How much of this wealth we see is financed?
Discussion
Just something I've been curious on for a while and if i'm seeing this through rose coloured glasses but people still seem to be getting a lot wealthier than the media suggests. Too many examples to mention but cars are generally a big ticket item and the roads are full of premium metal like Land Rover, Porsche etc. Even if they are all financed the cost of running these cars has massively increased in the past few years. For all this cost of living crisis and inflation talk the media seem to regularly mention we don't seem to be doing too bad. I would be interested to know if there are any genuine stats to how much wealth is owned vs financed and how it has changed since Covid.
I’ve never actually paid much attention to it, but I’d be amazed if more than 1 in 20 cars were actually properly expensive, like over £100k expensive. The majority are just normal cars, and then you’ve got a huge chunk of the population that can’t even afford a car. So maybe it’s just the case that you’re noticing the cars of the top few percent of earners?
Isn’t it something like 80-90% of all new cars are financed in some way, including the likes of Land Rover and Porsche? But if a couple are bringing in £8-10k a month after tax - which isn’t outrageous - spending a grand or two on cars every month doesn’t really dent the finances much.
Statistically it’s probably mainly financed, though.
Isn’t it something like 80-90% of all new cars are financed in some way, including the likes of Land Rover and Porsche? But if a couple are bringing in £8-10k a month after tax - which isn’t outrageous - spending a grand or two on cars every month doesn’t really dent the finances much.
Statistically it’s probably mainly financed, though.
I believe a real wealth divide is happening and some people can legitimately go out and buy expensive things. I also believe (and have seen) others trying to look the same by financing big ticket items with questionable financials to support it. I run a mediocre car, but I own it, I live in a nice place but there's nicer - but I own it. There's some nice Lamborghinis in our car park but I doubt they're owned outright.
There is the argument you should finance everything to take advantage of investing - but I've never signed up to that theory.
There is the argument you should finance everything to take advantage of investing - but I've never signed up to that theory.
I take a really keen interest in finances - nothing complex, just index funds, cashback, reward cards, pension overpayments, etc.
I follow quite a lot of different finance people, and a couple of things I noticed:
1) For many households, a car payment or lease is just considered normal outgoings. Like mortgage, electricity, council tax, car payment of £250, etc.
2) A funny meme I see a lot is: "People see me in my 15 year old Ford Focus and assume I don't have much money ... yet I have £200k in investments". Where as they'll see a person in a 26 plate BMW M3 and think they're rich, where as they're in debt, it's all on finance, etc.
3) Where one of these finance people post fairly typical information, like "Invest in a S&S ISA to get 7-8% returns", hundreds wll reply about how deluded it is and mention cash savings rates, and "it's just gambling", etc.
4) The majority of people just don't want to help themselves, or ignore finances. They'll push it to oneside, or just live month-to-month.
5) I saw some disregarding reward cards, and credit cards with cashback incentives as they didn't want to "share their data". Therefore missing out on likely hundreds of returns per year.
6) Changing companies and routinely reviewing your direct debits can save loads. Even last month we noticed our internet costs had gone up about £15 over a year without us even realising. So we changed company.
7) I also noticed a theme of people saying they didn't have much money to invest, and it was therefore not worthwhile. One thing I realised quickly, was it can snowball really noticably, by just adding £10 here and there, or saving £10 now and again, the extra rewards available. It all piles in and suddenly you find yourself with £1000 invested. But many will just say, "I only have £10 left".
I also am staggered by the statistics on savings people have. From the Fidelity website:
For the 25-34 age group, the average held in ISAs is £10,5562, while the median amount held in pensions is £18,800
I follow quite a lot of different finance people, and a couple of things I noticed:
1) For many households, a car payment or lease is just considered normal outgoings. Like mortgage, electricity, council tax, car payment of £250, etc.
2) A funny meme I see a lot is: "People see me in my 15 year old Ford Focus and assume I don't have much money ... yet I have £200k in investments". Where as they'll see a person in a 26 plate BMW M3 and think they're rich, where as they're in debt, it's all on finance, etc.
3) Where one of these finance people post fairly typical information, like "Invest in a S&S ISA to get 7-8% returns", hundreds wll reply about how deluded it is and mention cash savings rates, and "it's just gambling", etc.
4) The majority of people just don't want to help themselves, or ignore finances. They'll push it to oneside, or just live month-to-month.
5) I saw some disregarding reward cards, and credit cards with cashback incentives as they didn't want to "share their data". Therefore missing out on likely hundreds of returns per year.
6) Changing companies and routinely reviewing your direct debits can save loads. Even last month we noticed our internet costs had gone up about £15 over a year without us even realising. So we changed company.
