When did "monthly cost" become the new "OTR"?

[rxe]

Obviously its because no person in their right mind would flop £20K on the desk in a dealership for some run of the mill bit of transport. A base model Ford Mondeo (an average car) costs £20K. Is anyone suggesting that the average bloke on an average salary is going to work for the whole year and spend nothing else .... just to afford the average car?

Of course he isn't, but he can rent it for 3 years and pay the depreciation over the three years. Low interest rates make it financially sensible, which is why the BoE has backed itself into a corner on its inability to raise interest rates.

The only difference between this and paying your telly off in instalments at Brighthouse is the interest rate.

[Trophy Husband]

MDMA . said:

Trophy Husband said:

It's often a no brainer. My wife is coming up to the end of her lease on a Citroen Cactus HDi Flair. Book price of car £22k ish new. Value now £11.5k if Autotrader is anything to go by. Cost to her for 18 months £4140 plus 6 months road tax and fuel. (Ave. 59mpg's) Who'd buy a car these days?

Find a car that's just won an award and the manufacturer wants to push for popularity. Let the manufacturer suffer the depreciation. Example in proof the Renault Kadjar/Captur. I bet there's some great lease deals on these at the moment.

for balance, don't you think 4140 is quite a lot for 18 months worth of motoring ?

if id bought a 4k car outright, ran that for 18 months, I'd be hoping there was still 2-3k left in the car if I needed to sell ( so half as much to run ).

just thinking out loud

In my world yes but I'm a bangernomics man. Hence the 1999 C240 Merc I drive. My comparison is against the depreciation of actual ownership. To own the Cactus would be cost of loan PLUS depreciation which is more than double what it has cost the good lady.

[xxChrisxx]

Dr Jekyll said:

The £230 a month that hasn't been direct debited away for the last year and a half would come in pretty handy.

Not a lot of comfort for the unlucky sod who's used car sts itself at the end of month 2.

[G0ldfysh]

Dr Jekyll said:

chrispmartha said:

As always happens on these threads, it's not comparing Apples with Apples.

And what if that 4k car sprung up a 2k bill in that 18months? MOT costs etc etc

Horses for courses and all that

The £230 a month that hasn't been direct debited away for the last year and a half would come in pretty handy.

Wouldn't the £230 a month have gone at the start to buy the 4k car?
With the theoretical 4k it is either all down at the beginning to buy a 2nd hand and fingers crossed, or spread out for 18months at £230 a shot.

[Fast Bug]

mikefacel said:

Fast Bug said:

When I started out in car sales in the late 90's around 75% of cars were financed in one way or another. The only ones that were paid for in cash seemed to be buy pensioners and well heeled people buying an MGF for their wife

Sure, but were they not actual loans where the real cost of the car was explicit, and indeed the buyer could haggle on the full buy price, rather than "it's only £200 a month"? Guess a bunch would have been contract hire but it seems the full cost is more hidden in contract hire ads these days whereas I'm sure it used to be much clearer.

You mean HP or PCP? Then yes, it tells you on the finance agreement. It tells you the price of the car, interest charges, any docs fees and a total amount repayable. The only difference is a PCP deal will also tell you how much balloon there is at the end of the agreement.

A lease is even simpler, you just add the monthly payments up and that's the total amount you pay. There's nothing else to pay bar maybe excess mileage charges and recon costs if you smash the thing up. I don't understand where the confusion is with a lease deal, if it's £180 a month on a 9+23 then it's £1620 initial rental + £4140 worth of monthly payments. How hard is that? That's the full cost. Or have I missed something and should expect an inbound parrot?

As a private buyer, you wouldn't be able to haggle the same discount off the list price as a leasing company would

[TazLondon]

I spent a large chunk of last Saturday at a Jaguar showroom and the salesman I was with admitted that nearly all of the new cars he sells are sold under a finance agreement (monthly payments).

Rewind just three years ago and the sticker price on the (then) new car I bought was the RRP. PCP/HP was available but as a secondary option.

At the Jag showroom I enquired about finance options on used cars and that was easily available too - albeit at almost 11% APR!!!

[xxChrisxx]

TazLondon said:

I spent a large chunk of last Saturday at a Jaguar showroom and the salesman I was with admitted that nearly all of the new cars he sells are sold under a finance agreement (monthly payments).

