If you buy a car on finance you can not afford it?
Discussion
ambuletz said:
I still remember a post that was linked to on here from another forum of some lad that was about 19/20 on apprenticeship wages buying a £3000 clio on finance and it working out costing him over £6000 in total. the car was a lemon and the spec of car he bought didn't come with the alloys that were standard but some awful steelies. everyone felt sorry for him.
I worked with a guy, probably back in 2004 who did something similar with a 306. Bought a very average spec car on a really terrible finance plan which he couldn't get out of. Ended up stuck with a really naff car and couldn't do much about it. Finance has become a way for many manufacturers to obscure the big increases in list prices. The manufacturer finance arms tend to offer very cheap (below regular market rate) PCP finance rates, discount via "deposit contribution", and inflate GMFV figures, keeping monthly payments low and the list price largely irrelevant. The manufacturer has to eat that loss eventually, but the high GMFV means few bother to buy out or refinance to keep the car, they just hop into another PCP and the manufacturer gets a nice car back into "approved used" stock to sell to someone else.
What has really shifted is the amounts asked for lightly used cars. I used to buy at 1-2 years old and run for 3-4 years - I was on a car allowance scheme that allowed cars up to 5 years old. Those cars offered a very big saving over buying new, even via a main dealer. The equivalents now are often more than you'll pay for a brand new car, and if you need to finance it then the rates are massively more than new orders. Presumably there's enough people who either need a car in a hurry (and can't wait the 6+ months that some cars take) or are still in that mindset of used must be a better option than new.
Is buying a new car on finance right for everyone? No, but I'd say it's a very sound choice for many people who want to drive a fairly modern new-ish car.
As for that Golf GTE example, I leased one (about halfway through it now) - it's costing £7042 in total for 2 years. Of course I should have just popped down the VW dealer with my debit card in hand but then I'm a bit thick.
What has really shifted is the amounts asked for lightly used cars. I used to buy at 1-2 years old and run for 3-4 years - I was on a car allowance scheme that allowed cars up to 5 years old. Those cars offered a very big saving over buying new, even via a main dealer. The equivalents now are often more than you'll pay for a brand new car, and if you need to finance it then the rates are massively more than new orders. Presumably there's enough people who either need a car in a hurry (and can't wait the 6+ months that some cars take) or are still in that mindset of used must be a better option than new.
Is buying a new car on finance right for everyone? No, but I'd say it's a very sound choice for many people who want to drive a fairly modern new-ish car.
As for that Golf GTE example, I leased one (about halfway through it now) - it's costing £7042 in total for 2 years. Of course I should have just popped down the VW dealer with my debit card in hand but then I'm a bit thick.
Alex_225 said:
I worked with a guy, probably back in 2004 who did something similar with a 306. Bought a very average spec car on a really terrible finance plan which he couldn't get out of. Ended up stuck with a really naff car and couldn't do much about it.
That's on them. if you don't know the spec of car you're buying and if you're getting a naff deal, then you're a fool.I have a lease car. I have tens of thousands invested that nets me a nice annual % of my initial input. My cash investment is twice what it would cost me to buy the car. Sinking large sums of money into a depreciating asset is daft.
Let's not forget the hassle of p/x or selling privately, that is also a big factor for people financing and then handing back after 2-3 years. It certainly works for me, having sold a few of my older cars that I bought just turned into a right nightmare, people trying to knock down the price time and time again. Just not worth the hassle anymore.
Sheepshanks said:
They get them very cheap, sometimes they even get paid for driving them.
Some top top level teams do such as Real Madrid and Bayern Munich for example I know they get the players their get a car from the sponsor companies, but not many players get this. And the discount is good but not amazing, the point im making is that plenty of people buy cars on finance that can definitely afford it.I do a personal lease for my car; I love to "play the game" and get the best possible in stock deal through a broker.
Young chap I sit opposite at work insists that I "cannot afford" my car. I point out to him that what I pay to lease the car wouldn't even cover depreciation if I had bought it. His retort is "but you don't own it". He cannot see that "owning" it or not the money spent on the depreciation is still gone into thin air. I definitely CAN afford the car: it costs, relatively, peanuts.
Mind you he rents a house. Depreciating vs appreciating asset mismatch I think.
Young chap I sit opposite at work insists that I "cannot afford" my car. I point out to him that what I pay to lease the car wouldn't even cover depreciation if I had bought it. His retort is "but you don't own it". He cannot see that "owning" it or not the money spent on the depreciation is still gone into thin air. I definitely CAN afford the car: it costs, relatively, peanuts.
Mind you he rents a house. Depreciating vs appreciating asset mismatch I think.
Some can some can't (to a point).
Footballers and other wealthy people who choose to do it........it's convenient for those changing cars frequently, I dare say some famous people may even get offers to drive in x y or z car? They want a new this that or the other and generally have no long term ownership aspirations?
Company cars most (all?) are done this way, so they can afford it as it's part of their salary package
Other mid income families/singles, like the comfort of fixed costs have no leanings towards having two cars or to doing any diy or know anyone 'handy' that could help. So they take the potentially slightly more costly route to get new(er) with fixed costs and reliability perceived or actual, warranty etc is a comfort.
Lower/income/youngsters, can get good insurance deals on new cars, perhaps they spend more than they should per month but that's a life choice, they stay employed they can afford it in basic terms.
The last category normally find over the years it's grinding them down that the sacrifice isn't worth it, at least at times, or until they graduate to one of the other levels?
Essentially cars are costly, sometimes old cheap cars can cost more than a newer financed one, but generally not, however you are in and everyone see's you in an old car.
