Financial madness or not (car and mortgage)
Discussion
So, is the following madness..... or not.
If you were in the position where you could pay your mortgage off fully, would you? I've heard the argument that it's best to keep a small mortgage in place on a property (for anti-fraud purposes).
On that basis, would it be madness to keep a small mortgage and utilising freed up funds to buy a dream car? I will add, that in this scenario, if said dream car was to depreciate to £0 (which would be unlikely), I would have alternative funds to still pay the mortgage off, so I would not be risking anything.
I appreciate that paying the mortgage off and staying well away from cars is sensible, but there's also the argument that life is too short.
If you were in the position where you could pay your mortgage off fully, would you? I've heard the argument that it's best to keep a small mortgage in place on a property (for anti-fraud purposes).
On that basis, would it be madness to keep a small mortgage and utilising freed up funds to buy a dream car? I will add, that in this scenario, if said dream car was to depreciate to £0 (which would be unlikely), I would have alternative funds to still pay the mortgage off, so I would not be risking anything.
I appreciate that paying the mortgage off and staying well away from cars is sensible, but there's also the argument that life is too short.
Keep your mortgage and invest the money.
Spunking it on a car is a more amusing version of burning it on a barbecue, but you know that.
A mate of mine always worked out how many more weeks/months/years he'd have to work until retirement to buy a thing and then decided if it was worth it. If you dream car which depreciates to whatever means another 3 years in work it really would have to be a flying time travelling DeLorean surely?
Spunking it on a car is a more amusing version of burning it on a barbecue, but you know that.
A mate of mine always worked out how many more weeks/months/years he'd have to work until retirement to buy a thing and then decided if it was worth it. If you dream car which depreciates to whatever means another 3 years in work it really would have to be a flying time travelling DeLorean surely?
In that scenario I'd pay the mortgage off and use the what's usually used to pay the mortgage to fund a car purchase. Being mortgage free would be far more satisfying, you might only be delaying the purchase of the same car by 6-12 months if you did it that way round- saving for car deposit then on monthlies.
I'd say a lot depends on your age, and how long left on the mortgage otherwise.
Some extremes and examples. If you're young, you could either take an optimistic view... you'll live forever, so pay the mortgage off then save up for the dream car. Or you could take a really pessimistic view, you might die tomorrow so enjoy what you have while you can, buy the car and pay the mortgage off in time.
It's not just optimism or pessimism, some people might find having the debt of a mortgage stressful, or feel happy when it's paid off, or something financial assurance type thinking.
As you get older that thinking still applies, but with fewer years for the mortgage you might look at the money saved and think how it might change your living and go for it... or you might still think you could die tomorrow and get with the car.
Without the benefit of hindsight, I don't think you can say either is the wrong choice.
Me, now, I'd pay off the mortgage. But then I've already had some fun cars.
Some extremes and examples. If you're young, you could either take an optimistic view... you'll live forever, so pay the mortgage off then save up for the dream car. Or you could take a really pessimistic view, you might die tomorrow so enjoy what you have while you can, buy the car and pay the mortgage off in time.
It's not just optimism or pessimism, some people might find having the debt of a mortgage stressful, or feel happy when it's paid off, or something financial assurance type thinking.
As you get older that thinking still applies, but with fewer years for the mortgage you might look at the money saved and think how it might change your living and go for it... or you might still think you could die tomorrow and get with the car.
Without the benefit of hindsight, I don't think you can say either is the wrong choice.
Me, now, I'd pay off the mortgage. But then I've already had some fun cars.
The way I'd look at it is your mortgage costs less to pay off now than it would in future. Not sure what fraud could be prevented by owing a mortgage. If you can pay off debt then it's generally best to. Put your mortgage payments into a dream car fund and start buying when your savings are in the price range of the dream car. You'd be paying off a debt and not buying a depreciating asset, both cost money. That's a logical solution. You may want the car with your heart, maybe life's too short.
Also... what is this dream car?
I've known colleagues release equity to buy their "dream car" and to give just three examples they've been:
New 2004 Honda Accord
New something or the other Golf of some sort
Some other s
tbox hatchback, sorry I'm losing interest now.
