Do you have a finance on your car?

[MsMiaWallace]

Only bought our car back in Feb & starting to get issues. Thinking of buying something newer but would need a loan.

I see loads of new expensive cars in the road & wondered how everyone affords them.

Do you have a car on finance & if so how much are your payments?

Yep. I have a new Peugeot 5008. Paid £6000 deposit plus trade in value for my old car (which was peanuts) and pay £150 a month for the next 4 years. I have a good salary but there's no way I could afford to buy a new car outright. My sister leases her car - also seems like a good option but not in the country where I live (EU country outside the UK).

We don't we have a ten year old Citroen, DM does, she has a 2019 Vauxhall mokka x and it's about £250 a month

@amyboo will you own it at the end or is there a large balloon payment?

No. We save up and buy our car outright. But we have been very lucky and had cars without major problems, so we keep ours for many years.

We have been buying new cars on car finance for 13 years. Got a new MG on order at the moment.

I remember a friend being really pleased when she paid her car finance off and what she could do with that money each month but then just a few years later worried because that car was failing and she needed a new one but could no longer afford the finance. We always pay finance and up grade our car every 3 or 4 years so are never in the position of finding that monthly fee as we never stop paying it.

It'll be mine at the end. I had my last car for 8 years but it had 40,000 km on it when I bought it. This one I plan to keep for around 10 years if possible as it's brand new. Mine is the main family car. DH had a small loan when he got his, but paid it off within 1.5 years and now owns his outright.

I'm upset as before we did buy a slightly newer car from available car with a bank loan. They failed us well.
This time decided to buy an older one & it's already giving us crap.
We were setting off with our caravan & it started. The kids are gutted as we had to turn around & go home. Now thinking we'd be better just paying for something newer but I don't really want finance!

Yep finance it as no way could afford to buy one outright. If I didn’t finance it would have a loan so effectively the same thing. Pay £156 a month as was the 2nd owner an Got it before 2nd hand cars went crazy money

Nope - we spend about £3-£5k outright and run them until they are scrapped .last car was £2900 and lasted us 7 years

I ment served us well lol not failed!

No would never borrow for a deprecating asset. Normally buy for cash and run for 10 years or so. Currently have a 68 plate i20 bought in 2019 with reasonably high mileage. Been a cracking little car.

before that had an 07 Zafira which never skipped a beat cost us £5495 in 2010 traded in for £750

save every month so have a fund ready to buy the next one.

hate paying interest.

Have never needed to before but I think we might for our next one. The last car we bought was about 6yrs ago (cost £9k) and now it’s beginning to have issues (100k miles on the clock). To replace it with a similar 2/3yr old car would be £13,000. It’s a lot to spend in one go and would more or less wipe out our savings.

So many of these new cars on the road are financed via PCP (a way of making it seem like the loan is mlre affordable) or Lease (so you never own the car).

With PCP you pay a deposir, then pay a monthly amount then pay a big balloon payment at the end if you want to own the car. This method of finance has given car salespeople the opportunity to sell people cars they can't afford, as ot reduces the monthly payments by way of the balloon payment. You pay interest of the entire value of the car (including balloon payment but minus deposit) for the duration of the deal. So even if you don't buy the car at the end you will have paid full interest for 3-5 years.

If you do this, take GAP insurnace. If you don't and the car is written off in an accident or stolen you will still be liable for full value of car plus (I think) interest for the duration of the agreement. Insurance will only pay you the value of the car at that point in time. In other words you could be left paying for a car that you no longer have.

Equally, if you lose your job... in PCP or a Lease you can't just hand the car back because you can't afford the payments, you will be subject to all kinds of penalties. On the other hand, if you don't keep up with payments then they will take the car and you will STILL be liable for the penalties. So no job, no car and still huge debt.

A personal loan from a bank may be the most economicsl way of buying a second hand car. You will normally get a better interest rate (I have an excellent credit history so would have got 3% vs 9% from car dealers on HP).

If you buy second hand then generally you shouldn't be too out of pocket if the car was written off or you had to selll it as you can pay off a loan early without being liable for all remaining interest. There might still be a slight discrepancy depending on the rate of depreciation but it will be significantly less than PCP. The more you can pay in a deposit the better protected you will be.

