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Original poster

Do you have a finance on your car?

159 replies

MsMiaWallace · 17/09/2022 07:09

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?

OP posts:
wonderstuff · 17/09/2022 09:10

Muststopeating · 17/09/2022 07:28

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.

Absolutely pay for GAP insurance on any PCP deal. I didn’t. Got backended which wrote of my 13 mo car, if it had been 12 mo the insurance would have replaced with new, but it wasn’t and I owed £1300 more in finance than the value of the car. Thankfully I got £1300 in injury claim payout, but still ended up without a car 😭.

Thankfully I had some savings, I’ve not bought PCP since, but my issue was I thought I understood the risk but I didn’t really. Lesson learnt!

Abraxan · 17/09/2022 09:11

We lease out electric cars. We've leased for a while now. We don't own them at the end. Instead we simply send them back and get a new one for 2-4 years, depending on the terms. We made a decision a while back about how much we were willing to spend on cars a month and we stick to that. We know we are in a privileged position to be able to do so. Have no desire to own the car for years so, for various reasons, leasing works best for us at the moment.

FloydPepper · 17/09/2022 09:12

amyboo · 17/09/2022 07:20

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.

Show quote history

I’m not sure your maths works here. 6000 deposit plus 150 a month for 4 years means you’re paying a bit over 13k

those cars cost 30k

so I think you must have a big balloon payment to pay?

Interested in this thread?

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General money
chilliesandspices · 17/09/2022 09:13

I bought my car on a 4 year PCP contract. Paid £1,500 deposit then £150 a month for 4 years. When it got to the end of the contract last year I decided to keep it and paid the £2,200 balloon payment. With second hand car prices going up it was valued at around £9,000 on we buy any car when I paid it off. I've only had to pay for services and MOT on top of that, it's never had any issues to fix.

StrikeandRobin · 17/09/2022 09:13

We always buy older cars and buy outright. DH has a little knowledge and has only bought one lemon in the 25 years we’ve been married.

Do you or your DH know anyone with an interest/knowledge in cars that can help advise about the next purchase? Is there a trusty mechanic you always use that could give any car you are thinking of buying a quick once over and say if it’s likely to last or not?

BooksAndHooks · 17/09/2022 09:16

We’ve always had a separate loan and buy nearly new under a year old usually. When it’s paid off we replace the car. We have found cars seem to be completely unreliable now, even nearly new we have spent thousands on multiple issues on our current car. We decided last year to lease, it’s a similar amount to the loan payments would be but includes the extra payment for all maintenance and tyres. Unfortunately we are still waiting for the car a year later as getting new cars seems to be an impossible task.

CourtneeLuv · 17/09/2022 09:16

I don't and I never will. I'd rather drive an older car and own it outright.

FloydPepper · 17/09/2022 09:18

The problem with the likes of PCP is that a lot of people don’t really understand it. Yes you can get a new car for “only £200 a month” but you’re still effectively borrowing the full amount, you’re just not paying it back. The balloon at the end is a debt which you can “pay off” by handing the cat back but once you start rolling things into the next deal it gets very expensive. Dealers love it because it’s opaque.

I think there’s a place for it if you know what you’re signing up for and don’t get dazzled by low monthly costs.

Original poster
MsMiaWallace · 17/09/2022 09:18

Badbadbunny · 17/09/2022 09:03

Never had a car on finance. Saved to buy my first which was an old banger I kept for a couple of years. During that time, I saved money each month so I'd have money to buy a better car next time, rinse and repeat for my first 3 cars over 5/6 years. Then I had saved enough to buy new. That first new car lasted me many years and hit 200k miles. I then replaced it with another brand new one which did the same - we've kept our cars for an average of between 10-15 years! The two cars we have now were both bought new, one is 14 years old and the other is 7 years old, both going strong and we have no plans to change either. In all my 40 years of driving, I've only ever broken down once. We drive carefully and always have cars properly serviced according to the handbook schedule - the two we currently have look immaculate and drive as good as they did when new. I record my expenses religiously, buying new and keeping them for years works out a hell of a lot cheaper than forever paying a monthly lease.

What makes have you owned?

OP posts:
HikingBoots · 17/09/2022 09:24

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

Same. I'd never get locked into monthly payments. If I lose my job, I just have to sorn my car and it wouldn't cost me a penny.

TabithaTittlemouse · 17/09/2022 09:28

We buy cheap cars and drive them until they fall apart. My car cost £600 (needed work doing) and I’ve had it for 4 years. It’s a ten year old car and even with bits that we’ve done/had done it’s still worked out cheaper for us.

03X · 17/09/2022 09:35

Our joint income is around 80k & I’ve never have a car on finance. Current car is 8 years old & pretty wrecked (on the outside 🤣) but MOT always passes & takes us from a to b. Will probably now run it into the ground. I always pay for car / insurance etc outright with savings & I don’t have that many savings!

I look at cars on the road that cost 80k and wonder how rich you need to be for a fancy new car.

But then, we all have different priorities. Nice house but crappy car.

I must admit, I am tempted by a new electric car though… I think my next car will be electric. Hopefully this one lasts me another 5-10 years.

twoandcooplease · 17/09/2022 09:40

Op, if you do get a new car ask the dealership for a pre-registered motor. You won't be the first name on the log book (the dealership will be) but it'll save you loads
I got 3k off one car and £3475 off another. There was under 20mi on each clock. It's always always worth asking!

hewouldwouldnthe · 17/09/2022 09:42

No. I buy small reliable 2-3 year old cars from a dealer (for financial reassurance) and sell or trade in my 6 year old car. I add around an extra £3000 to buy outright. Do this as soon as the car gets around 6 years old but is in good condition and low mileage. I get twitchy about 6 years in as I hate the thought of breakdowns and repair bills.

