£10,000 Debt

[Twincam16]

Red 4 said:

Interesting points on new car vs. old car, depreciation, etc.

It all depends how much discount you secure on a new or nearly new car

Then, the only thing to factor in is depreciation because you will have a warranty and the car will not need items such as tyres, brakes, exhaust, etc.

Compare this to an older car with repair bills, MOT's, the cost of breakdown cover, vehicle excise duty (assuming it won't have 12 months on it when you buy), it will still depreciate, etc. etc. and the difference may not be as great as you think

I have made money on older (within 3 years old) cars after running them for 6 months or so and then selling them on so I appreciate that "free" motoring is do-able

Factor in the real, potential and hidden costs of older cars though and it isn't as easy as it sounds

Thing is though, your average family car will lose in depreciation what, say, a Ferrari 400i will consume in maintenance costs, but when you came to get rid of it you'd still have a 400i.

Obviously I'm not suggesting that you should buy a Ferrari instead of a Focus, but it makes even more sense as the costs get lower. Depreciation is collossal and inevitable on just about any new car. Maintenance costs are something that may happen, and that are ultimately optional (in that you can choose to sell the car rather than repair it if the repair exceeds the car's value).

Also, £10k bills are something I expect to see in the restoration file of a classic Aston Martin, not a Mondeo. However, that's the kind of money you'd normally expect to lose on your average family runaround if you get rid of it within a couple of years of buying it.

I suspect like many things these days, we're encouraged to follow 'convenience' and hurl money indiscriminately at organisations whose marketing encourages us not to think about the real consequences of anything. Unfortunately this pattern of thinking isn't just a slight irritation, it is actually something that is doing the country genuine, deep economic damage and it must be curtailed unless we want to end up like Ireland.

Thing is, there's nothing at all wrong with buying a new car. Just keep it until the £20k or whatever you spent on it has been spread out over enough years to be consummate with your earnings. If you spend £10k on a new car then keep it for 15 years, looking after it properly, then that's less than £1k a year on average regardless of the car's actual market value.

Buy a car for £10k and sell it after two years and it may well have cost you three times that per year.

[Cyder]

Last time I checked the spreadsheet we were on £15k plus £18.5k student loan.

Earning circa £50k p/a between us.

Debt is a result of student life, crap financial decisions and poor car choices!
Life's great lessons

[alfaman]

Twincam16 said:

I think it's the culture of the family you're brought up in .

errr no...more to do with 135% import tax and c. $100k for a license to put a car on the road

[thinfourth2]

Twincam16 said:

As a result, I left university just owing the money for my course. A lot of people I know left owing the kind of money that would buy you a twin-outboard speedboat.

Strange you should mention that as I went to college with a guy who spent his student loan on a small yacht. Which he sold to buy a larger yacht and then sailed round the med for 2 years

[The Wookie]

Twincam16 said:

Thing is though, your average family car will lose in depreciation what, say, a Ferrari 400i will consume in maintenance costs, but when you came to get rid of it you'd still have a 400i.

...I'm not seeing any positives here

[Manicminer]

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

I think luck does have some part to play, I know people who despite being very frugal have amassed some debts when falling ill, partners passing away or losing their jobs.

Fortunately I think todays teenagers will find it much harder to get the silly amounts of credit available in the late 90's.

[anonymous-user]

Pretty pointless stats in some ways.. I could top up my 50k mortgage to 100k and buy a Porsche but have no loans. Or take out a 50k loan to buy it. Both scenarios would make me an idiot but only one is classified as bad..

[P-Jay]

Bankruptcy is far from consequence-free.

It's not a magic reset button ether, I think a lot of people got talked into it by the Bankruptcy firms a few years ago when it became 'fashionable' truth is they'll take every thing you own (financed or otherwise) and sell them off to pay off what they can and heavily garnish your income for a long time afterwards.

Doesn't sound very nice to me, all your worldly possesions (ok, they let you keep certain things) gone, and pocket money to live on for 5 years.

[z4chris99]

30k student debt.

nothing else. could pay off my student stuff if I wanted to buy happy with it sitting there

[alfaman]

Here's how NOT to do it [an ex G/F of mine ... this is 100% true]

1/ get well paid job in an IB

2/ acquire appropriate spending habits [ $1000 for a top , $6000 for a jacket ....]

3/ lose job

4/ retain spending habits

5/ become a pwopertay developer

6/ develop a few houses

7/ over-reach on developments and overspend on labour [see 2/ above]

8/ take out an additional 400k GBP loan on your final dev to buy some "sure bet" internet stocks in Feb 2000 [the 400k will become 4m when IPO'd ]

9/ dot com crash, IPO failed ... 400k = ZERO value

10/ interest rates increase - cant service mortgage or council tax

11/ let out all bedrooms to pay mortgage

12/ tenants lose job

13/ get into massive arrears .. bank and LA call in loans ...owe around 450k GBP

14/ acquire new banker B/F [me] to become an "investor" in property dev co.

15/ b/f spots the ruse and doesnt bite...no longer b/f

16/ sale of house and flats at fire sale price to keep banks at bay

17/ go bankrupt

edit : the upside was she had a couple of things in common with S. Beeny

Edited by alfaman on Wednesday 30th May 16:50

[With these feet]

Red 4 said:

Interesting points on new car vs. old car, depreciation, etc.

It all depends how much discount you secure on a new or nearly new car

Then, the only thing to factor in is depreciation because you will have a warranty and the car will not need items such as tyres, brakes, exhaust, etc.

