How the hell do people afford cars these days?
Discussion
Theoldguard said:
So without any car finance do you think we would still have a typical Ford Focus 25k today when the average salary is around 30k, I would think either we would have lower car prices to align closer to earnings on affordability or we would have far higher earnings to be able to afford these things.
Nothing wrong with finance in certain situations and it works for many, but these days it's almost a given that someone takes a car on finance, the best deals are often for those taking finance.
If you save a couple of years to buy a car you know it can be hard work, only for someone to come along sign the dotted line and off they go, worry about the repayments another day. There will always be someone who is happy to borrow, so to get what you want you many have no option but to borrow themselves or lose out.
Look at the poor buggers saving for housing deposits only to find that a few years down the road that deposit is not enough as prices have increased another 20% in that time, all on the back of cheap borrowing and ever larger mortgages. It's certainly not because every ones wages are surging.
Are cars any more expensive than they were 30 years ago, once you factor in inflation? I dont particularly think so. Nothing wrong with finance in certain situations and it works for many, but these days it's almost a given that someone takes a car on finance, the best deals are often for those taking finance.
If you save a couple of years to buy a car you know it can be hard work, only for someone to come along sign the dotted line and off they go, worry about the repayments another day. There will always be someone who is happy to borrow, so to get what you want you many have no option but to borrow themselves or lose out.
Look at the poor buggers saving for housing deposits only to find that a few years down the road that deposit is not enough as prices have increased another 20% in that time, all on the back of cheap borrowing and ever larger mortgages. It's certainly not because every ones wages are surging.
And where a Ford Escort / Focus and the Golf were once the poverty spec people car, the companies involved have quietly elevated them both in size and finish, leaving a gap in the market for cheaper brands. Its easily possible to get a new car for under £14K from the likes of Dacia which is probably bigger than a Ford Escort / first gen focus was, better put together and better spec'd.
Tomanybikes said:
Deep Thought said:
Yup. SaaS and Cloud services replacing bespoke software and physical infrastructure hardware. Why buy something that requires a large capital outlay and devalues heavily as soon as you buy it when you can simply pay a subscription to use it, allowing you to focus on your core business? It cant be a surprise that peoples private lives reflect that. Most people dont want to own a car, they want a capability. A car is something that moves them about, not is part of their life.
Competition keeps the pricing palatable, just like in the new car market.
When are you going to rent a Dacia?Competition keeps the pricing palatable, just like in the new car market.
Deep Thought said:
Are cars any more expensive than they were 30 years ago, once you factor in inflation? I dont particularly think so.
And where a Ford Escort / Focus and the Golf were once the poverty spec people car, the companies involved have quietly elevated them both in size and finish, leaving a gap in the market for cheaper brands. Its easily possible to get a new car for under 14K from the likes of Dacia which is probably bigger than a Ford Escort / first gen focus was, better put together and better spec'd.
The cost to wage ratio should be the factor imo.And where a Ford Escort / Focus and the Golf were once the poverty spec people car, the companies involved have quietly elevated them both in size and finish, leaving a gap in the market for cheaper brands. Its easily possible to get a new car for under 14K from the likes of Dacia which is probably bigger than a Ford Escort / first gen focus was, better put together and better spec'd.
Deep Thought said:
Yup. SaaS and Cloud services replacing bespoke software and physical infrastructure hardware. Why buy something that requires a large capital outlay and devalues heavily as soon as you buy it when you can simply pay a subscription to use it, allowing you to focus on your core business? It cant be a surprise that peoples private lives reflect that. Most people dont want to own a car, they want a capability. A car is something that moves them about, not is part of their life.
Competition keeps the pricing palatable, just like in the new car market.
The subscription model was a push from the "supply" side and marketed to help build demand. Back in the day you would buy the Microsoft Office suite and never need to upgrade. Companies moved their products to a subscription model as it keeps a steady stream of incoming revenue. You simply remove the option to buy outright and people will eventually have to upgrade and give in. Competition keeps the pricing palatable, just like in the new car market.
Similar happened with the car industry, except they first tried building in 10 year life cycles via planned obselence. Remember when you'd see a car advert and they'd advertise the "OTR" price? Now they advertise monthly payments only. I do "feel" the price of cars rose in that time too, but haven't looked at inflation adjusted figures.
Ofcourse there are people that it genuinely suits, then there are others who think it suits them.
As you say, it disguises depreciation into a single monthly payment. The norm used to be that the average Joe would buy used. Someone a little more well off would have already taken that depreciation hit, and would have been able to absorb the hit. Now the average Joe is taking that hit without realising and also not realising it hurts their financial resilience in the long term.
Yet the irony is that the average Joe feels as though they are doing well (their parents had a Ford but they can "afford" a Mercedes etc) and their over confidence may push them to over leverage.