Mybeautifulfriend22 · 17/09/2022 09:45

My partner bought his 2008 VW brand new outright before I met him. He has kept it well, very low mileage before we met. He doesn’t need it for much as wfh or walks. We do a lot of walking and use public transport/taxis on nights out.

It’s well serviced and passes it’s MOTs most years. No crazy bills but upkeep/maintenance. He won’t get a new one until this dies. He has again saved up over the years and probably has enough now. He hates credit/finance etc.

hewouldwouldnthe · 17/09/2022 09:47

DH and I used to buy nearly new cars at auction, use for a year, sell on and buy again at auction. Nail biting and exciting in equal measures. Not recommended if you're not experienced in this form of buying, but we had relatively new cars, cheaply for many years.

Lovetogarden2022 · 17/09/2022 09:55

Most of my friends who drive a "new" car get it through their work as a company car for example. I'd be very wary of buying through finance etc independently.
I know a few people who've gone and bought a new car on finance and every time it's been a nightmare and cost them a fortune. There's always been a quibble when they go to hand it back after three or five years about scratches or slight (unnoticeable) damage to the seat, or a mystery "problem" with the engine. These inevitably cost thousands (one friend got a £15K bill!) to "repair" before they can hand it back.
My neighbour was a car salesman at a very well known company and literally said to me "don't ever buy one of these cars new. It's a total scam."
You're miles better getting a second hand one and putting the money aside each month for unforeseen problems and for your next car

MugginsOverEre · 17/09/2022 09:55

amyboo · 17/09/2022 07:11

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).

Pretty much this. Peugeot 5008 (bloody amazing aren't they?) but £7K inheritance as deposit and we're paying £200 a month for 4 years.
We bought when the prices for used ones had gone up due to the chip crisis.

MugginsOverEre · 17/09/2022 10:01

I would never go for specific car finance whether it's HP or PCP. The interest is too high. We took a personal loan from the bank because we have great credit and got a really really low interest rate. The payments are less than what we can afford so we actually pay £300 extra on top of the £200 so it's going to be paid off in no time with my part time job. PCP was more to pay back plus a lump sum at the end with no option to repay more or early.

Tessasanderson · 17/09/2022 10:07

Bought our car back in 2012. Paid £10k cash and it’s done 50,000mls since. Tyres, brakes and servicing only. It’s done it’s job brilliantly and used by my son to learn to drive. It will be handed to my daughter in a couple of years under the provisor that she gives it back when she is finished with it. I want it for ever.

it will be replaced with same car as partner doesn’t want anything else.

so that car is currently at less than £1000 per year and dropping. It hasn’t attracted any finance charges and doesn’t owe us anything.

we have a £85k joint income. We have a £55k car on the drive as well (co car). A low mortgage and would be happy to pay cash for next car. Makes me feel ill thinking about the money people burn on owning metal boxes.

Whiterose23 · 17/09/2022 10:13

We lease an electric car. We didn’t want to buy outright at the moment but after the three years we will have the option to pay the balloon payment. If we have had no issues with the car we will do this.
I think it’s around £700 per month to lease, I appreciate we are in a fortunate position to be able to afford this but It does save us £400 a month in fuel that we were previously paying. This price also includes insurance for two, servicing and tyre replacement.

jacostajune · 17/09/2022 10:13

No, we by relatively new but second hand and run them till they die. We are lucky enough to not have any loans / debts at all and prefer to keep it that way.

I'm sure the number is available somewhere but I'd love to know how much is owed / paid in car lease and PCP in this country. I see huge flashy brand new cars everywhere, my NDN's family have a Range Rover and a BMW, which I can be pretty certain about them not having bought outright!

DoodlePug · 17/09/2022 10:18

Fearnecuptea · 17/09/2022 08:08

Brought my car outright for £1k, 5 years ago 😂 it's 15 years old. No issues. It's obviously an old banger but does the job and has got us to France and Scotland and back this summer, plus daily commuting to work. Always passes the MOT.

I would much rather put the money I'd be paying for a car payment into a S&S ISA every month? I'm reading this thread I feel like the only person who doesn't think monthly car payments is an investment.

Hate the thought of paying £10k on a car that's going to be worth £2k or similar in 10 years.

I'm right there with you on that.

We're in the top 10% of household incomes but wouldn't dream of spending good money on a car despite living rurally and needing them every day.

Currently got a 2012 and 2005 😆

The 2005 needs replacing but I can't believe the price of used cars these days. I usually go for something 3-5 years old and run it into the ground but even a 5yo car is ridiculous atm.

Goldmember · 17/09/2022 10:19

We have had HP and leased cars but prefer to spend max £4.5k on an older car, keep it for a few years, then part ex for similar. We pay for breakdown cover on our older cars but didn't with the new leased ones.
We don't use our car for work, only trips out. So whilst reliability is important, we can cope for a week or two without one.

mindutopia · 17/09/2022 10:33

Yes, used to just buy secondhand outright, but finance actually works out cheaper. Currently pay £180 a month for 2021 Skoda, means saving money on MOT and regular repairs and even tyres (we get so many free tyres, already had 2 replaced which would have costed us an extra £300 just in the first 6 months).