Rewind just three years ago and the sticker price on the (then) new car I bought was the RRP. PCP/HP was available but as a secondary option.

At the Jag showroom I enquired about finance options on used cars and that was easily available too - albeit at almost 11% APR!!!

In a vacuum that 11% APR sounds scary but has almost no meaning, without the other figures around it.

eg 10k over 36 months.
£10k @ 5% APR = 299x36 = £10789
11% APR, but you qualify for our £1000 contribution
£9k @ 11% APR = 295x36 = £10607

I hope I've done my back of the fag packet calcs correctly.

Really the only way to do this, is to crunch the numbers on all the scenarios. Then pick the one that suits best.

Edited by xxChrisxx on Tuesday 6th September 15:08

[red_slr]

I remember going Carcraft in Rochdale in the 90s and there were no prices on any of the cars, only weekly payments. So a long time!

[Dr Jekyll]

G0ldfysh said:

Wouldn't the £230 a month have gone at the start to buy the 4k car?
With the theoretical 4k it is either all down at the beginning to buy a 2nd hand and fingers crossed, or spread out for 18months at £230 a shot.

It's only fingers crossed if the 4k left no savings at all. In any case the chances of a £2K bill not covered by warranty on a 2 month old car is extremely remote, it's more likely to last well over 18 months without such a bill. I've never had a bill of over £1K in over thirty years of car ownership, of which none was in a car less than 3 years old and all but 1 year in cars > 4 years old. I haven't had a car break down for more than a quarter of a century.

[Rick101]

rxe said:

Obviously its because no person in their right mind would flop £20K on the desk in a dealership for some run of the mill bit of transport.

Plently of folk do. Father in law, ohh no, never finance me just bought a used Focus for 18K iirc. of course he got totally stiffed on his immaculate low mileage trade in.

My ever challenging Mother has just bought a white Evoque.
sShe has now decided she doesn't like it because it small and doesn't have a CD player. she didn't think to look at it before buying. she just wanted something prestige.

She prob has a brand new car every year but I doubt the Evoque will even last that long. She can't understand that anyone with any sense finances because she has equally snobby friends who buy their Range Rover autobiography's for cash.

Leave them to it. Some people like to think they are better than others. Fine by me.

[Matt UK]

zedstar said:

Matt UK said:

ORD said:

Monthly payments disguise the true "life" cost to unsophisticated buyers.Most car finance s basically another case of selling expensive things to people who do not understand the product and the cost. Exploitation.

Hardly exploitation.

Information is not unavailable and these products are not forced onto people. If the unsophisticated buyers do not choose to look into the details, they are daft. But it's their money, so obviously happy to take the risk their product / service has a daft-tax applied.

Theres clearly some expoitation, even its just a little. How many salesmen bundle the GAP/paint protection etc into the monthly payment and try their best to avoid showing the customer the actual price of the car and products until they're about to sign? I've been trying to buy a car recently and all the salesmen do is quote monthly prices, when I finally get the actual cost theres always some protection add ons that the salesman 'thought i'd definitely want'.

I'm not for a second suggesting salesmen lie or don't give people an opportunity to check the headline figures BUT the monthly figures give an opportunity for the thick customers to end up buying things they don't want.

To fair, all you have to say is "please can you itemise this out"

[Moonpie21]

Just adding my own man maths to the mix...

Maybe think about it like this MDMA for 18 months:

Car £4,140
Insurance £1,000
Servicing £1,000
Fuel £1,700 (assume 30mpg, 10,000 miles per annum, £1.13/litre)

540 days = £14.52 a day

I'm thinking the above estimate is overly generous... having a family and the ability to transport all of them 24/7. I think it's a pretty good deal.

I'm 90% certain my wife and I getting the bus/train to work whilst dropping off my child at nursery and planning weekend trips to keep the family sane. Could not be achieved for £15 a day using public transport.

So is it expensive, I don't really know or care does it suit my personal circumstances better yes. You are probably right I could buy a second hand car and run it after resale for a fraction of that. But I run a higher risk of getting a lemon with a big bill and the inconvenience of selling it after.

I'm not saying it's right or wrong, just that's how I justify it in my head. I am lazy though.

In fact I actually got "caught" on my last PCP deal at the end apparently one of the options I wanted, not needed could only be done with something else meaning we had to go through the whole process again. Effectively it worked out £1.13 more a month was I upset a little but life is too short to worry about that so signed up for it.

