said:

Why should everything revolve around what we most like and want? Should I have a right to everything I fancy, even if it's not really financially sensible for me to go ahead?

What happened to a bit of self control and delayed gratification? There are a multitude of car options out there, things aren't split between "buy new, lease/PCP new, go without".

I'm not berating finance, but many people seem to think they have a god given right to certain things.

I don’t think that is what SFTWend is implying at all.

I read it as it’s your money and it’s up you to budget it however you want hopefully in such a way to bring value to your life.

If someone wants to live at home with their folks till they are 35 but drive a 911 crack on doesn’t impact my life. Might not be for me personally but each to their own if it makes them happy so be it.

If you’d rather drive a shed but max out your mortage to buy the nicest house or do 5 holidays a year also crack on.

I read Ramit Sethi’s book I will teach you to be rich 10 years ago when I was 18 and it was the best thing I ever did in terms of finance. Money is just a tool to let me live the life I want.

[nickfrog]

^^ exactly. Why worry about something that doesn't impact you? Or is it some sort of defense mechanism?

[otolith]

nickfrog said:

^^ exactly. Why worry about something that doesn't impact you? Or is it some sort of defense mechanism?

People who see their bought and paid for car as a status symbol seem not to like other people “cheating”. But why people who aren’t themselves playing that game get so upset about it, I don’t know.

[nickfrog]

Yep, no idea.

[Niguy]

Come on guys, this is Pistonheads, if you aren’t driving a £1,500 shed you bought with cash then you’re losing at life and will suffer the consequences!

[monthou]

okgo said:

Of course it is.

70% of cars are financed and most people are a single bill from debt. People are a shambles.

70% sounds too low for new cars and too high for all cars.
Where does it come from?

[okgo]

monthou said:

70% sounds too low for new cars and too high for all cars.
Where does it come from?

Can’t remember.

80-90% is for new as you say, not sure on total on the road. Lower of course but still imagine it’s lumpy.

My bought and paid for status symbol is suffering.

[otolith]

okgo said:

My bought and paid for status symbol is suffering.

Didn’t get the impression you were playing that game, to be honest.

[Theoldguard]

Buying outright instead of PCP / leasing is certainly not always the way to go, but then I view my car purchases differently, for me it's all about the overall costs.

£30k in the bank,yes you could buy outright but if well invested over the past decade would have returned 8-10% annually without too much effort.

You could pick up decent £30k cars for £3k per annum on lease if you were more interested in chasing the deal rather than the car. So your investment annually is virtually offsetting your lease cost, compounded over a number of years the money invested would return more than your total rental costs and still you have your original investment.

I have done it this way for years,

£5k of Nvidia shares bought 5 years ago would be worth £89k today, surely using large chunks of your money on a depreciating asset makes bad financial sense. If you have nothing behind you and use a large chunk of your salary each month on a lease / PCP that's a different debate.

[SFTWend]

CG2020UK said:

I don’t think that is what SFTWend is implying at all.

I read it as it’s your money and it’s up you to budget it however you want hopefully in such a way to bring value to your life.

If someone wants to live at home with their folks till they are 35 but drive a 911 crack on doesn’t impact my life. Might not be for me personally but each to their own if it makes them happy so be it.

If you’d rather drive a shed but max out your mortage to buy the nicest house or do 5 holidays a year also crack on.

I read Ramit Sethi’s book I will teach you to be rich 10 years ago when I was 18 and it was the best thing I ever did in terms of finance. Money is just a tool to let me live the life I want.

Thanks, yes that was my point. Life choices.
Other point was that cost of depreciation, or higher maintenance costs on an older car, doesn't always mean ownership is more prudent than renting.

I always stretched myself financially climbing the property ladder. My now wife rented flats, when she wasn't travelling or living with elephants in Sri Lanka. Thanks to me, we live mortgage free in quite a nice house, but it's my wife that has all the wonderful life stories to share with our son.

[ACCYSTAN]

Theoldguard said:

Buying outright instead of PCP / leasing is certainly not always the way to go, but then I view my car purchases differently, for me it's all about the overall costs.

£30k in the bank,yes you could buy outright but if well invested over the past decade would have returned 8-10% annually without too much effort.

You could pick up decent £30k cars for £3k per annum on lease if you were more interested in chasing the deal rather than the car. So your investment annually is virtually offsetting your lease cost, compounded over a number of years the money invested would return more than your total rental costs and still you have your original investment.

I have done it this way for years,

£5k of Nvidia shares bought 5 years ago would be worth £89k today, surely using large chunks of your money on a depreciating asset makes bad financial sense. If you have nothing behind you and use a large chunk of your salary each month on a lease / PCP that's a different debate.

Nvidia shares are the exception!
Anyone who invested a penny in any company on the AIM market likely has nothing to show for it a decade later!

[cj2013]

SFTWend said:

It's a bit of a nonsense to state that PCP is money thrown away. We all choose what we spend our money on and, if you like having a new car, there is something to be said for being able to budget on fixed monthlies.

Buy the car, instead of PCP, and you've lost a shed load in depreciation especially if sell to trade when it's time to change. Plus lost interest on savings or alternative finance costs.

I've just gone for a new car for the first time. Not PCP but a two year lease works out cheaper than the four year old model I'd intended buying and keeping for two years.

Someone very wealthy said "if it appreciates buy it and if it depreciates rent it".

As you say, PCP gives you protection against depreciation if you never intend to own the car fully. "Do I have to buy the whole car, or can I just cover the projected depreciation?"

Granted, you'll pay interest on that amount - but that's only if you're borrowing it. People do also overlook your point that you pay interest on lumping it up front, as you could have put it in a variety of savings arenas that would/should garner interest too.

So buying a £50k car new that you won't want to keep after its two years old; provider says "in 2 years time, we think it'll be worth £25k". No matter whether you choose to put the full £50k down, or put a deposit + some monthlies, the worst case scenario is that they were completely accurate and you'll lose £25k. If it's worth more, you get that back by selling it after 2 years.

It really just depends on the terms. The one way you can be scammed by PCP is high GMFV combined with high interest, as you can end up financing a smaller amount and paying back what you could have done via a straight loan.


Sometimes when I hear people talking about PCP I think they must just mean dodgy used car PCP with aqua credit card style interest