Finance Question

[Blue_star]

Some people cant afford buying outright, you know….especially if dont have the skillset to deal with breakdowns and old car maintanence in general.

Did you make lots of money from not borrowing for a car?

[anonymous-user]

7 5 7 said:

So glad I have never been suckered into this merry go round with financing a car, never ever been remotely tempted at all, once you've done the sums like above it's quite eye opening.

I did it when I was young, all common sense went out the window and I would sign any document put in front of me if it meant I could get my hands on the latest shiny thing.

Then one day I had an epiphany, I got bored of all of these purchases after a month and they were just another car. I then put all the figures into a spread sheet and worked out how much it had cost me. Basically a fairly large chunk of my salary was going each month to pay for a car that I largely drove to work to earn money to pay for the car. I sold the car, paid off the finance and I have been driving sub £5K cars ever since.

I had other loans at the time, I put all the figures into Excel and every month when I had paid another payment I updated the figures until I had paid every single thing off. Since that day I have had zero finance other than a mortgage.

Numerous times I have had enough savings to buy a car like this A class cash but it is quite amazing how you don't want to spend it when the cash is sitting in front of you as real money. I now overpay 10% of my mortgage a year instead which makes me much happier than the temporary buzz on a new car.

Instead of instant gratification I now like to do things that will make future me's life easier.

Cue all the "could get hit by a bus tomorrow" my cousin dropped down dead of a heart attack/cancer at 45" stories.

Blue_star said:

Did you make lots of money from not borrowing for a car?

Yes, overpaying 10% on my mortgage instantly saved me £12K in interest payments at the current interest rate. This could actually be £24K depending on the mortgage rate I get when I have to remortgage in 18 months time.

I had the option of a company car or the allowance instead. I went for the allowance and purchased a £1200 shed I owned for 5 years. The company car would have cost me £550 a month when the loss of allowance and BIK tax was taken into account. so over 5 years that is £550 * 60 or £33000

So yes, not buying a nice car has saved me a minimum of £45K and probably more than that. Plus I would still need to pay the 10% back on the mortgage as well.

Edited by anonymous-user on Friday 9th June 16:16

[OnionBhaji99]

Pit Pony said:

5k miles? That's fk all. You'd be cheaper getting a taxi. (probably)

£26k to do 20k miles
Plus fuel, insurance and servicing.
Shall we call it another £9k
£35k
£1.75 per mile.
How much is a taxi?

Edited by Pit Pony on Thursday 8th June 20:14

My Ubers in the last couple of months have averaged out at:

£1.86 per mile for longer journeys (50 to 100 miles).
And £3.56 per mile for short journeys (sub 10 miles).

[Sheepshanks]

7 5 7 said:

So glad I have never been suckered into this merry go round with financing a car, never ever been remotely tempted at all, once you've done the sums like above it's quite eye opening.

It's not necessarily a bad thing. If you're going to regularly get a new car (for whatever reason) anyway then it may be a reasonable way to do it, depending on the deal available.

That's the crux of it, really - as I posted earlier in the thread, PCP is aimed at shifting new cars so in "normal" times there were hefty incentives to use PCP. It's not so attractive at the moment and it never really made sense on used cars.

[7 5 7]

Blue_star said:

Some people cant afford buying outright, you know….especially if dont have the skillset to deal with breakdowns and old car maintanence in general.

Did you make lots of money from not borrowing for a car?

Very true, I just cut my cloth accordingly and adjusted my expectations on what I can actually afford to buy and run, rather than what I want.

I wish I did have the skillset to deal with breakdowns too, would make it even cheaper!! But, a good RAC membership and good local garages etc is a good thing, and a must if swimming in this area of the market, I must of just got lucky over the years with what cars I ran, but have saved alot.

[Grumps.]

Geffg said:

I’ve got mine on pcp and hence when I did I made sure to only put £500 deposit down as I knew at the end I could literally walk away and in my mind only cost me the deposit. The monthlies are just an ongoing outgoing as I’ve never owned a car in 32yrs due to always swapping every 2/3yrs. Looking at deals if I can’t afford the monthly with only that deposit I look at something else.
Not going to work or suit everyone but I find this works ok for me. I know I’m only renting the car but in the past I’ve never gotten to the end of finance so I’ve never had the pleasure of actually owning the car anyway.

I always assumed it was better to put as much deposit as possible as the borrowed amount would cost less in interest?

Im crap at this stuff btw.

[Sheepshanks]

Grumps. said:

I always assumed it was better to put as much deposit as possible as the borrowed amount would cost less in interest?

Im crap at this stuff btw.

Yes, you would pay less interest but the GFV is fixed so paying a lot up front only reduces your monthly payment.

.
Ideally, the GFV would be set low so at the end of the deal you'd have equity to roll into the next deal as a deposit and your monthly would stay about the same. But the industry is short-sighted and doesn't look beyond the immediate deal and wants to make the monthly as low as possible so GFVs tend to be pretty spot-on, so when you get to the end of the deal either you have to find another lump for a deposit or pay much more per month.

