How the hell do people afford cars these days?
Discussion
ChocolateFrog said:
For the last 15 years or so borrowing was almost free. Something like £500 on £20k over a few years.
Although I'm not one to finance cars I can see why it was actually the logical thing to do a lot of the time.
It wasn’t likely anything like as cheap as that for much of the public though. Although I'm not one to finance cars I can see why it was actually the logical thing to do a lot of the time.
Acuity30 said:
Buying outright will always be the cheapest method.
That's just incorrect IME. I mostly buy outright but I have leased cars that would have been more expensive to buy even at max discount. And that's not even taking account of the opportunity cost before someone gets crossed.nickfrog said:
Acuity30 said:
Buying outright will always be the cheapest method.
That's just incorrect IME. I mostly buy outright but I have leased cars that would have been more expensive to buy even at max discount. And that's not even taking account of the opportunity cost before someone gets crossed.
Johnson897210 said:
nickfrog said:
Acuity30 said:
Buying outright will always be the cheapest method.
That's just incorrect IME. I mostly buy outright but I have leased cars that would have been more expensive to buy even at max discount. And that's not even taking account of the opportunity cost before someone gets crossed.Clearly the opportunity cost of the capital plays a major part as does the prevailing interest rate together with can the capital be put to better use earning a higher interest rate than the pcp or finance e.g. a business opportunity or other investment earning maybe 20% if so this clearly reduces the appeal of outright purchase using your own cash.
Other aspect is whether the pcp rate may be manufacturer subsidised such as the Golf R was in 2014 at a ridiculously low c £250 a month through VW finance in order to bolster sales. GR Yaris 0 % finance on launch too a no brainer especially as these sold for big overs ££ when first introduced so why pay cash.
Acuity30 said:
My ethos has always been, if you have to finance it, you can't afford it. Obviously doesn't apply to a mortgage, but certainly does to a car.
Buying outright will always be the cheapest method. Buying brand new is financial suicide when it comes to depreciation as well, unless by some miracle you buy something which will appreciate from the get go.
If there was a brand new car I absolutely had to have for some reason, I'd go about it as follows:
Buy a cheap runabout outright
Save for a few years
When said car has done the bulk of it's depreciation in 3-5 years, buy it outright
Sell the runabout.
Thing is if you didn’t have people to buy new then what would you buy? Buying outright will always be the cheapest method. Buying brand new is financial suicide when it comes to depreciation as well, unless by some miracle you buy something which will appreciate from the get go.
If there was a brand new car I absolutely had to have for some reason, I'd go about it as follows:
Buy a cheap runabout outright
Save for a few years
When said car has done the bulk of it's depreciation in 3-5 years, buy it outright
Sell the runabout.
Also when buying new you would have to be a complete idiot to buy outright unless it’s an investment car.
Keep the money in the bank and make sure your money has a better rate than the finance.
Whenever I’ve bought a new car I’ve always made sure I’ve got at least 20% discount off of it and 0% on the finance.
Composite Guru said:
Thing is if you didn’t have people to buy new then what would you buy?
Also when buying new you would have to be a complete idiot to buy outright unless it’s an investment car.
Keep the money in the bank and make sure your money has a better rate than the finance.
Whenever I’ve bought a new car I’ve always made sure I’ve got at least 20% discount off of it and 0% on the finance.
Though, to be fair, if you only ever buy a car that you can get 20% off AND 0% finance then it's probably because very few people want one, and it's likely to depreciate like a stone...Also when buying new you would have to be a complete idiot to buy outright unless it’s an investment car.
Keep the money in the bank and make sure your money has a better rate than the finance.
Whenever I’ve bought a new car I’ve always made sure I’ve got at least 20% discount off of it and 0% on the finance.
Discombobulate said:
Composite Guru said:
Thing is if you didn’t have people to buy new then what would you buy?
Also when buying new you would have to be a complete idiot to buy outright unless it’s an investment car.
Keep the money in the bank and make sure your money has a better rate than the finance.
Whenever I’ve bought a new car I’ve always made sure I’ve got at least 20% discount off of it and 0% on the finance.
Though, to be fair, if you only ever buy a car that you can get 20% off AND 0% finance then it's probably because very few people want one, and it's likely to depreciate like a stone...Also when buying new you would have to be a complete idiot to buy outright unless it’s an investment car.
Keep the money in the bank and make sure your money has a better rate than the finance.
Whenever I’ve bought a new car I’ve always made sure I’ve got at least 20% discount off of it and 0% on the finance.
Last car before that was a V40 R Design Pro which was fully loaded. One of the last ones off the line before they stopped it. Lost about £7k on it over 4 years. Pretty reasonable for a brand new car.
Edited by Composite Guru on Sunday 26th January 18:35
Composite Guru said:
Never had that problem so far. My current car is a Corolla GR Sport. Residuals are pretty good.
Last car before that was a V40 R Design Pro which was fully loaded. One of the last ones off the line before they stopped it. Lost about £7k on it over 4 years. Pretty reasonable for a brand new car.
What did you think of it? My mother is thinking of getting a V40Last car before that was a V40 R Design Pro which was fully loaded. One of the last ones off the line before they stopped it. Lost about £7k on it over 4 years. Pretty reasonable for a brand new car.
