How the hell do people afford cars these days?
Discussion
Hi all
Recently I've been wondering how the hell people finance their cars. It's not a question of, do you use PCP or personal loans? More a question affordability in general. Let me set the scene. As a two income household we earn a smidge over 100k. We're very lucky and both work hard.
I run a Merc E350 Diesel Estate 2010. She runs an Puma ST on a lease deal. Fuel is currently ~£1.53L by me in the midlands.
I bought my car for around 10k second hand. I split that between cash deposit and small personal loan. A rough payment of £150 per month sorts the loan. A nice round figure in my mind. Not breaking the bank but not cheap either.
With tax and insurance on top it's around £200 pm just to put the car on the road, by the time fuel is added on it's quite an expensive ordeal each month. I don't do huge mileage, perhaps below average per year. The Mrs does quite a bit more than me. Above average I'd say.
The idea of having something plug in hybrid or electric really appeals to me as it would cover 90% of my journeys in EV. Plus the Mrs could use it for the school runs too. I've never had anything than a small personal loan for a car.
So I venture to the usual places to check for second hand cars and perhaps even lease deals, just to see what sort of prices are knocking about.
I'm absolutely shocked at the money it would cost to get something even remotely new. I've never had a new car in my life and I'm fine with that. However, £400pm for a Honda E, £500pm for a Tesla model3, £700+ for Jag I pace, £900pm for a Merc EV. Seriously that's more than my mortgage.
So I'm sat here wondering, for the average joe like me, who would like to get into something a little more modern than a 12yr old merc, how on earth do people afford these things? Surely people don't pay £500-1000pm on a lease do they? Are people really paying more than a mortgage for a car?
Do people take out huge loans to buy a second hand car for 20k and have monthly payments of £400+
Personally I think a 100k household is a very fortunate position to be in but paying such vast amounts of money for these deals seems madness, or is it just me?!
Recently I've been wondering how the hell people finance their cars. It's not a question of, do you use PCP or personal loans? More a question affordability in general. Let me set the scene. As a two income household we earn a smidge over 100k. We're very lucky and both work hard.
I run a Merc E350 Diesel Estate 2010. She runs an Puma ST on a lease deal. Fuel is currently ~£1.53L by me in the midlands.
I bought my car for around 10k second hand. I split that between cash deposit and small personal loan. A rough payment of £150 per month sorts the loan. A nice round figure in my mind. Not breaking the bank but not cheap either.
With tax and insurance on top it's around £200 pm just to put the car on the road, by the time fuel is added on it's quite an expensive ordeal each month. I don't do huge mileage, perhaps below average per year. The Mrs does quite a bit more than me. Above average I'd say.
The idea of having something plug in hybrid or electric really appeals to me as it would cover 90% of my journeys in EV. Plus the Mrs could use it for the school runs too. I've never had anything than a small personal loan for a car.
So I venture to the usual places to check for second hand cars and perhaps even lease deals, just to see what sort of prices are knocking about.
I'm absolutely shocked at the money it would cost to get something even remotely new. I've never had a new car in my life and I'm fine with that. However, £400pm for a Honda E, £500pm for a Tesla model3, £700+ for Jag I pace, £900pm for a Merc EV. Seriously that's more than my mortgage.
So I'm sat here wondering, for the average joe like me, who would like to get into something a little more modern than a 12yr old merc, how on earth do people afford these things? Surely people don't pay £500-1000pm on a lease do they? Are people really paying more than a mortgage for a car?
Do people take out huge loans to buy a second hand car for 20k and have monthly payments of £400+
Personally I think a 100k household is a very fortunate position to be in but paying such vast amounts of money for these deals seems madness, or is it just me?!
Evo Sean said:
Are people really paying more than a mortgage for a car?
Do people take out huge loans to buy a second hand car for 20k and have monthly payments of £400+
Yes and yes. It's doable on a household income of half what yours is, if you're happy to credit yourself up to the eyeballs and have nothing or very little left over at the end each month.Do people take out huge loans to buy a second hand car for 20k and have monthly payments of £400+
/thread
Me and the little red meddler (also known as Mrs. Tremaine) run 5 cars in our household - our combined income is nowhere near yours.
