How do lots of people afford the brand new luxury cars ?

I know some of the people on higher salaries at work (NHS) are doing salary sacrifice to avoid more money going into their pensions as the tax bills on the theoretical pension money can be astronomical. £1000s of pounds tax that needs paid upfront because inflation is high.

That’s like saying if you don’t have the cash to pay for a house outright you can’t afford it. Which is clearly bollocks.

I imagine the majority of new cars are leased or on pcp. They can afford the payments but don’t have the money available to pay for the car upfront. They can’t technically afford it but leasing an expensive car makes them feel like they can.
There are still people rich enough to buy them outright.

@MissConductUS I agree with your post. I bought new last year, nothing flash, a super economical hybrid, but before I did, I checked out lease options and couldn’t find anything, even a little corsa under £250. I ran the figures on my new car vs lease and yes, of course included depreciation, and it came out the same when inputting a realistic mileage not the stingy allowance the headline price includes. I double checked with a pal who always leases and they confirmed what I had found re: lease costs. Certainly at the modest car end there weren’t super deals to be had. I‘d rather order my own and not worry about mileage and any potential damage at handover. Depreciation is dead money but so is cash paid to lease companies.

Not so much these days.

I bought my small city car brand new outright four years ago (with the benefit of a £2k scrappage scheme). I've just checked and with its low mileage and the second hand car market as it is, my car is now worth almost double what I paid for it. If that's depreciation, I'll take it thanks.

It depends on residual value, rate of depreciation, etc. It needs to be calculated on an individual basis. My car was 2k a month to lease but depreciation in the first 3 years was 60k so I was quids in buying outright.

Exactly - these threads always contain at least on statement like -
Only a financial idiot would buy a depreciating asset like a new car outright.
But owning a car isn't like Sir Fucking Alan Sugar buying a new office block. Unless you are very lucky you're still paying for new car depreciation - just in a different way.

Generally speaking there is no point in owning a car outright as it will depreciate in value

If you want to run new cars all the time then this may be true. But if you buy a 2 year old car and keep it till it’s 10 that’s a lot cheaper than paying monthly. 2 years at 400 a month plus 2k is 6800 for the first year.

If driving round in expensive brand new cars is important to you then fair enough and you have to pay for the depreciation somehow, but it cannot be described as financially smart whether on lease or bought outright.

This

PCP has some of the lowest criteria going.

"Do you have a pulse?" Yep. Credit approved!!

PCP accounts for about 80% of new cars sold allegedly. Hardly surprising given the low monthly payments and easy access to a new car that most can't afford to buy outright. They're geared to extract the maximum return in profits/sales so has to be easy to obtain.

Being given credit doesn't mean you can afford something. It means a credit company sees you as a prime opportunity to make money. The two things are separate issues and assuming that if you are given credit you can afford something is a fallacy that screws up a lot of people.

^ this was the subject of a recent moneybox on R4. So many people are given credit they cant afford in real terms.

Fair enough, I thought we were talking about car envy/car loans?

We buy them second hand and keep them a long time. Our Land Rover is 12 years old (we bought it at 5 years), has done 110,000k and runs beautifully. We’ll keep it for at least another 5 years fingers crossed.

Yes

I assume the poster is referring to the fact that if you have paid off your mortgage, that means you once had a mortgage. Therefore you did ‘do credit’ at least once.

You said you don't do credit but surely that is what a mortgage was?

www.confused.com/buy-a-car/tips-for-buying/the-most-cost-effective-way-to-buy-a-new-car

Confused now. Which bit of my statement is incorrect? Are we splitting hairs here? Happy to duck out of this thread now. (I am biting on my own tongue.)

By lease do you mean PCP or is it more like a long term rental?

Well sorry but your statement isn't true then, is it?

I also own my home outright and I never do credit. Ever

Yes!

You paid the mortgage off ?

I agree, and we’re all at different ages and stages. I’m an older parent with two adopted children, both of whom have significant ongoing needs, and will continue to, so I needed to make myself as financially secure as possible at as early an age as possible.

We buy used cars but are careful about which ones. We like Japanese cars as they tend to be reliable.

The brand new German car owners we know seem to be young men still living with their parents, so very few outgoings other than a massive car repayment every month.