Having said that, at the moment with firm used car prices people could be doing OK and finding they have quite a bit of equity in their cars. The problem this gives the industry is people may decide to pay the GFV and keep the car as they think they're getting a bargain. If they do this then the PCP treadmill scheme has failed. So it's quite a balancing act.

[JagYouAre]

Sheepshanks said:

It's not necessarily a bad thing. If you're going to regularly get a new car (for whatever reason) anyway then it may be a reasonable way to do it, depending on the deal available.

That's the crux of it, really - as I posted earlier in the thread, PCP is aimed at shifting new cars so in "normal" times there were hefty incentives to use PCP. It's not so attractive at the moment and it never really made sense on used cars.

This is it really. These threads always end up going in the same direction with the crowd who like to put down others who do PCP, there is really a lot of anti-finance sentiment here. In the right circumstances it can make sense (low interest rates etc. even zero percent deals). And like you say the economic environment is not ideal just now and at 9.9% used rate you're better off taking the bank loan option if you really want the car and want to pay monthly.

What these people (the "I over paid my mortgage instead aren't I great" folks) never seem to mention is that without easy finance, their used market would probably look a bit thin. And you could have just walked everywhere and paid your mortgage off at 25.

Live and let live. But yeah this particular deal isn't great.

[aaron-j9c9a]

Why can’t we just live and let live. There’s really no need to be judgemental.
Most of the millionaires I know finance cars, it doesn’t mean they can’t afford it.
Just because you choose finance it doesn’t mean you can’t afford the item, this is an old mindset

[H4rsePower]

I am a petrol head and I'm always going to have a nice car because it makes me feel good and I enjoy driving.

When I was younger I ran a Porsche I couldn't really afford and I loved every minute of it. Until the engine blew and I had to get a loan to rebuild it. (On a car that was funded by a loan. Lol.)

These days I am fine though. I have overpaid 40k on my mortgage this year. I have a couple savings accounts, an isa and 2 pensions I pay into every month. I don't really need finance. It's just easy.

I think it's sad to deny yourself your passion. I have a family member who could afford any car they wanted. Despite being mad about cars they choose to drive around in sheds. Due to concerns about their financial future (which is pretty damn solid) it's tragic imo. If you like nice cars (and if you are on this forum you probably do) Get one!.

It seems to be so easy with all the finance options out there! Haha!

I bemused by the notion of banking your car allowance and running a POS or running a very cheap car just to ensure you avoid having any debt whatsoever. These kind of strategies seem to me to be at the opposite end of the scale to the 21 year old who's paying a grand interest a month for an Rs3, but just as bad. If you are indeed a petrol head.

[ChrisH72]

There's no right or wrong answer.

OP simply needs to decide how much he's willing to put down as deposit and how much he can easily afford in monthly payments. You'll save in interest by borrowing less over a shorter term but that's not necessarily the best option for everyone.

I understand why people go for a PCP. You can buy an expensive car with little up front cost. If monthlies are affordable it's fine and you have no bother desposing of the car when you've finished with it. Many people probably don't even look at the overall cost.

Even if you have the cash to pay up front, taking 25k out of your savings feels like quite a big deal. It'll save you money in the long run but it's a large chunk to stomach in one go. Also, I imagine that few people actually have that kind of money in easy access savings. You get better returns by locking money away or investing long term so it's not usually available immediately.

[Pit Pony]

Blue_star said:

Some people cant afford buying outright, you know….especially if dont have the skillset to deal with breakdowns and old car maintanence in general.

Did you make lots of money from not borrowing for a car?

There's a whole thread about shed ownership.
It's not about making money, it's about the compromise between the cost per mile, the initial investment, the fun, and the hassle or potential hassle.
My last 4 cars.
2011, I wrote off my car (a mk3 astra) and a bloke at work told me about a mate of his who was selling a 51 plate 1.8 S40 sport. £350. An inch deep in bird st.
Ran it for 2 years, until the gearbox broke. Rather than buy a gearbox off a volvo breaker, I sold him the car for £350.
Had a look on gumtree and the nearest car to me was an 04 plate 1.6 16v sport astra for £900. Paid £850.
Ran it for 3 years, when on the beige forum (autosh!te.com) there was a 3.2 MV6 omega for sale for £600. Cost me £525.
Now, there was a bloke at work bragging that he had got a new merc on lease, only £390 a month. With his deposit it worked out at £21k over 3 years, leased, so fk all at the end. so I decided to see if I could make the omega last 3 years. I mostly paid for repairs. Probably 50:50. Probably spent £2k over 5 years to put 75k on the clock. Sold it for £600. Averaged 28 mpg, so not ruinous on the fuel, but not great either.
Spent £6500 on an astra to replace it. In 2021. At that point the newest, lowest milage car i'd ever owned.
Because I'm that sort of guy, I will try to get it to 200k ... only 120k to go, and at this rate, I'll be retired by then.