You get the picture. Paying back a huge chunk of money over 20 years, even with a relatively low rate, so you can drive something that seems great now but will ultimately end up as a £200 car is utterly bonkers.
I've owned loads of cars but they've either always been "whatever" money to me, the quantum of which has gone up and down with my successes and failures in life, or they've been given to me to use by an employer and I'm usually not very interested in them.
The idea of financially stretching myself in the slightest for one would have me back in a £500 Peugeot before the end of the day, and I am perfectly happy to cut my cloth to a £500 Peugeot and probalby had more fun thrapping it than my idiot colleagues got out of their "I paid back £42k over 15 years for a £30k Golf" equity release purchases (real figures given - 15 year mortgage at 5%).
I've known colleagues release equity to buy their "dream car" and to give just three examples they've been:
New 2004 Honda Accord
New something or the other Golf of some sort
Some other s
tbox hatchback, sorry I'm losing interest now.You get the picture. Paying back a huge chunk of money over 20 years, even with a relatively low rate, so you can drive something that seems great now but will ultimately end up as a £200 car is utterly bonkers.
I've owned loads of cars but they've either always been "whatever" money to me, the quantum of which has gone up and down with my successes and failures in life, or they've been given to me to use by an employer and I'm usually not very interested in them.
The idea of financially stretching myself in the slightest for one would have me back in a £500 Peugeot before the end of the day, and I am perfectly happy to cut my cloth to a £500 Peugeot and probalby had more fun thrapping it than my idiot colleagues got out of their "I paid back £42k over 15 years for a £30k Golf" equity release purchases (real figures given - 15 year mortgage at 5%).
Edited by GeniusOfLove on Tuesday 28th January 16:40
911Spanker said:
By that reasoning you shouldn't have a mortgage at all. Even a car bought in cash is a waste when it should be used for reducing the mortgage.
Sheds for everyone...!!
Not necessarily a shed, but I think compromising in a material way on mortage, investments, retirement for a car that will depreciate to basically zero is a mugs game.Sheds for everyone...!!
If you can afford it and won't miss the money, go for it, otherwise as I said cut your coat according to your cloth. Not a very fashionable view in our massively leveraged culture, but there you go.
Full discloure - I make my living from people buying things they can't afford with credit they don't understand
It sounds like you can afford it all - pay off mortgage, buy shiny car, and still be saving?
That said, exact figures are needed. If your levering last 5% of an ex-council semi to buy a rusty Focus, then look carefully...
If you are leveraging the last 5% of The Manor, sat on 10 years of maxed out ISA's and a £1m pension and looking to buy a classic 911.... Then go for it.
That said, exact figures are needed. If your levering last 5% of an ex-council semi to buy a rusty Focus, then look carefully...
If you are leveraging the last 5% of The Manor, sat on 10 years of maxed out ISA's and a £1m pension and looking to buy a classic 911.... Then go for it.
Edited by POIDH on Tuesday 28th January 16:49
TeaVR said:
Well, it didn't expect this thread to have so much interest.
Only ever did car finance once (and that was 0% on a Boxster S back in the day), but surely using the mortgage is more efficient than getting a car loan (which so many people do these days)?
You can easily do the maths for total cost of different ways of borrowing. The mortgage approach often looks cheaper because it's "only X more per month" but if that's over 15 years or something then it gets expensive. AS I said a real example of a £30k car chucked onto a 15 year mortgage at 5% might look tempting at £237 a month but will end up costing you nearly £13k in interest in that period, you'll end up paying £43k for it.Only ever did car finance once (and that was 0% on a Boxster S back in the day), but surely using the mortgage is more efficient than getting a car loan (which so many people do these days)?
How much is that car going to be worth when it's 12 years old and you have 3 more years of paying for it? How much will you be enjoying it at that point?
As others have said, what car it is matters. If it's a brand new something or the other then yeah it's almost certanly financially unwise, if it's an Elise that'll never really drop in value until you crash it then not so unwise.
ETA - how about at 6%, then it'll cost you £15.5k in interest. Things rack up on long term debt.
