How the hell do people afford cars these days?

[jimPH]

Tobermory said:

jimPH said:

Some serious mental gymnastics there.

I did however use a similar argument for paying off my mortgage whilst earning tax free overseas, that way, if and when I come back I don't have to use taxable earnings to pay it off. I'll just put more in my pension to maximise tax relief.

I know paying mortgages off means you don't inflate away the debt, but having it paid is a good feeling mentally too.

How did you manage to pay off your mortgage without first bringing the money into the country which would then have made it taxable do you mind me asking?

I'm PAYE, my code is NT. I live and work overseas, seconded from a UK employer. I'm usually well under 90 days in the UK too, it's not for everyone.

[austina35]

I've just purchased a new car. 28k.

I traded in my old one for 9.5k
I paid 14.5k in cash
I put 4k on finance over 12 months.

I just couldn't find the 4k in cash to buy outright. The finance bit included an extra years warranty and 2 free services. So in theory, it should be relatively cheap for a few years.

[anonymous-user]

jimPH said:

Tobermory said:

jimPH said:

Some serious mental gymnastics there.

I did however use a similar argument for paying off my mortgage whilst earning tax free overseas, that way, if and when I come back I don't have to use taxable earnings to pay it off. I'll just put more in my pension to maximise tax relief.

I know paying mortgages off means you don't inflate away the debt, but having it paid is a good feeling mentally too.

How did you manage to pay off your mortgage without first bringing the money into the country which would then have made it taxable do you mind me asking?

I'm PAYE, my code is NT. I live and work overseas, seconded from a UK employer. I'm usually well under 90 days in the UK too, it's not for everyone.

Thanks, that sounds like a very specific set of circumstances.

I might drop the podcaster a line as I quite like them and it’s not like them to give such bad advice.

[nickfrog]

Tobermory said:

(The only possible justification for this is if you can shelter earnings somewhere that you don’t pay tax either now or at all, hardly likely to be relevant for the average buyer.)

I am pretty sure that pension tax relief is open to everyone ; you don't even need to work to get it on your first £2,880/year.

That's not to say that it will work for everyone but then again no one claimed it did.

An imbecile on a podcast doesn't change the fact that "it depends". I don't know the circumstances of the elusive "average buyer" so I don't draw conclusions either way.

[anonymous-user]

nickfrog said:

Tobermory said:

(The only possible justification for this is if you can shelter earnings somewhere that you don’t pay tax either now or at all, hardly likely to be relevant for the average buyer.)

I am pretty sure that pension tax relief is open to everyone ; you don't even need to work to get it on your first £2,880/year.

That's not to say that it will work for everyone but then again no one claimed it did.

An imbecile on a podcast doesn't change the fact that "it depends". I don't know the circumstances of the elusive "average buyer" so I don't draw conclusions either way.

No that's a fair point, but the specific advice that he gave was 'you should never use cash to buy a £20K car, you're always better off financing it and then proceeded to give the very one sided explanation that I posted. Obviously there is a hierarchy of priorities which is something like:

pay off high interest debit such as credit cards
maximise contributions to tax efficient savings like ISA's pensions etc
invest some of your remaining disposable income

If after this you have little disposable income left then yes the only way you can buy a new car is on finance, but that's not the way it was put. I suspect people who are not in fact maxing out their pension contributions etc might be (mis)led into thinking that finance was a good idea for them when it really isn't.


Listen at 50 minutes

https://youtu.be/IIE8evFOomM

Edited by anonymous-user on Saturday 7th May 13:28

[av185]

Welshbeef said:

Ivor Saw said:

I buy a new car every three years. The market has gone crazy... Three months ago I got a quote for leasing a BMW i3. It was £335 a month. It's now gone up to £514... in three months! Got a quote to lease a Renault Captur today. Cheapest I could get was £398... for a Renault Captur! As we head toward a recession, and some struggle to pay their energy bills, where's the sense in these prices? It appears that car manufacturers evidently cannot reduce their costs to offer cheaper prices. So what happens?

Well.
The prices in 2020 were crazy cheap.
Interest rates crazy low then
Car makers pumping out volume at little if any margin

Now pushing our cars in far lower volume and realising hey we’re making more money.

And yesterday Mini once again raised their new car prices but this time wait for it by up to 30% yes 30 % on some models you heard correctly.

The Mini JCW convertible has shot up a massive £6400 to a quite remarkable £37000 exclusive.

Signs more manufacturers will follow suit as well with the supply chain issues worsening and componentry costs rocketing in price.

Having seen the huge rise in used prices over the last 15 months in particular with nearly new prices being obtained for 12 month old and premiums over new list for lightly used cars manufacturers are also using this factor to jack up prices for lower margin sales to improve profit.

[Deep Thought]

av185 said:

And yesterday Mini once again raised their new car prices but this time wait for it by up to 30% yes 30 % on some models you heard correctly.