But my son has just paid £23k cash on some low mileage 4 year old mazda suv.
He's an accountant, does the sums. His man maths said, if it lasts 10 years that's 19p a mile. If he leases a car it's more per mile. He's got to service and maintain any car, and most cars now are capable of getting to 150000 miles, before they start to wear out.
I did point out that he's spent more than the total I've spent on all the cars I've owned in 39 years. Apparently I'm a freak.

[Pit Pony]

OnionBhaji99 said:

Pit Pony said:

5k miles? That's fk all. You'd be cheaper getting a taxi. (probably)

£26k to do 20k miles
Plus fuel, insurance and servicing.
Shall we call it another £9k
£35k
£1.75 per mile.
How much is a taxi?

Edited by Pit Pony on Thursday 8th June 20:14

My Ubers in the last couple of months have averaged out at:

£1.86 per mile for longer journeys (50 to 100 miles).
And £3.56 per mile for short journeys (sub 10 miles).

When my father in laws driving became erratic, I used this kind of maths to show him that he would be better off, without a car. He had a free bus pass and a bus stop at the end of the road, and the local shops, he didn't take the car to.
Could we get him to book a taxi ? Rarely. He'd just phone my wife...

[Pit Pony]

7 5 7 said:

Very true, I just cut my cloth accordingly and adjusted my expectations on what I can actually afford to buy and run, rather than what I want.

I wish I did have the skillset to deal with breakdowns too, would make it even cheaper!! But, a good RAC membership and good local garages etc is a good thing, and a must if swimming in this area of the market, I must of just got lucky over the years with what cars I ran, but have saved alot.

Good
And
RAC

IN THE SAME SENTENCE?
that's an oxymoron, if ever there was one.

[JackJarvis]

PCP deals on used cars are always terrible. Also, deal aside I'd never want to finance a 4 year old car over 4 years. It'll be getting on for 8 years old, probably throwing up a few chunky bills and you'll still be paying monthlies on it.. and still not own it.

I tend to either lease brand new cars or buy used with a bank loan / cash.

[OnionBhaji99]

Pit Pony said:

OnionBhaji99 said:

Pit Pony said:

5k miles? That's fk all. You'd be cheaper getting a taxi. (probably)

£26k to do 20k miles
Plus fuel, insurance and servicing.
Shall we call it another £9k
£35k
£1.75 per mile.
How much is a taxi?

Edited by Pit Pony on Thursday 8th June 20:14

My Ubers in the last couple of months have averaged out at:

£1.86 per mile for longer journeys (50 to 100 miles).
And £3.56 per mile for short journeys (sub 10 miles).

When my father in laws driving became erratic, I used this kind of maths to show him that he would be better off, without a car. He had a free bus pass and a bus stop at the end of the road, and the local shops, he didn't take the car to.
Could we get him to book a taxi ? Rarely. He'd just phone my wife...

Eerily similar story for us!

[Tinkermantony]

H4rsePower said:

I am a petrol head and I'm always going to have a nice car because it makes me feel good and I enjoy driving.

When I was younger I ran a Porsche I couldn't really afford and I loved every minute of it. Until the engine blew and I had to get a loan to rebuild it. (On a car that was funded by a loan. Lol.)

These days I am fine though. I have overpaid 40k on my mortgage this year. I have a couple savings accounts, an isa and 2 pensions I pay into every month. I don't really need finance. It's just easy.

I think it's sad to deny yourself your passion. I have a family member who could afford any car they wanted. Despite being mad about cars they choose to drive around in sheds. Due to concerns about their financial future (which is pretty damn solid) it's tragic imo. If you like nice cars (and if you are on this forum you probably do) Get one!.

It seems to be so easy with all the finance options out there! Haha!

I bemused by the notion of banking your car allowance and running a POS or running a very cheap car just to ensure you avoid having any debt whatsoever. These kind of strategies seem to me to be at the opposite end of the scale to the 21 year old who's paying a grand interest a month for an Rs3, but just as bad. If you are indeed a petrol head.

This is it for me. I just sold my 2014 lexus hybrid and bought a 2017 340i.
Cost me £11. 5k to change and I could have banked that into the mortgage.

But the way I see it is, I'm 34, baby is on it way in December, ice being crucified by everyone, if I don't enjoy the delights of the straight 6 twin turbo engine masterpiece now ill look back and regret it.

First drive home and I felt like my soul has been cleansed of the evil spirit that is the CVT/hybrid.

[LightningBlue]

Not that it changes the maths but where did the original post mention an ‘A Class’? He said it was a C Class Coupe which is more desirable.
If it was an A Class might as well buy a Ford Focus or Vauxhall Astra to differentiate yourself these days!