Why do people budget cars in total spend?
Discussion
For example when someone says they have a £25k budget - what does that actually mean?
A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
I think most average car buyer will have a monthly cost they can afford which will be payments on a loan/PCP etc. taking into consideration part ex and/or deposit.
This may also include insurance cost but I prefer to pay this annually if I can.
Then there's the general running costs to add including servicing, car tax and any repairs.
The most recent car I have bought only cost £1200 so no loan, I paid the insurance for the year so I will put £100 per month for running costs excluding petrol. This will have to cover tax (runs out Oct 2010, £205 for year), servicing and also I need enough at the end of the year to pay the next years insurance (£370).
Hopefully it will be enough as it will need 2 tyres sometime over the next 6 months (£120 fitted).
This may also include insurance cost but I prefer to pay this annually if I can.
Then there's the general running costs to add including servicing, car tax and any repairs.
The most recent car I have bought only cost £1200 so no loan, I paid the insurance for the year so I will put £100 per month for running costs excluding petrol. This will have to cover tax (runs out Oct 2010, £205 for year), servicing and also I need enough at the end of the year to pay the next years insurance (£370).
Hopefully it will be enough as it will need 2 tyres sometime over the next 6 months (£120 fitted).
GreatGranny said:
I think most average car buyer will have a monthly cost they can afford which will be payments on a loan/PCP etc. taking into consideration part ex and/or deposit.
This may also include insurance cost but I prefer to pay this annually if I can.
Then there's the general running costs to add including servicing, car tax and any repairs.
The most recent car I have bought only cost £1200 so no loan, I paid the insurance for the year so I will put £100 per month for running costs excluding petrol. This will have to cover tax (runs out Oct 2010, £205 for year), servicing and also I need enough at the end of the year to pay the next years insurance (£370).
Hopefully it will be enough as it will need 2 tyres sometime over the next 6 months (£120 fitted).
Which seems sensible.This may also include insurance cost but I prefer to pay this annually if I can.
Then there's the general running costs to add including servicing, car tax and any repairs.
The most recent car I have bought only cost £1200 so no loan, I paid the insurance for the year so I will put £100 per month for running costs excluding petrol. This will have to cover tax (runs out Oct 2010, £205 for year), servicing and also I need enough at the end of the year to pay the next years insurance (£370).
Hopefully it will be enough as it will need 2 tyres sometime over the next 6 months (£120 fitted).
I'm just confused by the way people on PH measure affordability by lump sums, such as 'budget of £30k'. Does this mean you have £30k to literally throw away?
oyster said:
For example when someone says they have a £25k budget - what does that actually mean?
A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
Good point.A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
I think that most people probably treat their current car as the deposit towards their next car, so reduce the calculation to how much finance they can afford per month + what their current car is worth as p/x.
Buying my current car, I estimated how much it would cost over 3 years to run and how much it would be worth by then. Turns out that a nice second hand sports car can cost you the same as a new hot hatch - guess which I picked
sorry if i am being thick but isn't it just because people have saved-up/inherited/remortgaged the house to the tune of £30k?
i think boradly everyone knows soemthing with a yank v8 will cost less to keep going than something with an ajp8...
if not people can use ongoing running costs as a way of deciding whether or not to buy something with low ongoing costs for £30k or something more 'exotic' for 23k with money in the bank for maintainence...
personally i would always set out to spend approximately £xk for a car with an approximate specification with a view to keeping it for n years. then if the impreza cost less to keep going than the golf but they were otherwise sufficiently attractive i'd buy the impreza...for eg.
i think boradly everyone knows soemthing with a yank v8 will cost less to keep going than something with an ajp8...
if not people can use ongoing running costs as a way of deciding whether or not to buy something with low ongoing costs for £30k or something more 'exotic' for 23k with money in the bank for maintainence...
personally i would always set out to spend approximately £xk for a car with an approximate specification with a view to keeping it for n years. then if the impreza cost less to keep going than the golf but they were otherwise sufficiently attractive i'd buy the impreza...for eg.
briSk said:
sorry if i am being thick but isn't it just because people have saved-up/inherited/remortgaged the house to the tune of £30k?
Is that how people decide what to spend?No wonder the country is f\/cked. You spend what's in your pocket, rather than what you can afford.
Whatever happened to working hard?
Because if I was to post up "What car should I buy with a TCO of no more than £1500 a year over the next 3 years not including fuel" it'd turn into a b
h fight about what costs actually exist and suggesting something I wouldn't have the capital to buy to start with. And some people would scratch their head trying to work out how to search the classifieds to find such a car.
