Does "everyone" really buy their posh cars on credit?

[Bottleplant]

Or using some sort of lease arrangement?

A colleague recently bought a £30k car and paid cash. Our boss, (privately and I guess unprofessionally) was having a little jealous bitch about it saying who earth pays cash for a car.

Now, I wouldn't dream of telling anyone such details about my financial situation and I earn less than either of them, but I have a broadly equivalent car and I've never had a car on credit in my life.

To me it seems odd to "buy" a luxury car you can't afford, which I would consider I can't if I can't pay for it.

I understand sometimes people will need to get a car for work etc by whatever means possible, but I was surprised at the suggestion that it's what "everyone" does.

I must admit I struggle to get my head around how people pay for these cars costing in excess of 30 grand. Surely not that many people have that amount of cash put by? So I suppose they must use credit. The monthly payments must be extortionate though!

This is exactly why I do it too.

I bought my last car in cash, however it’s recently turned out to have some really significant issues. The garage told me I’d be better off if it was financed because the finance company would help me argue with the warranty company.

I know a bloke on his 20th Landrover as he buys a new one every two years for cash. Rich enough not to care.

Yes. It's certainly a luxury.

I lease my car and invest my money. Makes better sense.

I imagine pretty well every tesla, i pace, i7, iX and Taycan are funded this way.

It makes no sense to invest a lump sum which could be making money for you in a depreciating asset.

Well it depends on the cost of debt and your expected after-tax investment returns. If you think you can invest the money and early 20% p.a. then yes you should probably lease your cars. But if, like a PP, your plan is to pay 5-7% lease costs and leave your money in a bank account then, in the traditional MM argot, you need to give your head a wobble.

DH's boss buys cash outright. He has some sort of income above his salary
My boss leases because he's hand to mouth but 'needs' a good badge for appearances.
SIl & Bil, literally walk to work, lease two cars at £450 each per month. We are puzzled but think it's a combination of not understanding the maths, keeping up with the Joneses and independence and equality in an unhappy marriage.
My parents leased and upgraded every two years during retirement as a fuck you to the neighbours and to prove to themselves after my childhood old bangers they had made it.

We are thinking about leasing an electric via salary sacrifice but last time we looked at it, it still seemed rigged against the customer even on high tax.

Obviously not ‘everyone’ does but a lot of people do. That said, I think most people buy ordinary family cars on credit or lease deals too. Pretty much everyone I know who has a new car rather than a second-hand one bought it on finance, including my DP.

It makes sense that a lot of people would be able afford a specific amount of money per month (whether that’s a large chunk of money for a posh car or a smaller amount for an ordinary one) without any problems, but don’t necessarily have a lump sum sitting there in a current account ready to shell out in one go.

To PPs saying it makes financial sense to use car finance - what’s the interest rate on the debt and what sort of return do you get on your investments? I borrow to invest too, as I have a mortgage plus I invest 😂

No horse in the race here as we were given my DF’s old car - very lucky!

I brought a 3yo car recently, chatting to the salesman about payments methods etc and he was saying that the vast majority of his sales were leasing deals.

I think it’s just down to what you prioritise. One of DH’s ex colleagues had a really nice brand new car (bought on finance) but was bemoaning how they couldn’t afford a holiday and how did we go away so much. All done to the fact that we both drive old cars and prioritise holidays over a shiny new car.

Do you consider yourself to not be able to afford a house if you have to have a mortgage? People have different priorities in life, the reverse snobbery on cars is tiresome. If people can afford the payments, what business is it of anyone else‘s?

So yes and no.

When interest rates were very low this was an easier calculation. I know a lot of people that have stopped financing cars now (lease and purchase) because you don’t get the savings in the same way.

I also think financing a car often encourages people to buy a newer car (ie depreciates more quickly!), or a more expensive car than they could otherwise afford.

I personally buy in cash vs borrowing to do it as I prefer having an asset I can sell, vs commitment to a lease or purchase agreement which may be more of a liability if things go wrong (and - will still be depreciating in value, no matter how much I still owe on it…!)

Personal preference really.

We tend to buy the cheap runaround outright and the ‘big’ car with a fixed rate bank loan - cheaper than leasing or PCP.

The big one tends to be a 4x4/something with a higher engine position due to rural living. That said, we need don’t replace our cars very often and tend to run them into the ground.

Also, we never buy new - not great value, plus I was always told cars need 5k miles to reveal any engine problems.

No, but I put that in the "need" category that i did describe in OP.

Depends where you live if surrounded by drug dealers they’ll all pay cash.

I’ve only ever paid outright, including for one expensive car. Cars aren’t a priority for me though so not something I’d go into debt for.

I have always bought a 2nd hand car, about 18 months old, paid cash and kept it for tennish years. I have worked out the maths and it is far more economical than pcp or lease deals. However, I have no interest in driving a flashy car to impress. Currently an Honda CRV, before that a Ford S Max, before that a Citroën Picasso. That's about 27 years of cars and I reckon my outlay hasn't topped an average of about £1000 - £1500 per year, plus maintenance. The Citroën did 70k, the SMax 100k, expect the CRV to return 100k.

It depends. Do you want to change your car every 3-years? Then credit. If you’re aiming to buy and hold, irrespective of value loss, which is what I do, I’ve no issue paying cash. Your boss might enjoy perpetual debt, and that’s okay. Let them suck.

A house is likely to hold its value at least, if not increase in value. Leasing a car is leasing something that will only ever depreciate. It’s not snobbery to avoid paying interest on something that’s worth less than when you took the finance out.

I think mine was about 10%

Put the cash in a stocks and shares ISA, bought Rolls Royce shares and quadrupled it!

Most people use the word "buy" when really mean rent (lease) or hire purchase.