My husband and I both have cars on finance - a 19 plate (soon to be upgraded) and 22 plate. Shared income of £75k. I pay £342 a month, he pays £300. Its a lot but when we both rely on our cars for work it's peace of mind that we're covered if anything goes wrong! X

@MrsU2022 genuine question but what do you mean by covered if anything goes wrong? Do you mean by warranty because they are new?

Always pay outright from savings and buy something about 2 years old and then keep until its about 10 years old. DH would have a job keeping his car in the good state that is needed for financed cars as his car gets fairly scratched up as soon as he starts using at as he goes fishing and stuff across fairly rough roads, I don't think he would want to be bothered keeping it nice.

Would add service history on a car if vital the Zafira had 50k on it just under 3 years old when we bought it when we got rid on 2019 it had 115k on it. Was beginning to fail but still had life in it and seen it since.

service history and looking at old MOT history can we useful.

Mine is lease 22 plate BMW x2
So is my husbands He has a Mercedes’ CLA I think

My sons car 3 year old BMW I bought for him in cash in April as we are in a clean air zone and his old car would cost him around £8 a day to drive home from work

When we bought our last to cars they seemed very keen to push the finance and of course the gap insurance, they don't like you to pay outright for cars.

Who doesn’t rely on their car for work?

our income is higher and your car payments are equal to our Mortgage.

also fully covered? not sure you’re anymore covered than me. 4 year old i20 still under warranty and free breakdown cover

also if you’re paying for maintenance your paying over the odds my OH has a company car through his business. And the lease for maintenance was £60 a month extra. So far the company has spent £400 on service and £220 on tyres. (I do his accounts). And has the car 2 year and 2 months so will only have an MoT and maybe two more tyres In the next 10 months.

They make commission on every element so the more finance and extras they can sell you the more they take home.

if you need gap insurance always cheaper to buy later separately.

Good advice re GAP insurance although not always necessary depending on what car you get. Certain cars (Eg Range Rover / Porsche) hold their value very well. My Porsche was recently stolen from my driveway and my gap insurance proved totally useless as the value of the car far outweighed the amount left on the finance agreement.

Only other bit I'd comment on would be the bit about not being able to hand the car back if you no longer want it. True with leases, not true with PCP. At any point you can ask for a settlement figure and you can sell the car and pay off the finance if you no longer want it. Only obvious issue with that is that the car value may not match the remaining finance, so you may be out of pocket there.

We always get cars on PCP because we have a high income but don't want to pay lump sums of £50-100k for a car outright as we like to change them every 2ish years. It's an expensive option and you pay a fair amount of interest. If you're not bothered about having a new or luxury car then it's probably not worth the added expense.

Equally, if you lose your job... in PCP or a Lease you can't just hand the car back because you can't afford the payments, you will be subject to all kinds of penalties. On the other hand, if you don't keep up with payments then they will take the car and you will STILL be liable for the penalties. So no job, no car and still huge debt.

Thats true of a lease certainly but not so much with a PCP. You can always sell a car on PCP, hopefully you have some equity in the car, otherwise you have to make up the shortfall.

As for interest, it very much depends on the rate. If you can get 0% finance then there’s very little point buying outright even if you have the cash sat in the bank. We’ve done just that before.

No, we paid 14k for our 64 plate Volvo about 7 years ago. We are lucky we only need one car between DH and myself, at the time we both worked within 10 minutes walking distance from home. We both now work from home permanently. The car has only done 40,000 miles and we've had no issues but we do keep a big pot of savings for emergencies.
We could afford a much nicer car but would rather spend the money on days out and holidays. We have a few friends with big expensive cars but none of them own them they are all on HP

I bought my 18 plate bmw 1 series 2 years ago, 4k deposit which I had saved and a 10k loan over 3 years (loan interest rates much cheaper than car finance), at the time it only had 10k miles on the clock and it only has 15k miles on it now. Due to covid/second hand car prices and low milage mine is actually worth around 2k more than I paid for it