The Mini JCW convertible has shot up a massive £6400 to a quite remarkable £37000 exclusive.

Signs more manufacturers will follow suit as well with the supply chain issues worsening and componentry costs rocketing in price.

Having seen the huge rise in used prices over the last 15 months in particular with nearly new prices being obtained for 12 month old and premiums over new list for lightly used cars manufacturers are also using this factor to jack up prices for lower margin sales to improve profit.

Bloody hell, thats nuts!

[Deep Thought]

nickfrog said:

Difficult to tell. Steve admitted to not being able to cope with a non-shed in the past so perhaps he genuinely imagines that anyone with a non-shed has to be a debt junky?

But he won't tell us if his boat is the cheapest shed boat available, yet despises those with a non-shed boat as being "all the gear and no idea".

There is no middle ground with Steve, it's black or white, zero nuance, zero modulation.

But the bitterness is obvious, despite being "liberated" of the shackles of a non-shed. Quite a contradiction.

Some of the people posting remind me of the preachers you sometimes see in some town on a saturday afternoon. Always glum faced with a megaphone droning on about eternal damnation for those not on the same narrow path as them and dressed in a grey suit, surrounded by 3 or 4 glum faced church goers nodding sagely when appropriate. They preach of how those worldy folk out there enjoying themselves are on the road to hell and they take particular glee in describing how that will be for them.

I think if i believed i had discovered the secret to eternal life i'd be a lot happier about it than they come across.

Similarly, eking out a living doesnt sound like a lot of fun if the only pleasure seems to be wishing ill on others.

[anonymous-user]

Deep Thought said:

Some of the people posting remind me of the preachers you sometimes see in some town on a saturday afternoon. Always glum faced with a megaphone droning on about eternal damnation for those not on the same narrow path as them and dressed in a grey suit, surrounded by 3 or 4 glum faced church goers nodding sagely when appropriate. They preach of how those worldy folk out there enjoying themselves are on the road to hell and they take particular glee in describing how that will be for them.

I think if i believed i had discovered the secret to eternal life i'd be a lot happier about it than they come across.

Similarly, eking out a living doesnt sound like a lot of fun if the only pleasure seems to be wishing ill on others.

There’s absolutely nothing wrong with making an informed decision to spend your money on a depreciating luxury like a new car (as agent Cooper said https://youtu.be/XjkVgc6gIqk)

What is wrong is when people are hoodwinked into thinking that it somehow makes financial sense as well.

[Deep Thought]

Tobermory said:

There’s absolutely nothing wrong with making an informed decision to spend your money on a depreciating luxury like a new car (as agent Cooper said https://youtu.be/XjkVgc6gIqk)

What is wrong is when people are hoodwinked into thinking that it somehow makes financial sense as well.

How many people are "hoodwinked" in to thinking that new A4 S Line at their door is the cheapest means for them have a car?

If i were to walk up to that person and tell them a 10 year old Mondeo could perform the same function for a fraction of the price, what percentage would this come as a revelation to?

If someone is happy to and can afford to pay £300 a month for something, how are they being hoodwinked?

I'm all for Jaguar Steve or Throttlebody or Tannheuser evangelising on the merits - and fun - of driving an older car to convince others to see the potential error of their ways, but thats never what they do is it? Its always a gleeful desire for others to get their comeuppance and the need for them - in their minds at least - to be proved right.

[av185]

Deep Thought said:

Some of the people posting remind me of the preachers you sometimes see in some town on a saturday afternoon. Always glum faced with a megaphone droning on about eternal damnation for those not on the same narrow path as them and dressed in a grey suit, surrounded by 3 or 4 glum faced church goers nodding sagely when appropriate. They preach of how those worldy folk out there enjoying themselves are on the road to hell and they take particular glee in describing how that will be for them.

I think if i believed i had discovered the secret to eternal life i'd be a lot happier about it than they come across.

Similarly, eking out a living doesnt sound like a lot of fun if the only pleasure seems to be wishing ill on others.

Very true DT agree entirely.

[ITP]

Tobermory said:

nickfrog said:

Tobermory said:

(The only possible justification for this is if you can shelter earnings somewhere that you don’t pay tax either now or at all, hardly likely to be relevant for the average buyer.)

I am pretty sure that pension tax relief is open to everyone ; you don't even need to work to get it on your first £2,880/year.

That's not to say that it will work for everyone but then again no one claimed it did.

An imbecile on a podcast doesn't change the fact that "it depends". I don't know the circumstances of the elusive "average buyer" so I don't draw conclusions either way.