Edited by GeniusOfLove on Tuesday 28th January 16:57
GeniusOfLove said:
You can easily do the maths for total cost of different ways of borrowing. The mortgage approach often looks cheaper because it's "only X more per month" but if that's over 15 years or something then it gets expensive. AS I said a real example of a £30k car chucked onto a 15 year mortgage at 5% might look tempting at £180 a month but will end up costing you nearly £13k in interest in that period, you'll end up paying £42k for it.
How much is that car going to be worth when it's 12 years old and you have 3 more years of paying for it? How much will you be enjoying it at that point?
As others have said, what car it is matters. If it's a brand new something or the other then yeah it's almost certanly financially unwise, if it's an Elise that'll never really drop in value until you crash it then not so unwise.
That's fair enough. This wouldn't be a long term purchase, maybe 5 years, then I'd sell the carHow much is that car going to be worth when it's 12 years old and you have 3 more years of paying for it? How much will you be enjoying it at that point?
As others have said, what car it is matters. If it's a brand new something or the other then yeah it's almost certanly financially unwise, if it's an Elise that'll never really drop in value until you crash it then not so unwise.
TeaVR said:
GeniusOfLove said:
Keep your mortgage and invest the money.
Spunking it on a car is a more amusing version of burning it on a barbecue.
Damn! A sensible response! ?? Spunking it on a car is a more amusing version of burning it on a barbecue.
An old boss of mine who has c90 cars in his collection ranging from fairly hum drum cars to original GT40's has seen the value of his collection massively outstrip most other methods of investing and with no CGT penalty. His last purchase before I left as his CFO was a limited edition Le Man Ford GT. Bought for £750k and already worth well over a million.
Yes you've got to be lucky and have time on your hands (and a place to store and service said cars) but it can be done.
Anything limited volume, old and especially those limited and old
If you're going to spunk it on, I dunno, a brand new Taycan for example then your money would be worth more if you had burnt it on a barbecue!
QuattroDave said:
Very much depends on the car you're looking at buying!
An old boss of mine who has c90 cars in his collection ranging from fairly hum drum cars to original GT40's has seen the value of his collection massively outstrip most other methods of investing and with no CGT penalty. His last purchase before I left as his CFO was a limited edition Le Man Ford GT. Bought for £750k and already worth well over a million.
Yes you've got to be lucky and have time on your hands (and a place to store and service said cars) but it can be done.
Anything limited volume, old and especially those limited and old
If you're going to spunk it on, I dunno, a brand new Taycan for example then your money would be worth more if you had burnt it on a barbecue!
I love it when people selling old X Type Jaguars or a crap old 00s 520i genuinely think they're investment grade like your bosses collection An old boss of mine who has c90 cars in his collection ranging from fairly hum drum cars to original GT40's has seen the value of his collection massively outstrip most other methods of investing and with no CGT penalty. His last purchase before I left as his CFO was a limited edition Le Man Ford GT. Bought for £750k and already worth well over a million.
Yes you've got to be lucky and have time on your hands (and a place to store and service said cars) but it can be done.
Anything limited volume, old and especially those limited and old
If you're going to spunk it on, I dunno, a brand new Taycan for example then your money would be worth more if you had burnt it on a barbecue!
I knew a chap who was keeping his Ford Mondeo ST200 in the garage as part of his "retirement plan". I doubt it's worth what he paid for it even now, 25 years on.
I think it depends how much money we are talking about and how old you are. Are we talking half the mortgage £100k+ or much less? Will it shave 10 years off or a couple of years?
Personally, as a 40-something I am pretty focused on reducing debts and building wealth so I don’t find myself having to work well into my 60s. I’m happy to forgo expensive cars and I’ve found cheaper cars can be just as much fun and less stressful to own (‘the things we own end up owning us’). I’ve been mortgage-free for 10 years now and it’s been nice. I sometimes find myself browsing 6 figure cars wondering if I could cash in some investments, but quickly snap myself out of it…
Personally, as a 40-something I am pretty focused on reducing debts and building wealth so I don’t find myself having to work well into my 60s. I’m happy to forgo expensive cars and I’ve found cheaper cars can be just as much fun and less stressful to own (‘the things we own end up owning us’). I’ve been mortgage-free for 10 years now and it’s been nice. I sometimes find myself browsing 6 figure cars wondering if I could cash in some investments, but quickly snap myself out of it…
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