I think a key difference between your situation and mine directly is that we pay tax and insurance yearly, not monthly. Generally, every March/April are our service, MOT and insurance months. These end up being expensive months but once it's paid for that's it for another year.
In theory, we could spend upwards of £1,000 on something - which would be more than the cost of our mortgage - but personally, I wouldn't be stupid enough to do that.
The truth is though, a lot of people are willing to spend £400+ per month on fairly basic cars. I have a friend who has spent upwards of £30k on a brand new ID.3 but will tell me about the cheap running costs, no tax, cheap service plan, how cheap it is to charge. He does around 5,000 miles a year. He's not saving money but a key reason he bought it was because his last few used cars have been lemons (one of which was only 3 years old at the point of purchase and broke down 3 times in the year he had it). I think he's mad but I do understand.
I think a key difference between your situation and mine directly is that we pay tax and insurance yearly, not monthly. Generally, every March/April are our service, MOT and insurance months. These end up being expensive months but once it's paid for that's it for another year.
In theory, we could spend upwards of £1,000 on something - which would be more than the cost of our mortgage - but personally, I wouldn't be stupid enough to do that.
The truth is though, a lot of people are willing to spend £400+ per month on fairly basic cars. I have a friend who has spent upwards of £30k on a brand new ID.3 but will tell me about the cheap running costs, no tax, cheap service plan, how cheap it is to charge. He does around 5,000 miles a year. He's not saving money but a key reason he bought it was because his last few used cars have been lemons (one of which was only 3 years old at the point of purchase and broke down 3 times in the year he had it). I think he's mad but I do understand.
It's a bad time to be buying used cars. But yes, I suspect many people pay many hundreds per month for cars they will never own.
It sounds like your merc is a bit overkill for your use-case though.
We've got a big family car (Ford Galaxy '17 plate, many bells and whistles) which is necessary due to 3 kids and funded with a personal loan. Also have a 10yr old Nissan leaf we paid 5k for a couple of years ago.
The Leaf costs virtually nothing to own/run so offsets the cost of the Galaxy which is only used for longer runs. Mrs uses the Leaf for the commute, I'm WFH.
You could likely sell your merc, get a used EV for sub 7k and save a fair chunk of cash.
I've got no problem getting loans for cars but I do always tend to be able to run them in a state of positive equity, just in case something happens and we need to ditch it. At the moment that positive equity is on the region of about 10k in my favour given we bought it jut before used car prices went totally mental!
And even at that level of income it's amazing how easy it is to spend up to your means and more, especially with kids!
It sounds like your merc is a bit overkill for your use-case though.
We've got a big family car (Ford Galaxy '17 plate, many bells and whistles) which is necessary due to 3 kids and funded with a personal loan. Also have a 10yr old Nissan leaf we paid 5k for a couple of years ago.
The Leaf costs virtually nothing to own/run so offsets the cost of the Galaxy which is only used for longer runs. Mrs uses the Leaf for the commute, I'm WFH.
You could likely sell your merc, get a used EV for sub 7k and save a fair chunk of cash.
I've got no problem getting loans for cars but I do always tend to be able to run them in a state of positive equity, just in case something happens and we need to ditch it. At the moment that positive equity is on the region of about 10k in my favour given we bought it jut before used car prices went totally mental!
And even at that level of income it's amazing how easy it is to spend up to your means and more, especially with kids!
Micro manage your expenditure, i slashed about 35% of our monthly outgoings a long time ago by going through all the sections of MSE, we avoid anything that has a monthly payment where possible as it adds up very quickly and you often pay more for it, we avoid debt everywhere we can.
its amazing how much you can piss up the wall buying lunch, coffee, takeaways, alcohol etc.
but as someone has already said I suspect a lot of people have huge amounts of debt
its amazing how much you can piss up the wall buying lunch, coffee, takeaways, alcohol etc.
but as someone has already said I suspect a lot of people have huge amounts of debt
kambites said:
I think it's pretty normal for "mid-earners" (ie not 40% tax payers) to spend £400 a month in total running a car.