No that's a fair point, but the specific advice that he gave was 'you should never use cash to buy a £20K car, you're always better off financing it and then proceeded to give the very one sided explanation that I posted. Obviously there is a hierarchy of priorities which is something like:

pay off high interest debit such as credit cards
maximise contributions to tax efficient savings like ISA's pensions etc
invest some of your remaining disposable income

If after this you have little disposable income left then yes the only way you can buy a new car is on finance, but that's not the way it was put. I suspect people who are not in fact maxing out their pension contributions etc might be (mis)led into thinking that finance was a good idea for them when it really isn't.


Listen at 50 minutes

https://youtu.be/IIE8evFOomM

Edited by Tobermory on Saturday 7th May 13:28

I watched this, it was bizarre. It’s as if he thought that if you buy a car on finance it is tax deductible!
He was convinced that you somehow save 13% immediately by taking finance at 7% because if you use savings to buy a car, which you have paid tax on at 20%, you have somehow saved 13% by financing.
He seemed totally oblivious to the fact that your 300/month payments also come out of already taxed income!

I think the phrase here is ‘don’t believe anything you hear on the internet!’

[Gad-Westy]

ITP said:

Tobermory said:

nickfrog said:

Tobermory said:

(The only possible justification for this is if you can shelter earnings somewhere that you don’t pay tax either now or at all, hardly likely to be relevant for the average buyer.)

I am pretty sure that pension tax relief is open to everyone ; you don't even need to work to get it on your first £2,880/year.

That's not to say that it will work for everyone but then again no one claimed it did.

An imbecile on a podcast doesn't change the fact that "it depends". I don't know the circumstances of the elusive "average buyer" so I don't draw conclusions either way.

No that's a fair point, but the specific advice that he gave was 'you should never use cash to buy a £20K car, you're always better off financing it and then proceeded to give the very one sided explanation that I posted. Obviously there is a hierarchy of priorities which is something like:

pay off high interest debit such as credit cards
maximise contributions to tax efficient savings like ISA's pensions etc
invest some of your remaining disposable income

If after this you have little disposable income left then yes the only way you can buy a new car is on finance, but that's not the way it was put. I suspect people who are not in fact maxing out their pension contributions etc might be (mis)led into thinking that finance was a good idea for them when it really isn't.


Listen at 50 minutes

https://youtu.be/IIE8evFOomM

Edited by Tobermory on Saturday 7th May 13:28

I watched this, it was bizarre. It’s as if he thought that if you buy a car on finance it is tax deductible!
He was convinced that you somehow save 13% immediately by taking finance at 7% because if you use savings to buy a car, which you have paid tax on at 20%, you have somehow saved 13% by financing.
He seemed totally oblivious to the fact that your 300/month payments also come out of already taxed income!

I think the phrase here is ‘don’t believe anything you hear on the internet!’

I listened to it last week and wondered if it might come up here. It seemed strange that any podcast would present financial advice in such a direct way. I'm not even sure that's legal is it?

I get the impression that Tony has heard this from elsewhere and now repeats it but maybe only picked up half the story. If you were being presented with a bonus from work and it was enough to buy a toy, there might be a solid argument that it could be cheaper to stick the money straight into a pension and borrow the money for the car. Or if you were about to buy from savings, but would then have needed to top your savings back up, you could then instead take a loan for the car but put the earnings that were going to go back into savings directly into your pension instead and leave your rainy day savings untouched. They seem plausible approaches but you're still quite likely to pay some tax on your pension eventually though so you'd never get the full saving Tony quoted. Although I don't recall him ever talking about the pension angle any way so not sure he'd actually thought all that deeply about it before splurging it out as some sort of insider top tip. He also quoted the oft used trope about never buying depreciating assets. I'd be surprised if many who quote this actually understand why they're saying it.

[Frimley111R]

Been thinking about this thread and I tend to agree.

I work in the EV sector and often get asked if I own an EV. The thing is, the Model 3 long range, which is a mid range EV, even leased is £5000 deposit and £500p/m in round numbers. That's a st load of money, £17,000 over 2 years.

It's not that I can't afford it but more that it seems a ton of money just to run a daily driver. Yes, I will save some money on fuel but then I'd need a home charger at £1100 (ok, I wouldn't pay that but...).

It feels like cars are getting like houses, far outstripping people's incomes. God knows what impact this will have after 2030 when all new cars will be EVs (or plug-in hybrids).

Cheap lease deals seem to be the only way to get around this, assuming you can get one for the cars you may want.

[a_dreamer]

Ultimately people pay what they are willing to pay and see value in things differently. Some people spend £50 a week on cigarettes, some get £40 hair cuts (more for females), others spend crazy money on clothes and furniture and watches and jewellery and phones and games consoles etc

Some mortgage themselves to the hilt, while some are happy to rent. Some go on really expensive holidays while others back pack across continents on the cheap.

Some people value wealth in terms of money in the bank or their assets, while others value wealth as their experiences and the fun they have in their lives.