Where as If I posted up "What car for £5000". Most people will suggest something where the capital to get it exists. And a search in the classifieds becomes a lot easier.
h fight about what costs actually exist and suggesting something I wouldn't have the capital to buy to start with. And some people would scratch their head trying to work out how to search the classifieds to find such a car.Where as If I posted up "What car for £5000". Most people will suggest something where the capital to get it exists. And a search in the classifieds becomes a lot easier.
Until cars are priced and sold differently then you will ask to find a car for £10k. Depreciation is irrelevant , to leave the dealership with the car I have to hand over £10k. How I got the £10k is irrelevant the car I choose will factor in the obvious costs such as tyres and servicing, meaning at £10k for a main car something dull is a better bet than a cheap exotic.
Purchase cost is like the 0-60 time. It only partially reflects real-world affordability in the way that standing-start acceleration only partially reflects real-world performance. However it's universal, easy to understand and facilitates conversations in the pub and on internet forums.
Having seen far too many meaningless recommendations for cheap 3200GTs and 928s and the like, I'd certainly prefer if all of the "what car?" threads would specify purchase cost plus £x per annum inclusive of maintenance and depreciation.
Having seen far too many meaningless recommendations for cheap 3200GTs and 928s and the like, I'd certainly prefer if all of the "what car?" threads would specify purchase cost plus £x per annum inclusive of maintenance and depreciation.
plenty said:
Purchase cost is like the 0-60 time. It only partially reflects real-world affordability in the way that standing-start acceleration only partially reflects real-world performance. However it's universal, easy to understand and facilitates conversations in the pub and on internet forums.
Having seen far too many meaningless recommendations for cheap 3200GTs and 928s and the like, I'd certainly prefer if all of the "what car?" threads would specify purchase cost plus £x per annum inclusive of maintenance and depreciation.
Good analogy Having seen far too many meaningless recommendations for cheap 3200GTs and 928s and the like, I'd certainly prefer if all of the "what car?" threads would specify purchase cost plus £x per annum inclusive of maintenance and depreciation.
The problem with £x pa is that any figures will always be an estimate. Purchase price is definite.
oyster said:
I'm just confused by the way people on PH measure affordability by lump sums, such as 'budget of £30k'. Does this mean you have £30k to literally throw away?
No, you've got £30k to spend on a car. As in, you can buy a car with the price of £30k or less. I'm not sure I see why you're confused, it's not like it's rocket science?
Person A goes and gets a bank loan of £7k. They now have a budget of £7k, assuming no tradeins or the like.
Person B goes to one of the many online calculators, figures out how much they can afford a month, which gives them their budget. They can now go and get a car of that value.
In January I sold my previous car, settled the finance, and had £5000 in my bank account when I was done. I had a budget of £5k. I went and bought a car with £4995 on the screen in the dealer's forecourt.
Am I missing something?
Rawwr said:
oyster said:
Is that how people decide what to spend?
No wonder the country is f\/cked. You spend what's in your pocket, rather than what you can afford.
Whatever happened to working hard?
You must've worked very hard to be able to buy your house for cash.No wonder the country is f\/cked. You spend what's in your pocket, rather than what you can afford.
Whatever happened to working hard?
If car A costs £30k to buy and you plan on selling it in 3 years time and you assume it will be worth maybe £15k then it has cost you around £400 a month in that time.
If car B costs £40k to buy and you plan on selling it in 6 years time, by which point you assume it will be worth £15k, then it has cost you around £350 per month.
Ignoring insurance, fuel, maintenance etc, which is the cheaper car?
oyster said:
Nothing else in life is purchased with this mentality - so why cars?
Pretty much everything else in life is purchased with this mentality.You want a holiday? It costs £3k not £x a month.
You want a TV? The price is £900 not £x a month.
You want a new lawnmower? The price is £500 not £x a month.
You want a car? It's £15k.
oyster said:
For example when someone says they have a £25k budget - what does that actually mean?
A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
Because they are normal!A car may cost £25k to buy but depreciate by £3k a year, or may depreciate by £5k a year. In this scenario one of them is more expensive to own, but they are the same price to buy.
Maybe I'm different, but I always calculate the cost of a car by how much it costs me per month/year. I know how much I earn and I know how much I can afford per month/year.
The only relevance to the purchase price is the means by which it will be financed.
Nothing else in life is purchased with this mentality - so why cars?
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