Edited by Composite Guru on Sunday 26th January 18:35
With even the most basic new cars costing over 20k very few people could afford to pay cash for one. But many of those people can afford the £200-300 monthly payments on finance. Yes you'll likely pay more in the long run but that's life.
In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
ChrisH72 said:
With even the most basic new cars costing over 20k very few people could afford to pay cash for one. But many of those people can afford the £200-300 monthly payments on finance. Yes you'll likely pay more in the long run but that's life.
In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
Taking the hit on 50% of £50k is somewhat different to taking the hit on 50% of £25k. Somewhat focuses the mind. In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
Acuity30 said:
Composite Guru said:
Never had that problem so far. My current car is a Corolla GR Sport. Residuals are pretty good.
Last car before that was a V40 R Design Pro which was fully loaded. One of the last ones off the line before they stopped it. Lost about £7k on it over 4 years. Pretty reasonable for a brand new car.
What did you think of it? My mother is thinking of getting a V40Last car before that was a V40 R Design Pro which was fully loaded. One of the last ones off the line before they stopped it. Lost about £7k on it over 4 years. Pretty reasonable for a brand new car.
Edited by Composite Guru on Sunday 26th January 18:35
As a natural pessimist I am not going to finance anything.Too old to take that risk. I also assume that all cars are expenses rather than assets.
If the world goes sideways at least I have no cashflow exposure and if I had to sell them out for some lower price, that's fair enough. I never pay more than list. During the height of the shortages some years ago I looked at trading in my Jeep Wrangler for a new one in the States.. The deal was almost done when the sales guy said "of course there will be be a shortage charge".
$20k.
I still have my old Jeep, and now they are calling up to offer me deals.It put me off and I will just drive the old one into the ground.
If the world goes sideways at least I have no cashflow exposure and if I had to sell them out for some lower price, that's fair enough. I never pay more than list. During the height of the shortages some years ago I looked at trading in my Jeep Wrangler for a new one in the States.. The deal was almost done when the sales guy said "of course there will be be a shortage charge".
$20k.
I still have my old Jeep, and now they are calling up to offer me deals.It put me off and I will just drive the old one into the ground.
dxg said:
ChrisH72 said:
With even the most basic new cars costing over 20k very few people could afford to pay cash for one. But many of those people can afford the £200-300 monthly payments on finance. Yes you'll likely pay more in the long run but that's life.
In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
Taking the hit on 50% of £50k is somewhat different to taking the hit on 50% of £25k. Somewhat focuses the mind. In recent years people have become obsessed with residual values to the point where they would like to run a car for 3 years without losing a penny and maybe even making a profit. That was a blip and those days have gone.
IMO the old rule of losing 50% over 3 years still applies today. Nobody worried about it pre covid.
And you can have the very same car for just 48x£500 monthly payments with a mere £6k deposit!
Sadly £50k can buy you a fairly mundane car these days. Kia Sorento anybody? But as no-one really pays cash for these kinds of cars the list price doesn't matter all that much.
I buy my cars with cash. But I'm in my 50s and don't buy brand new. I suspect most new cars are bought on finance by younger folk with decent jobs who have disposable income but maybe not a whole lot of savings.
I actually always choose to finance my cars using a personal loan but do get the best deals,
My logic being if I lose my job tomorrow new car included on a personal loan I need hypothetically £2k a month. If I have £20k in savings I’ve bought myself 10months to sort a job and can also sell the car if needed to maybe buy me another 8 more months when that runs out.
I use £20k of cash and lose my job I need to sell the car and still only have 8 months and no car.
My logic being if I lose my job tomorrow new car included on a personal loan I need hypothetically £2k a month. If I have £20k in savings I’ve bought myself 10months to sort a job and can also sell the car if needed to maybe buy me another 8 more months when that runs out.
I use £20k of cash and lose my job I need to sell the car and still only have 8 months and no car.
Let’s be real here majority of folk pcp/pch because they don’t have any other option !
300/400 a month is what they are forced into due to inability to create sizeable savings.
I’ve been there myself. Several kids and a mortgage payment plus everything else in top, even as a top earner you just don’t have the ability to save much. I think it’s reasonable to say I t’s not until later in life that you value building up savings, reducing outgoings, making your money work for you, certainly over having a flash new car every 2yrs.
400 a month pch is still £20k gone over 48 months. I think the best way to motor is to buy outright say a 4-5yr old car for 20k (borrowed from savings) and run it for 4 or 5 years. If you pick wise it’ll be ultimately reliable and there will still be substantial value in it at the end.
300/400 a month is what they are forced into due to inability to create sizeable savings.
I’ve been there myself. Several kids and a mortgage payment plus everything else in top, even as a top earner you just don’t have the ability to save much. I think it’s reasonable to say I t’s not until later in life that you value building up savings, reducing outgoings, making your money work for you, certainly over having a flash new car every 2yrs.
400 a month pch is still £20k gone over 48 months. I think the best way to motor is to buy outright say a 4-5yr old car for 20k (borrowed from savings) and run it for 4 or 5 years. If you pick wise it’ll be ultimately reliable and there will still be substantial value in it at the end.
Edited by Edible Roadkill on Monday 27th January 01:09
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