Getting in serious debt to buy the car of your dreams.
Discussion
Ok, before we start, all my stuff is paid for, but I pose this hypothetical question to you....
I expect many of you have financed your cars by going down the hire purchase/personal loan/PCP route.
The question is, is it wise to borrow a huge amount of money, to finance a heavily depreciating "asset".
For example someone who has scraped together 20k, but borrows 80k to buy that Aston or Ferrari or Maserati he/she has always wanted since being a young child.
Scenario...Borrow 80k over (say) four years...total debt (say) with interest 95k
Car worth around £60k after a couple of years, and 40k a couple of years after that.
Seems a bit unwise....
After all, it's only a bit of metal....isn't it?
I expect many of you have financed your cars by going down the hire purchase/personal loan/PCP route.
The question is, is it wise to borrow a huge amount of money, to finance a heavily depreciating "asset".
For example someone who has scraped together 20k, but borrows 80k to buy that Aston or Ferrari or Maserati he/she has always wanted since being a young child.
Scenario...Borrow 80k over (say) four years...total debt (say) with interest 95k
Car worth around £60k after a couple of years, and 40k a couple of years after that.
Seems a bit unwise....
After all, it's only a bit of metal....isn't it?
What do you do when you need thousands for insurance, hundreds for tax, thousands for the increased servicing for supercars, a set of tyres a year at over a grand? If you have to scrape to finance the car itself then you could be in for depressing times.
During this time the repayments will be a millstone that leave you with no money to buy a house/go on holiday/have a baby/save.
I would aim lower, e.g. for a £20k to £30k porche, a Caterham or other kit car as a second car. Maybe a punt on a TVR Cerbera.
Then you can worry about it sat on the drive/road rotting away whilst you are still on the hook for insurance/tax because you can't afford the petrol to run it as a daily driver.
ETA and who is gonna lend 80k to someone on a low budget? It would have to be a very secured loan I imagine which might limit this to homeowners.
During this time the repayments will be a millstone that leave you with no money to buy a house/go on holiday/have a baby/save.
I would aim lower, e.g. for a £20k to £30k porche, a Caterham or other kit car as a second car. Maybe a punt on a TVR Cerbera.
Then you can worry about it sat on the drive/road rotting away whilst you are still on the hook for insurance/tax because you can't afford the petrol to run it as a daily driver.
ETA and who is gonna lend 80k to someone on a low budget? It would have to be a very secured loan I imagine which might limit this to homeowners.
Edited by TurricanII on Wednesday 7th January 00:43
Personally I think it's not wise and I wouldn't but I am part of the 'YOLO' generation so I'm in the minority.
If owning a blingy new car really is the fulfilment of a life-long dream, they aren't going to get a better opportunity to do it later in life, and they can essentially afford the repayments, depreciation, running costs etc, then they can go ahead if they must. Sure, you'll be wasting the biggest lump of cash you're ever likely to waste, but at the end of the day we're all here once and for a finite and indeterminable length of time so if it's their ultimate life dream, I pity them and wish them good luck.
If owning a blingy new car really is the fulfilment of a life-long dream, they aren't going to get a better opportunity to do it later in life, and they can essentially afford the repayments, depreciation, running costs etc, then they can go ahead if they must. Sure, you'll be wasting the biggest lump of cash you're ever likely to waste, but at the end of the day we're all here once and for a finite and indeterminable length of time so if it's their ultimate life dream, I pity them and wish them good luck.
I think if you're scraping the money together for a deposit on say a Ferrari you're never going to fully enjoy owning it. You'll end up being scared to put miles on it as its going to batter the residual value. You'll always be worried you're going to have some huge bill around the corner too. Likewise with tyres and services and so on.
I just wouldn't do it.
I just wouldn't do it.
I've never heard, "Scraping money together" and "buying a Ferrari/AM", in the same sentence before.
Its one thing buying a car, its another thing to be able to afford it.
Bit off topic but my gfs employer has a friend where the lady and husband both in top positions in General Electric HQ, just bought a mahoosive mansion recently and live/sleep in the living room as they can't afford to heat and cool the whole house. Never heard such madness, also makes me wonder how and what types of people get top tier positions in a colossal company like GE.
Its one thing buying a car, its another thing to be able to afford it.
Bit off topic but my gfs employer has a friend where the lady and husband both in top positions in General Electric HQ, just bought a mahoosive mansion recently and live/sleep in the living room as they can't afford to heat and cool the whole house. Never heard such madness, also makes me wonder how and what types of people get top tier positions in a colossal company like GE.
Was chatting to the finance manager at Romans last year - he said 90% of their sales are financed - including by the celebrities and footballers.
The vast majority of wealthy individuals IME use finance to get what they want.
Using debt for a purchase isn't a bad thing in itself its a question of whether you can afford the debt not the purchase that confirms if it is a bad decision.
The vast majority of wealthy individuals IME use finance to get what they want.
Using debt for a purchase isn't a bad thing in itself its a question of whether you can afford the debt not the purchase that confirms if it is a bad decision.
It's not wise, but spending any money over and above the purchase & running costs of a K11 Micra isn't "wise" but most of us do it anyway because we like and want to have a car that is more than just functional transport. I wouldn't call arriving at death's door with a huge bank balance having done nothing with your life wise either FWIW. As with everything, there are many shades in between and most people will balance wisdom with desire and it works out just fine for the vast majority of them.
Too many on PH are so far up their own arse with regards to the choices other people make it beggars belief.
Too many on PH are so far up their own arse with regards to the choices other people make it beggars belief.
I love cars and consider myself as much of a PHer as the rest of you. However, I think I always put my head before my heart, and my wallet before my passion when it comes to this.
Even my company car is something cheap and cheerful, when I've a range of options at my disposal which would satisfy most on here.
My summer toy (MX-5) is as much of a motoring luxury as I'll allow myself and I've only really got it because it used to be my commuter.
Even my company car is something cheap and cheerful, when I've a range of options at my disposal which would satisfy most on here.
My summer toy (MX-5) is as much of a motoring luxury as I'll allow myself and I've only really got it because it used to be my commuter.
dench said:
Bit off topic but my gfs employer has a friend where the lady and husband both in top positions in General Electric HQ, just bought a mahoosive mansion recently and live/sleep in the living room as they can't afford to heat and cool the whole house. Never heard such madness, also makes me wonder how and what types of people get top tier positions in a colossal company like GE.
Very short term cashflow constraint perhaps?People love to jump straight to conclusions. It is regarded as a leveller in life whenever one can fill in the gaps around a tit-bit of information to make anyone who seems to do better appear like an idiot and therefore in one's own mind one feels superior.
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