Some want a car right now, and happy to pay more over the term but have it on monthlies, as their perceive that as less risky and measure money based on monthlies as that is how they get paid - how they work out their mortgage etc.

Some people spend less time worrying about depreciation and a cost of a car and just buy it however.

Ultimately it is great how there are so many options out there for people.

Sadly some will get stung as the recession takes hold and with energy prices increasing. That's life.

[jimPH]

a_dreamer said:

Ultimately people pay what they are willing to pay and see value in things differently. Some people spend £50 a week on cigarettes, some get £40 hair cuts (more for females), others spend crazy money on clothes and furniture and watches and jewellery and phones and games consoles etc

Some mortgage themselves to the hilt, while some are happy to rent. Some go on really expensive holidays while others back pack across continents on the cheap.

Some people value wealth in terms of money in the bank or their assets, while others value wealth as their experiences and the fun they have in their lives.

Some want a car right now, and happy to pay more over the term but have it on monthlies, as their perceive that as less risky and measure money based on monthlies as that is how they get paid - how they work out their mortgage etc.

Some people spend less time worrying about depreciation and a cost of a car and just buy it however.

Ultimately it is great how there are so many options out there for people.

Sadly some will get stung as the recession takes hold and with energy prices increasing. That's life.

The one thing in common with all the different type of people you mention, is that people don't line being stung.

Just looking at my ISA, it's about 25k down from December, so despite earning like a PBCDWAG, I'm not feeling particularly spendy. Now I'm quite sure there are people better off than me that don't care and maybe some that earn less and don't care! But I think most people, despite what they earn are not feeling as flush as they were and in no mood to lose (more) money.

[Theoldguard]

jimPH said:

The one thing in common with all the different type of people you mention, is that people don't line being stung.

Just looking at my ISA, it's about 25k down from December, so despite earning like a PBCDWAG, I'm not feeling particularly spendy. Now I'm quite sure there are people better off than me that don't care and maybe some that earn less and don't care! But I think most people, despite what they earn are not feeling as flush as they were and in no mood to lose (more) money.

This is where I am, I enjoy the nicer things in life but also work hard and put alot of effort in looking after my money to make sure it works for me, putting it places where I believe I will get the best returns. This has worked well for me for almost a decade now having leased some very nice vehicles and bought one or two whilst trying not to touch my hard earned instead living off the various growth funds I have set up. However that has been 10 years off almost uninterrupted growth in terms of market funds, a fairly decent jobs market and low costs in terms of energy, food, and motoring.
We had an orangery built on the back of the property in 2016, I paid just shy of £30k all in and its added value to my property, today it would be costing around £50k for the same job and its unlikley to add much more value with houses already very high and likely with rising IR to start falling or at least levelling off over the next few years.

Holidays have come down in prices, so this year its a few of those but everything else is on hold, I am not going to pay today's silly used prices or going to wait and have to pay full on a new, leasing is also unattractive so I am sticking with my 6 year old for at least the foreseeable.

It's the likes of myself who can afford these things and previously have done, but will be uncomfortable with the rising prices and just not getting the returns elsewhere. I would need a whole new approach to funding a vehicle compared to the last 10 years and I'm not prepared to do that.

[skinnyman]

I Haven't got time to read all 60+ pages, so I've no idea how the discussion has progressed, but this is exactly why I'm currently driving a 2008 Ford Cmax.

I've had various cars over the years, in 2015 I bought a brand new Focus ST, a few years later I bought a Vauxhall VXR8, then in 2018 a brand new Golf GTI. In October 2021 I sold that to buy my wife a new car, the plan was to use her old Ford Cmax for a month or so whilst I sorted myself a new one, 9mths later and I'm still driving it. Every new car seems overly expensive these days. My Focus ST (albeit 7yrs ago) was the top of the range with some extras, it cost me sub £25k, an equivalent ST is now nudging £40k. Having driven a few I'd quite like an EV, they're now £35k for an average model. My plan was to sit tight in my Cmax and wait out the storm, although now I'm not so sure it's ever going to pass.

[Frimley111R]

skinnyman said:

My plan was to sit tight in my Cmax and wait out the storm, although now I'm not so sure it's ever going to pass.

Me neither. New cars are going up in price and although that is partly due to demand and cost of materials I can't see them coming back down. I think it'll shrink the whole sales industry as fewer people are willing to spend so much of their salaries on a new car when most modern-ish cars are already so good.

[Technoholic]

I've read through most, but not all, of this thread. I'm still at a loss as to the best way to finance my new car that is due in about 4 months.

The default response I seem to get is invest the capital and take a PCP, but even if I could get a better growth on the investment than the PCP would cost me, I still don't like being committed to £1000+ a month on a PCP. Those people don't take that real life feeling into their advice.

I do just want to do what is the most financially sensible but I seem to not be able to work it out!