Finance was/is designed to get more people into new cars, it's often a win for the person and a win for the seller if you can pull it off (and they definitely have!), where it's occasionally a loss is to the odd uninformed/reckless/naive/overexcited person that gets stuck in an agreement that they probably shouldn't have.
I would say overall it's perhaps a little too easy and overly encouraging to get into a finance agreement (particularly for youngsters) but ultimately it's personal choice.
Footballers and other wealthy people who choose to do it........it's convenient for those changing cars frequently, I dare say some famous people may even get offers to drive in x y or z car? They want a new this that or the other and generally have no long term ownership aspirations?
Company cars most (all?) are done this way, so they can afford it as it's part of their salary package
Other mid income families/singles, like the comfort of fixed costs have no leanings towards having two cars or to doing any diy or know anyone 'handy' that could help. So they take the potentially slightly more costly route to get new(er) with fixed costs and reliability perceived or actual, warranty etc is a comfort.
Lower/income/youngsters, can get good insurance deals on new cars, perhaps they spend more than they should per month but that's a life choice, they stay employed they can afford it in basic terms.
The last category normally find over the years it's grinding them down that the sacrifice isn't worth it, at least at times, or until they graduate to one of the other levels?
Essentially cars are costly, sometimes old cheap cars can cost more than a newer financed one, but generally not, however you are in and everyone see's you in an old car.
Finance was/is designed to get more people into new cars, it's often a win for the person and a win for the seller if you can pull it off (and they definitely have!), where it's occasionally a loss is to the odd uninformed/reckless/naive/overexcited person that gets stuck in an agreement that they probably shouldn't have.
I would say overall it's perhaps a little too easy and overly encouraging to get into a finance agreement (particularly for youngsters) but ultimately it's personal choice.
Lets use a food example, say cereal. I know that I'm having a bowl of cereal each morning. I could buy and keep a years supply. I could store the cereal in my house and probably pay for the whole lot of cereal I'd use in a year. But then I'd be tied up with a lot of cereal. But I'd own my cereal. And get to tell people I own it all.
Alternatively I could buy a smaller amount from the supermarket each week. This will cost me more in the long run. But if I get bored of cornflakes it's easier to change to Weetabix. But sadly everyone will think I can't afford my cornflakes.
Alternatively I could buy a smaller amount from the supermarket each week. This will cost me more in the long run. But if I get bored of cornflakes it's easier to change to Weetabix. But sadly everyone will think I can't afford my cornflakes.
Killboy said:
And people that paid £3k for their car cash think they are richer than anyone who has their car on lease. 
This in spades!!!It's very like people criticising what car you drive - when I got a MK3 MR2 (roadster) in 2000 (paid for with money, cash up front) I used to get some right stick off a guy at work - proper bellend. According to him it was slow, and a "hairdresser's car". You can imagine how witty and original I thought the hairdresser thing was; my sides were splitting.
What did he drive? A 1.2 litre Nova.
Anyone entering finance agreements outside of FCA regulated dealers and with so called brokers, be very careful... Some of those agreements actually waive away your rights under the consumer credit act. Those that understand the act know that it affords you certain protection and having a regulated agreement is much better than an unregulated one.
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Mr Tidy said:
J4CKO said:
Its just a choice, for a couple of years, do it if you can afford it, see how it pans out and then adapt.
That can't be a good idea - surely most of those finance options require people to sign up for 2, or more usually 3, years.What happens if you get made redundant, or get a new job that means you'll go way over the mileage limit?
Those sort of deals don't usually have much flexibility in them.
Just buy a car - and if you can't do that then you can't afford it!
You cant plan for every eventuality, when taking on liabilities of any kind its a mixture of planning and a leap of faith.
Trouble is, I guess its easy to get addicted to a new shiny car every 2 or 3 years and having something nicer than you could save for and buy, I dont as I know I would resent the payment every month, but I dont actually see the depreciation for my car going out of the bank, doesnt mean its not happening.
I tend to find those who moan about leases/PCP in general ( not exclusively) tend to be those who don't spend a lot on a car anyway.
When you're spending £15-20-30-50k etc on a car you look at the options available and choose which suits you best financially in most cases. As I commented in another thread, if you show me someone spending significant money on a new car who says they don't consider the future value when they plan to exit ownership then i'll show you a liar on the whole.
For those spending £5k on a car and running it for 4 years who cares about pcp/lease/purchase etc, the car will likely be fit for scrap when you're done anyway.
When you're spending £15-20-30-50k etc on a car you look at the options available and choose which suits you best financially in most cases. As I commented in another thread, if you show me someone spending significant money on a new car who says they don't consider the future value when they plan to exit ownership then i'll show you a liar on the whole.
For those spending £5k on a car and running it for 4 years who cares about pcp/lease/purchase etc, the car will likely be fit for scrap when you're done anyway.
Shakermaker said:
That won't include the "optional final payment" though.
Well, so what?If they buy a £25k car that's worth £15k in a couple of years, they're spending £5k a year for two years no matter how you cut it.
They can do so by whichever methodology they like. If they can find one that works out at only spending £4k a year or something, seems stupid not to.
InitialDave said:
Shakermaker said:
That won't include the "optional final payment" though.
Well, so what?If they buy a £25k car that's worth £15k in a couple of years, they're spending £5k a year for two years no matter how you cut it.
They can do so by whichever methodology they like. If they can find one that works out at only spending £4k a year or something, seems stupid not to.
Shakermaker said:
That was my point. They aren't being sold a car for £5,400, they are leasing one and if they want to purchase, would have to pay the rest at the end of the term.
And........They are costing the price of a two year pcp/lease vs the cost of owning it for two years by paying cash and selling for cash
as an aside, and as somebody has rightly pointed out already, i'd rather invest my cash and make it work for me if the two numbers above were very close.
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