After those inane ramblings I know I have nothing left at the end of the deal but I have justified it to myself and will always be able to afford a banger to get me from A to B if it all went wrong (personal savings choice).

[Dr Jekyll]

Rick101 said:

rxe said:

Obviously its because no person in their right mind would flop £20K on the desk in a dealership for some run of the mill bit of transport.

Plently of folk do. Father in law, ohh no, never finance me just bought a used Focus for 18K iirc. of course he got totally stiffed on his immaculate low mileage trade in.

My ever challenging Mother has just bought a white Evoque.
sShe has now decided she doesn't like it because it small and doesn't have a CD player. she didn't think to look at it before buying. she just wanted something prestige.

She prob has a brand new car every year but I doubt the Evoque will even last that long. She can't understand that anyone with any sense finances because she has equally snobby friends who buy their Range Rover autobiography's for cash.

Leave them to it. Some people like to think they are better than others. Fine by me.

Surely you are still spending the £20k whether 'flopping it on the desk' or signing up for repayments?

[Rick101]

I would add I was also in Jaguar showroom last weekend looking at an SVR and they couldn't give us a monthly. The two they had sold were both cash buyers at 116K odd so they had to go away and do some sums to work out a finance deal.

[swisstoni]

Everyone pays for depreciation. Just in different ways.

[eldar]

Rickeh said:

There was a BMW advert on TV the other day that had £XXX per month 'plus initial rental' but didn't say what the initial rental was. Given most leases are 6+23 sort of deals I thought it was a bit underhand to not mention that the initial rental was probably the best part of 2 grand (unless it's a 1+23 deal?). I may have got the wrong end of the stick because I only caught the last part of the ad but it's the first time i'd seen a monthly figure quoted and then 'plus initial rental'.

There are a number of TV ads that focus on the monthly cost only. The initial payment is carefully concealed in small, fuzzy print ender a flashing image...

I wonder how many people wander into a dealer and expect to get a £30,000 car for £239 a month for three years.

[Terminator X]

Lucas Ayde said:

BuzzBravado said:

My point is, that it's poor money management not to look beyond the monthly payments. Paying monthly is fine, but not caring to find out the overall cost is just stupid.

You should be glad that people are thinking as long-term as a month ahead - most these days seem to live week to week financial-wise and would be dead in the water if they lost their job or faced a sudden large expense.

Luckily the economy is looking rock solid and there is little change of any financial turmoil .....

Best not leave the house just in case.

TX.

[Rick101]

Dr Jekyll said:

Surely you are still spending the £20k whether 'flopping it on the desk' or signing up for repayments?

No. Not unless you are buying the thing on a hire purchase or something? Any sensible finance deal would cost you a fraction of that.

The issue is more him losing around 10K each time he changes his base model car having been a proud OWNER when he could have just leased and got a top spec car for half price.

He is the perfect customer for leasing. Changes every 2 years, does minimal mileage. Washes it every other day. Smallest mark would see a visit to main dealer only for a inflated cost repair. he says he looked at the next model up but it was too much money. I didn't bother trying to explain leasing to him again.

[chrispmartha]

MDMA . said:

its a bit like saying what if you lost your job in that time. who keeps paying the repayments ?

horses for courses and all that.

You'd have the £4k in the bank you didn't spend on the car ;-)

[xxChrisxx]

Dr Jekyll said:

It's only fingers crossed if the 4k left no savings at all. In any case the chances of a £2K bill not covered by warranty on a 2 month old car is extremely remote, it's more likely to last well over 18 months without such a bill. I've never had a bill of over £1K in over thirty years of car ownership, of which none was in a car less than 3 years old and all but 1 year in cars > 4 years old. I haven't had a car break down for more than a quarter of a century.

Plenty have, and plenty don't want the hassle of having to deal with a sort a 'breakdown' out, or find the money. I mean jesus, you hear enough stories on here of warranty companies trying to wheedle out of paying for a nonsense 'wear and tear' item that is in reality a non serviceable component.

They just want a little motor, that works and if it goes wrong they throw it at the dealer and get a courtesy car. Maybe they just want to buy a car that noone else has farted in yet.

I really don't understand the mocking of new car buyers from the game theory aspect of cheap second hand motors.
They are paying, so you don't have to.

Edited by xxChrisxx on Tuesday 6th September 15:34