7) I also noticed a theme of people saying they didn't have much money to invest, and it was therefore not worthwhile. One thing I realised quickly, was it can snowball really noticably, by just adding £10 here and there, or saving £10 now and again, the extra rewards available. It all piles in and suddenly you find yourself with £1000 invested. But many will just say, "I only have £10 left".
I also am staggered by the statistics on savings people have. From the Fidelity website:
For the 25-34 age group, the average held in ISAs is £10,5562, while the median amount held in pensions is £18,800
ManicMunky said:
If you had £1M invested, earning 10-15%, would you buy a £100,000 car outright or finance it for 5%?
Wealth always borrows other people's money, because it's cheaper for them.
Id buy a £30k car and not worry about it. I just bought a boat and financing didn't even enter my mind.Wealth always borrows other people's money, because it's cheaper for them.
It's a real mix of actual wealthy people and people trying to look wealthy
My sister and her husband are good examples of the latter:
Porsche Taycan GTS - £120k
LR Defender -£80k
Both on finance (Porsche is through his business), LR is on HP, think they are paying nearly £1k a month just for the Defender.
For them, it's all about looking wealthy, they mix in circles of self made millionaires and don't want to appear 'poor'. It's a strange situation tbh.
My sister and her husband are good examples of the latter:
Porsche Taycan GTS - £120k
LR Defender -£80k
Both on finance (Porsche is through his business), LR is on HP, think they are paying nearly £1k a month just for the Defender.
For them, it's all about looking wealthy, they mix in circles of self made millionaires and don't want to appear 'poor'. It's a strange situation tbh.
After a fairly unremarkable amount of earning and spending over my lifetime I'm now at 52 years old with a nice pot of money that I could quite easily get a nice sporty or luxurious new car.
I don't because despite being a car person, there is little or nothing currently of interest to me that I want to spend money on.
However there are clearly lots of other people in the UK of a similar demographic to me who do like the current new vehicle selection hence they buy.
Just saying that (for example) 100k is not what it used to be, and arguably cars haven't kept pace with inflation anyway.
I don't because despite being a car person, there is little or nothing currently of interest to me that I want to spend money on.
However there are clearly lots of other people in the UK of a similar demographic to me who do like the current new vehicle selection hence they buy.
Just saying that (for example) 100k is not what it used to be, and arguably cars haven't kept pace with inflation anyway.
joshcowin said:
ManicMunky said:
If you had £1M invested, earning 10-15%, would you buy a £100,000 car outright or finance it for 5%?
Wealth always borrows other people's money, because it's cheaper for them.
Where are you getting a 10%-15% return?Wealth always borrows other people's money, because it's cheaper for them.
Around here I see a lot of thirty-somethings in 80-90k Land Rover products, it's a different trend to 5 years ago.
ManicMunky said:
If you had £1M invested, earning 10-15%, would you buy a £100,000 car outright or finance it for 5%?
Wealth always borrows other people's money, because it's cheaper for them.
Comparing risky investment returns (which are subject to tax) with fixed interest costs in a recipe for disaster.Wealth always borrows other people's money, because it's cheaper for them.
Where we are, i'm not seeing as many brand new high end cars about as i used to. Or even high end cars full stop.
But they are still about. I'd imagine the vast majority of them are on finance or leased.
Hard now for middle income earners to be able to run a new X5 or Rangie, given prices have went up so much and finance deals arent as compelling as they were, but i think high earners are still financing / leasing.
But they are still about. I'd imagine the vast majority of them are on finance or leased.
Hard now for middle income earners to be able to run a new X5 or Rangie, given prices have went up so much and finance deals arent as compelling as they were, but i think high earners are still financing / leasing.
LRDefender said:
I find wondering about other folks wealth or lack of, a rather puzzling thing.
I would be most grateful if someone - the O.P. perhaps - why some people are so obsessed with the subject that they feel obligated to start a thread about it....
You don't have to be obsessed to have an interest in how the economy is doing outside what the media and economists tell us. Colour me curious. (and FWIW my business relies on this "wealth" continuing)I would be most grateful if someone - the O.P. perhaps - why some people are so obsessed with the subject that they feel obligated to start a thread about it....
Edited by Phooey on Thursday 23 July 11:54
PCP changed the game, 20 odd years ago. Suddenly, for a manageable amount of money per month, you could pretty much always be driving a new or fairly new car. Also, for just a few more pounds per month you could be driving a BMW or a Mercedes instead of a Ford or Vauxhall, which is exactly what happened. About 80-90% of private cars leave showrooms via PCP deals, and about half of second-hand sales too.
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