Edited by Ice_blue_tvr on Sunday 22 May 08:24
Deep Thought said:
Yup. SaaS and Cloud services replacing bespoke software and physical infrastructure hardware. Why buy something that requires a large capital outlay and devalues heavily as soon as you buy it when you can simply pay a subscription to use it, allowing you to focus on your core business? It cant be a surprise that peoples private lives reflect that. Most people dont want to own a car, they want a capability. A car is something that moves them about, not is part of their life.
Competition keeps the pricing palatable, just like in the new car market.
This is an interesting point. At a risk of a tangent to the thread, the only thing I subscribe to (that I can think of) is Netflix. This is because it’s the cheapest way to watch box sets and cheaper than buying DVDs from Tesco. Competition keeps the pricing palatable, just like in the new car market.
I still have my record collection, old bikes and buy and sell my cars (half the fun). But I’m so out of date. My children have subscriptions to Microsoft Live Gold, Sony equivalent, Anime streaming services etc. It’s the only way they can access these things. Try as I might to dissuade them, it’s the future. It’s how they access what they want to do - like a car for most people.
Deep Thought said:
Are cars any more expensive than they were 30 years ago, once you factor in inflation? I dont particularly think so.
And where a Ford Escort / Focus and the Golf were once the poverty spec people car, the companies involved have quietly elevated them both in size and finish, leaving a gap in the market for cheaper brands. Its easily possible to get a new car for under 14K from the likes of Dacia which is probably bigger than a Ford Escort / first gen focus was, better put together and better spec'd.
Cars have been increasing rapidly the last decade and wages have not been growing at the same pace, the actual monthlies people pay have been manageable but OTR are alot higher, take a VW polo not that long ago, less than 10 years these were hovering around £10k, now they are closer to £20k.And where a Ford Escort / Focus and the Golf were once the poverty spec people car, the companies involved have quietly elevated them both in size and finish, leaving a gap in the market for cheaper brands. Its easily possible to get a new car for under 14K from the likes of Dacia which is probably bigger than a Ford Escort / first gen focus was, better put together and better spec'd.
If anything modern manufacturing and efficient supply chains should bring the prices down, think how few people they need to build these cars compared to 30 years ago, even shopping and logistics has been cheaper.
With exception the past 2 years.
PTF said:
Jaguar steve said:
lornemalvo said:
Exactly right. Old school thinking that hopefully will make a return
Oh I do hope not. 
It's the big borrowers and big spenders who're both keeping the creaky old cart of UK PLC wobbling down the road and the rest of us in comfort.
If these people stopped striving and aspiring and earning and borrowing and spending and paying tax and instead started scrimping and saving and maxing out their pensions and ISAs rather than filling their lives with shiny tat the economy would collapse like a wet cardboard box.
Ice_blue_tvr said:
The subscription model was a push from the "supply" side and marketed to help build demand. Back in the day you would buy the Microsoft Office suite and never need to upgrade. Companies moved their products to a subscription model as it keeps a steady stream of incoming revenue. You simply remove the option to buy outright and people will eventually have to upgrade and give in.
Similar happened with the car industry, except they first tried building in 10 year life cycles via planned obselence. Remember when you'd see a car advert and they'd advertise the "OTR" price? Now they advertise monthly payments only. I do "feel" the price of cars rose in that time too, but haven't looked at inflation adjusted figures.
Ofcourse there are people that it genuinely suits, then there are others who think it suits them.
As you say, it disguises depreciation into a single monthly payment. The norm used to be that the average Joe would buy used. Someone a little more well off would have already taken that depreciation hit, and would have been able to absorb the hit. Now the average Joe is taking that hit without realising and also not realising it hurts their financial resilience in the long term.
Yet the irony is that the average Joe feels as though they are doing well (their parents had a Ford but they can "afford" a Mercedes etc) and their over confidence may push them to over leverage.
For sure and many will be looking at that expensive PCP car they are just renting and wondering if it’s the bit of bling they should have in their lives right now. Similar happened with the car industry, except they first tried building in 10 year life cycles via planned obselence. Remember when you'd see a car advert and they'd advertise the "OTR" price? Now they advertise monthly payments only. I do "feel" the price of cars rose in that time too, but haven't looked at inflation adjusted figures.
Ofcourse there are people that it genuinely suits, then there are others who think it suits them.
As you say, it disguises depreciation into a single monthly payment. The norm used to be that the average Joe would buy used. Someone a little more well off would have already taken that depreciation hit, and would have been able to absorb the hit. Now the average Joe is taking that hit without realising and also not realising it hurts their financial resilience in the long term.
Yet the irony is that the average Joe feels as though they are doing well (their parents had a Ford but they can "afford" a Mercedes etc) and their over confidence may push them to over leverage.
Edited by Ice_blue_tvr on Sunday 22 May 08:24
snoopy25 said:
I understand this, although I have a limited knowledge on these things, but surely at some point the roundabout has to stop at some point?