Compare this to an older car with repair bills, MOT's, the cost of breakdown cover, vehicle excise duty (assuming it won't have 12 months on it when you buy), it will still depreciate, etc. etc. and the difference may not be as great as you think

I have made money on older (within 3 years old) cars after running them for 6 months or so and then selling them on so I appreciate that "free" motoring is do-able

Factor in the real, potential and hidden costs of older cars though and it isn't as easy as it sounds

Searched the ads for a "reliable" marque (I worked for Honda so preferred choice)
Saw a 98 5 door with 24k genuine miles fsh etc. £1250 (more than its probably worth but hey?)
Few tiny dings but immaculate inside. Needed £100 worth of brakes as seized caliper/ wheel cyl's but went through a test with no advisories. £1350 for a low mileage car (40 - 45 mpg, with working A/C I add!).
I had previously paid off a personal loan on the Accord which was £175 a month - so £2100 a year. Ok so not in the same league but costwise worthwhile. 2nd class driving is always better than 1st class walking!
New cars will be considerably more to buy than this, and unless you buy a complete pup, bangernomics is very difficult to argue with.

[KardioKate]

On the other hand there is my boss, who at one point, was mortgaged up to £2+m. Got a chain of 10 shops, and every time he had enough deposit, bought another house to rent out.

Now? He has sold 5 shops as he's 'retiring' (at 50) money in the bank, no debt and 15 or so houses all currently let.

Debt isn't the massive evil everyone thinks it is... IF you can and do manage it properly.

Of course in reality most personal debts I assume, is on cars and handbags. Which is silly.

[turbobloke]

Manicminer said:

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

I think luck does have some part to play, I know people who despite being very frugal have amassed some debts when falling ill, partners passing away or losing their jobs.

Don't forget divorce.

Often one spouse won't know what the other is planning until the news arrives, at which point finances may well be in turmoil for both unless the couple is super-rich and immune to everything including lawyers.

From mortgage-free to new mortgage if one can be had, house prices much higher probably, or renting in a hovel as worst case scenario. Liquidity off a cliff. Possible pension hit. And the rest.

How many people plan for that when starting out in work and in a relationship?

If there are children then for the man this can be equivalent to pressing the re-set button in terms of finances, like starting out again almost.

[Getragdogleg]

I only have a mortgage, no credit cards, store card, loans or other bks, if I want it I save and buy it once I have the cash.

I hate the Mortgage, it's the one debt I cannot avoid.

[GarryA]

ShawCrossShark said:

Wouldn't surprise me. I have about £15k on top of my mortgage which I am struggling to pay back.

My wife (soon to be ex-wife) however has managed to escape without any

Did you not think to remortgage for the 15k, pay off debts, then sell the house.

[Countdown]

offendi said:

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

This is how i was brought up , if i cant afford then i save and wait until i can. its the whole "but i want it now wah wah " that got us where we are today .

Ditto. No debts and a fair amount of assets.

However that's after working for 20 years and splurging nowhere near what our friends do on cars, holidays, and eating out.

[GBB]

DJC said:

Part of my job is to assess families finances; it is quite shocking the number of outwardly wealthy families who have been living on credit and hand-to-mouth for a number of years.

Friend is a redundancy counsellor (helping in job search, etc).

worst case she saw was a director (title not main board) of major UK supermarket. He had 3 months to get another job at same pay level or he was sunk due to his ongoing costs.

Never live beyond your means, and that means current or forseeable (as nothing is forever).

[Twincam16]

Countdown said:

offendi said:

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

This is how i was brought up , if i cant afford then i save and wait until i can. its the whole "but i want it now wah wah " that got us where we are today .

Ditto. No debts and a fair amount of assets.

However that's after working for 20 years and splurging nowhere near what our friends do on cars, holidays, and eating out.

I do wonder whether stricter regulations need to be brought in on personal borrowing to prevent this happening again? Like a face-to-face meeting with a bank manager to ensure the people in receipt of the loan are intelligent enough and understand the consequences of what they're doing, as well as demonstrating their ability to pay it back easily.

Because as it is, we have banking organisations preying on people least able to control their finances. It's all very well to say 'it's their fault then, let them sink or swim, not my problem' - but when it's happening on a macro level to hundreds of thousands of people, it has a serious knock-on effect on the economy and we've all been affected by that regardless of how financially careful (or morally unscrupulous) we are.

[otolith]

P-Jay said:

Bankruptcy is far from consequence-free.

It's not a magic reset button ether, I think a lot of people got talked into it by the Bankruptcy firms a few years ago when it became 'fashionable' truth is they'll take every thing you own (financed or otherwise) and sell them off to pay off what they can and heavily garnish your income for a long time afterwards.

Doesn't sound very nice to me, all your worldly possesions (ok, they let you keep certain things) gone, and pocket money to live on for 5 years.

That sounds rather more like an IVA than a bankruptcy - and even then, they don't seize assets unless they are extravagant, they aren't coming for your TV and furniture and your old banger, though if you've a Range Rover Sport on the drive that may be a bit different. I know a bankrupt who essentially lost nothing material - the house was in -tve equity and was being foreclosed upon anyway, they kept their (modest) car, moved into rented accomodation and were forced to live within their means. I know somebody else who took the IVA route, and while they will eventually have gone through five years of living on the breadline as a result, they have not had anything seized either.

Incidentally, as far as I can see, the only beneficiary of the IVA option is the company which orchestrated it, the creditors have received peanuts in comparison to the fees and the debtor would have been much better off taking bankruptcy. They wouldn't do so, too proud to accept the stigma, but a different generation to the bankrupt.

[FunkyNige]

z4chris99 said:

30k student debt.

nothing else. could pay off my student stuff if I wanted to buy happy with it sitting there

I suppose that will be normal now the tuition fees are £8k a year, but doesn't it mean it you'll need a wage of £26k just to pay off the 3% interest?