How do people afford to PCP brand new cars?!

[JusWunderin]

DH recently mentioned looking into us getting the car I’ve had my eye on for many eyes now. But we’ve looked at prices for financing one and my good god alive it’s not what I expected!

I’m struggling to imagine someone having £400 a month to comfortable pay for a car, we had a budget of about £200 a month.. which I thought would get me something pretty nice!😂

My heart is a little sore, I’ve never really had anything ‘proper nice’ we don’t buy anything designer, branded/luxury. We live modestly, both work full time in what we thought were good jobs on relatively good money for where we live. this car was the one thing I just thought would be my little bit of luxury in life.. but it turns out it’s quite far out from ‘a little bit’ of luxury 😂 it’s big luxury and now I’m pretty gutted as I can’t imagine us ever having that sort of money to fork out every month for a car 😅

If you lease/brought a brand new car recently.. how? What job do you do? How much do you earn (if you don’t mind me asking)? I need to know where I’m going wrong 😂

You see so many people driving lovely new cars - I dread to think how much of their monthly salaries are going towards them!

I ended up buying a 3 year old BMW from savings.

The car supermarket hated us as we didnt take any of their financing deals or warranties 😂

You can get a BMW 1series for about £250 a month I think? (Totally taking that from an advert I saw)

Cars are ridiculously expensive

I have no idea so I'm going to follow out of interest as we need to change cars within the next year. No to a brand new one, but a newer one as ours is getting quite old (I do love it though, basic but reliable and economical). DH vaguely suggested doing hire purchase (not sure of all the terms/deals exactly) which was very unlike him to suggest something like that as he doesn't care about nice cars. I was a bit hesitant about it.

A couple friends I've had do the thing where you get a new car every 3 years on a pay monthly thing that just seems to go on forever. But it includes insurance, servicing, warranty and basically means relatively little additional outgoings on the car. However, £400 is still such a lot per month, far more than it would cost a long-term driver to insure and service, etc, separately.

No idea but following with interest.

We've both got good jobs but can't imagine paying out hundreds per month for a car.

People that earn more I guess

I work in the area where people pay £500 or more per month and service of the car can be over £1000

My mild hybrid Hyundai Kona costs me £220 a month but that was with a £5k deposit ( my old car that was 5 years old and had cost me £7500 brand new).

Don't buy a new car, so stupid. And don't do PCP, it's an absolute scam. Get a bank loan, the interest rates are lower and at least you own the car from day 1. Our loan is £200 a month, and we can overpay/pay it off whenever. We have a decent car but I couldn't care less what it is.

I pay £180 per month for my Toyota aygo

No I wouldn't be getting sucked into this at all. We have a nice 4 Yr old Volvo which we bought for around 15k and I fully expect it to last us however long we want it to, at least 6 or 7 years. I would not be paying out £400 a month for a car, that's just crazy!

Some people I know who are self employed have lease cars as they can put them down against their taxes I think. Not sure as I'm not self employed.

The current high interest rates have had a big impact on car leasing/PCP/HP payments causing quite a hike in monthly pricing.

Dealers/manufacturers/finance firms are trying to pull the wool over people's eyes by the use of very high "option to purchase" fees at the end of the term, which means that the monthly payment is only covering the cost of depreciation and interest over the 2/3 year term. You still have to pay typically £10-£20k at the end of the lease/contract if you want to keep the car. Another trick is them using your part exchange as a bigger deposit to give the illusion of lower monthly payments. A further trick is to set up the contract with a low annual mileage (again to reduce monthly payments) and then they hit you at the end if you've gone over the allowed mileage, sometimes by a pretty steep "per excess mile" charge.

These days, it's very expensive to lease/contract. Go back a few years and it was pretty cheap because of the historically low interest rates which underpin the finance deals as well as pretty high second hand values. But all that's gone now. Interest rates are a lot higher and will never go back to those historical lows, and second hand car prices are starting to fall again too.

You have to do the numbers and look at the total cost of "ownership" over the lease/contract period, including the deposit/up front payment, monthly repayments, "balloon" payment at the end, and costs of any marks/damage/excess mileage.

I see numerous contract/Lease deals for my clients as I cringe at the cost of some of them when they've been misled (or not asked the right questions) by the salesperson. Considering the supposedly high level of financial services laws/rules and compliance, it's still the wild west out there!

Mine is just under £200 a month for a brand new but budget car. I also used the scrappage scheme a few years ago so that boosted my deposit. Cars are mega expensive.

So I wasn’t looking specifically at ‘brand new off the shelf’ but even the 5 year old SUV’s I’ve been looking at are coming out of our price range. I’ve always had older cars and now we’ve had our two children and know we won’t have any more, have brought our family home ect we thought it would be a good time to start thinking about the small luxuries we might be able to get. But I’m so shocked it’s out of my reach 😂

Thanks the car suggestions, I’ll have a look into some other options. I’m just a bit gutted that the car I’ve wanted for years is realistically never really going to be an option if I want the luxury of a new(er) car 😩

I guess it’s back to the drawing board!

You can still PCP a used car, so you could have 'almost new'. Although I'd be wary of that because the depreciation is so much higher in the first couple of years that it's much less likely to have any equity at all at the end of a PCP deal with a used car.

I always used to do PCP pre covid, but I was commuting 200 miles a week, and we used the car as our 'main' car (plus I have a car allowance with my job, so it felt like the money was there for that purpose, even though it's just paid as part of my salary). I think I was paying c£350 per month for a nice Golf (with quite a high annual mileage, and spread over 4 years). Interest rates have zoomed up though, as have car prices, so I can well imagine it would be a lot more than that now.

Now my car isn't the 'main' car any more, and I'm only commuting c50 miles p/w (and doing a lot less business miles in general) we bought a second hand car outright (having saved up over the past few years).