When the roundabout was about to stop in the credit crunch in 2008/9 look how the governments sprung into action to save the people that caused the crisis in the first place and made them even richer because the “roundabout stopping” as you put it is unthinkable for the world.nickfrog said:
Tomanybike said:
A mythical 40k pension contribution to mitigate PCP interest does not seem to hold water for most people.
Nothing mythical as I am sure you know, it doesn't have to be as much as 40k. You also know that it doesn't have to be for most people to still validate the fact that "it depends".Plenty of people put decent money in pension and it is not difficult to see why with the tax relief (while it lasts!). Choosing to put money in pension can be a very smart move even if that means not paying cash for a car, whatever its value.
griffter said:
Deep Thought said:
Yup. SaaS and Cloud services replacing bespoke software and physical infrastructure hardware. Why buy something that requires a large capital outlay and devalues heavily as soon as you buy it when you can simply pay a subscription to use it, allowing you to focus on your core business? It cant be a surprise that peoples private lives reflect that. Most people dont want to own a car, they want a capability. A car is something that moves them about, not is part of their life.
Competition keeps the pricing palatable, just like in the new car market.
This is an interesting point. At a risk of a tangent to the thread, the only thing I subscribe to (that I can think of) is Netflix. This is because it’s the cheapest way to watch box sets and cheaper than buying DVDs from Tesco. Competition keeps the pricing palatable, just like in the new car market.
I still have my record collection, old bikes and buy and sell my cars (half the fun). But I’m so out of date. My children have subscriptions to Microsoft Live Gold, Sony equivalent, Anime streaming services etc. It’s the only way they can access these things. Try as I might to dissuade them, it’s the future. It’s how they access what they want to do - like a car for most people.
If that's private pension pots then presumably most people just use it to supplement other retirement income.
I have a modest private pension which should hopefully be around double that amount when I take it. Most of the time I feel like I'd be better off stuffing it under the floorboards!
I have a modest private pension which should hopefully be around double that amount when I take it. Most of the time I feel like I'd be better off stuffing it under the floorboards!
Tomanybikes said:
nickfrog said:
Tomanybike said:
A mythical 40k pension contribution to mitigate PCP interest does not seem to hold water for most people.
Nothing mythical as I am sure you know, it doesn't have to be as much as 40k. You also know that it doesn't have to be for most people to still validate the fact that "it depends".Plenty of people put decent money in pension and it is not difficult to see why with the tax relief (while it lasts!). Choosing to put money in pension can be a very smart move even if that means not paying cash for a car, whatever its value.
Anyway, that's where "average" or what you called the "norm" in another post can be misleading. By definition, and as I am convinced you know, a pension pot is an accumulation tool so you really need to see what people have saved up near retirement age. The average will include:
- people who have only just started working and therefore just started contributing
- people who have bought an annuity but kept a little in their pot
- people who have been drawing down for a while to complement the SP.
- people who have other pension provision, either for diversification or inheritance or for fear of the LTA. This includes ISA, BTL, GA before "Bed and ISA", etc...
What's far more relevant is the breakdown by age group:
https://occaminvesting.co.uk/average-pension-pots-...
Average pension pots [UK]:
Ages 16-24: 2,700
Ages 25-34: 9,500
Ages 35-44: 30,600
Ages 45-54: 81,200
Ages 55-64: 189,700
Ages 65-74: 190,000
Ages 75+: 90,300
That tells me that the average couple at retirement age have accumulated 380k which is probably still not massive depending what lifestyle you're after in retirement but still 3 times as much as the 63k each. Again though, the average could hide quite a wide disparity...
The really bad news however is that 55% of people have no "pension pot", as in pension wrapper, but we don't know how many of these have other pension provisions. But hopefully auto enrolment will eventually change that. We do need more basic financial education (and basic data analysis skills
)Edited by nickfrog on Monday 23 May 13:43
Tomanybikes said:
Looking at the stats if you look at ALL people at 65 then it’s around 100k but still more than was quoted on the other thread.
But still makes for a depressing retirement for many people who certainly will struggle to “afford a new car” as the thread title asks.
Indeed, not a fair world. Different people have different outcomes in retirement and therefore make different decisions as to how they afford cars, whether new or not (I don't think the title or the topic is specifically about new). But still makes for a depressing retirement for many people who certainly will struggle to “afford a new car” as the thread title asks.
As ever, it depends. There isn't one solution that fits everyone's particular circumstances.
Edited by nickfrog on Monday 23 May 14:00
Pistonheader101 said:
motoring is far too expensive now. I'll be selling up and sharing a car with my spouse.
That's my plan ultimately as well. Once ICE motors are done and we have to have a stupidly expensive EV I should be in a position to share the one car hopefully. Bus pass will help too!Gassing Station | Car Buying | Top of Page | What's New | My Stuff