I think £400 is very tight value for running car, with fuel prices set for £2 a litre a lot of people will be putting £400 of fuel in the tank a month alone, let alone any additional cost like finance, servicing, maintenance, insurance and tax etc.New cars are expensive. And these days, more than ever. List prices have skyrocketed recently and supply chain issues mean that there is little incentive for manufacturers to offer discounts. Plus many people are more than happy to sign lease after lease and never look at what it actually costs. My niece, 22, has a minimum wage job working in trampoline park - and leases a brand new Mini. Which is madness to my mind. But to her, she can cover the monthlies, she gets a shiny car that impresses her friends, and that's all that matters.
My mantra has always been that if you can't afford to buy a car for cash, then you can't afford to lease it. That's perhaps a little powerfully-built-director, but it works for me. Also, there are still deals to be had if you look around. I am taking delivery of a new Zoe in a few weeks (I know; hand in my PH card etc. etc.) A cursory google shows leases from around £300/month, whereas with practically zero effort I'm going to be paying £150/month for mine (admittedly with a bit of help from the generosity of HMG's EV grant, which you can't get any more).
My mantra has always been that if you can't afford to buy a car for cash, then you can't afford to lease it. That's perhaps a little powerfully-built-director, but it works for me. Also, there are still deals to be had if you look around. I am taking delivery of a new Zoe in a few weeks (I know; hand in my PH card etc. etc.) A cursory google shows leases from around £300/month, whereas with practically zero effort I'm going to be paying £150/month for mine (admittedly with a bit of help from the generosity of HMG's EV grant, which you can't get any more).
Depends on overall circumstances doesn’t it,
I’m the only one that earns in my household all the bills are paid every month the mortgage is paid she has bought a car outright for cash so no monthlies only tax insurance and general maintainance and I enjoy having a work car,
Our disposable every month is around £1,500/£1,800 so we could buy fancy cars but instead we would rather overpay the mortgage and eat out and treat the kids and holidays
Bet yes some people like to spend and be in debt and look successful others don’t!
I’m the only one that earns in my household all the bills are paid every month the mortgage is paid she has bought a car outright for cash so no monthlies only tax insurance and general maintainance and I enjoy having a work car,
Our disposable every month is around £1,500/£1,800 so we could buy fancy cars but instead we would rather overpay the mortgage and eat out and treat the kids and holidays
Bet yes some people like to spend and be in debt and look successful others don’t!
dave_s13 said:
It's a bad time to be buying used cars. But yes, I suspect many people pay many hundreds per month for cars they will never own.
so what if they never own itmy train ticket is over £300 a month, i will never own the train, its just a mobility cost, same thing with a car
£1200 shed bought four and a half years ago, £30 road tax, £200 insurance, 55MPG all day long, £200 for a set of tyres and serviced myself with oil and filters from eBay for £30.
I actually turned down a company car and took the car allowance and decided to run a shed instead as the company car option would have cost me £500 a month in real money (loss of car allowance and additional BIK tax.
Those people who spend £400 to lease a car they are never going to own are mental in my opinion unless £400 is nothing to them.
I actually turned down a company car and took the car allowance and decided to run a shed instead as the company car option would have cost me £500 a month in real money (loss of car allowance and additional BIK tax.
Those people who spend £400 to lease a car they are never going to own are mental in my opinion unless £400 is nothing to them.
Gibbo205 said:
kambites said:
I think it's pretty normal for "mid-earners" (ie not 40% tax payers) to spend £400 a month in total running a car.
I think £400 is very tight value for running car, with fuel prices set for £2 a litre a lot of people will be putting £400 of fuel in the tank a month alone, let alone any additional cost like finance, servicing, maintenance, insurance and tax etc.My wife's Skoda has cost a bit more but still no more than £150 a month and that does more like 6-8000 miles a year.
The thing which makes cars expensive is an insistence on buying them new and replacing them regularly. The actual day-to-day running costs of sensible cars really aren't that bad unless you do huge mileages.
Edited by kambites on Tuesday 8th March 12:44
I think (OP) you've got it about right on your current setup. You could change the Merc for a different brand and get something newer but wouldn't be worth it imo.
We're in a similar situ 100-120 bracket but massive mortgage and I would never contemplate spending any money on a car loan/pcp/lease. I have 5 cars here though so if one breaks I simply use another
We're in a similar situ 100-120 bracket but massive mortgage and I would never contemplate spending any money on a car loan/pcp/lease. I have 5 cars here though so if one breaks I simply use another
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