Our last car two years ago was hp, unknowing to me my husband swapped it for a brand new pcp and told me he believed it was hp also. I checked the paperwork and it was pcp so was pissed off because our last car would of been paid off and completely ours by now and now wer tied to another pcp. I wanted to get rid of the large monthly payment then in time sell that one outright and use some of our savings to buy another newer one outright. We can afford it but I just find it unnecessary when I had a better way of doing it planned rather than being tied to the monthly payment.

£400 I'm imagining must be a range rover, big audi or something or have you got bad credit scores and getting a high interest rate?

I completely agree! I've just clicked through my work scheme to look at EVs and some of them are £600pcm! I was blown away that someone would pay that to HIRE a car.

I honestly think it's madness. I bought a 2016 car 3 years ago. It has alot of tech in it and drives perfect. Only has low miles too. Costs me under a £100 to run each month with insurance and tax is £30. My friend never buys a car. He's just gone and got a pcp 21 plate for nearly £400 a month without insurance and tax 😭 his home needs a new roof and repairs but he won't spend the money on that. It's bonkers!

It's different if you have an EV through a work scheme, as it comes out before tax (assuming it's a proper company car scheme). So the actual cost to you is less.
So don't write off an EV straight away - the headline cost might be more, but the cost to you might be considerably less depending on what tax bracket you're in.

@Capmagturk You are right, it’s a Mercedes so is more on the luxury brand end of cars.
I can start looking at other cars and don’t mind doing so. Just a part of me is sad I won’t be getting my nice Merc I’ve dreamt about.

I do like VW’s. I used to have a good and of all the cars I’ve owned it’s been by far my favourite to drive. Not sure I’d have one again with two kids. I’m too used to have a bigger car now 😂

We're getting a bank loan and it's significantly less than the garage's HP finance deals and PCP etc. and we will own the car. Looking at buying a 5 year old (ish) car but that's still a big step up from our 10 year old one which 2 years ago replaced my then 13 year old one! I'm hoping by borrowing we will reduce the unforeseen maintenance costs that older vehicles bring!
My friend has a VW Golf on PCP and changes it every 3 years, costs about £250 a month. If I'm paying out monthly I want to own something at the end of it, and the big 7 seater family car we need is well out of reach brand new.

Nothing wrong with buying new as long as you don't pay list prices! You need to grow a back bone and haggle.

We've just bought a brand new car, only 7 miles on the clock, from a dealership with £4k off list price of £18k - they registered it at the end of March to hit registration targets for hefty manufacturer bonuses. End March/early April is a brilliant time to do it, even more so if you're not too fussy about colour/spec. We had a "choice" of 7 cars at the same price with the same low mileage (delivery mileage only), but only two choices of colour and only two choices of spec. The one we chose wouldn't have been our first choice, but when you get £4k off list, we can put up with that!! We put the Reg number in we buy any car and could make a small profit if we took it to them today!!

The previous brand new car we bought was in 2015, same time of year, March, got a car with a £20k list price for only £15k with a full tank of fuel, floor mats, tow bar fitted, safety pack fitted (all round sensors), and a full spare tyre (which presumably they took off another car!). Again, just haggled hard, right time of year, the dealership were clearly desperate to hit their registration targets. That time, it wasn't even pre-registered, we got it straight from the compound and down as first owner. Initially we walked away when they didn't come down enough on price, but they phoned us a few days later to agree to what we were offering!!

You only lose a lot of money when driving off the forecourt if you pay list price and don't haggle! If you have the freedom of time to buy, colour, not too fussy on variant, etc., you can often get a good deal. Obviously, there have been times when we've got knocked back by dealerships - you can't win all the time, but when that happens, just move on to a different dealership, or try again at a different time of year. Sometimes, if you walk away, they phone you with a better offer.

Priorities I guess. My husband got an inheritance in 2020. We both got rid of our cars and bought new ones. Mine was new out of the show room. Never been used and had all the bells and whistles on it. But was a cheaper car. But this is will last me for years and years now. But my husband got an older car as it was a more expensive one and just wanted that car make and it had no bells or whistles on it. That was his priority.

I know some people have eye watering amounts to pay on their cars but they sacrificed everything to drive the car they wanted that type of car. To me it’s madness. But I soend a ton of money on my garden which I know people raise an eye brow at as well.

Some people have more money than you and some of those prefer to spend said money on nice cars. I don't think it is too hard to figure out.

@taxguru oh thats really interesting! I would have thought there would be no chance of haggling on new cars, maybe old cars but new ones I would have thought they would be a set price. You’ve given me something to think about!

When you ask, they tell you they don't haggle these days and it all has to be list price, but when you walk away, they tend to start talking!! I think the industry as a whole is trying to get away from the old haggling image, but when it comes down to them having to hit registration targets to get the very valuable manufacturer bonuses, they'll talk!

The thing is that the registration bonuses are per car, and work in ranges. So it may be £250 per car for the first 10 cars, then £500 per car for between 10-20. So if they've registered 10 they'll get £2500, but if they register 11, they'll get £5500, as they get the extra £250 on the first 10 as well!! So there's a few thousand "in the pot" as an incentive to register the 11th!!

I used to be the accountant for some car dealerships so was well versed in how it works.

Things are changing and before long, the traditional dealership will be no more (especially with most electrics being sold under the lease model rather than purchase) and as the manufacturers transition over to direct supply from the manufacturer/finance company, so will become mostly used car retailing, service and parts., but in the meantime, there's still deals to be done if you're flexible with make & model and timing.

To answer your question of how we do it DH’s job comes with a car allowance of £600 a month. He works in finance.

We did buy a second hand car in the past and then had an absolute nightmare with it in terms of repairs and costs. I love the ease of our current situation.