Why do people on limited incomes choose upmarket cars?

[SirGawain]

Not really an AIBU, nor a criticism of peoples lifestyle choices, but I'm genuinely curious.
I live in an estate of mostly starter type homes built about thirty years ago. Many of the houses have been aquired peicemeal by different housing associations. The neigbours are generally very nice and most seem to be employed in decent, if not well paid, jobs.
As they are living in housing association properties I assume that they are not particulary affluent. What puzzles me is that the car of choice for many is a BMW or an Audi. Why would people spend there money on an expensive car which depreciates rather than investing it in a homes which will rise in value?

Go to mainland Europe and fancy cars are much less frequent.

Interestingly this isn’t universally true. Go to affluent parts of Germany and the kids are all driving in old Audi’s, BM’s and Mercs. And not necessarily the smallest model as there aren’t enough of those around.

Because all these fancy cars only cost about £300 a month.

We could never afford to buy a Mercedes 4x4 but we could afford £400 per month to lease one.

About 25 years ago the difference between buying say a new mid range Merc (eg c class) and a 5 year old ford was the difference in price between a one bed or a two bed house. Not so today in most locations. Houses for many are no longer attainable.

To those who have accused me of being a snob; I am not.
to those who suggested rational explainations why such cars made finacial sense, (mainly PCP), thanks.

But the point is, if you add it up over the years, you can actually pay more for a car owned outright that costs a few thousand up front but needs MOT, tax, servicing, the odd thing repairing versus a £25k car on PCP where the dealer pays for some of the above/or they are not needed e.g. no MOT for 1st three years and unlikely to go wrong.

Precisely the opposite actually. It's not all thrown in - you pay for it. You absolutely do pay for it. You pay for the heaviest depreciation period of car - the first few years.

Leasing works really well because it fulfills a short term needs - only it does hat time and time again, nice new car, 'peace of mind' etc. Over a longer term, you pay much more, as the £xx per month never goes away. You accrue nothing.

It's very seductive and fits into most people's lives because they just can't afford to put down large deposits, or buy outright.
The unexpected repair bills do happen, but quite often it's because people haven't budgeted for them or put money away each month to pay for them. A lease deal does all that, and wraps it up into one nice monthly figure. You don't get free serving in lease deals anymore than you get a free phone with a mobile deal - it's absorbed into the cost.

I get your point. I have a friend who lives in a HA house. She would love to own and financially her and dp are in a comfortable position with good credit just no deposit. They pay well over 300 a month for their car. Tbf its not one of the ones mentioned above but they coild have a relatively new more modest car for half the price.

Similarly a friend of dps lives in a not very nice house in a not very nice area drives a merc and her daughter who is under 10 wears single items of clothing at £200+per item. It makes no sense to me but people are free to choose their own priorities it just annoys me when they whinge about it.

I live in a former HA starter house. At the time we only had a small deposit and a small two bed house met our needs. Then I was put at risk of redundancy but managed to get a job where I was given a brand new company car. A few years later I left that job but bought a 9 year old Audi for £4K as I wanted something reliable with a big boot as I was pregnant but didn’t want have a car payment. In the meantime we have stayed here and have been overpaying the mortgage every month. We didn’t move when I was pregnant as we didn’t want to have a massive mortgage to pay whilst I was on mat leave so stayed in our small house with a small mortgage with cars we fully own.

Point of note - they don't always make 'financial sense' - they make for attractive propositions - which is very different.

They are extremely attractive propositions. The downsides are rarely mentioned because it's not in any sales interests to do so.

They are extremely attractive propositions. The downsides are rarely mentioned because it's not in any sales interests to do so.
This is my gut instinct.
Why would dealers and manufacturers push a new way to 'have' a fancy new car regularly unless they knew it was in their interests to push the product?
There's no way this push towards leading expensive cars is being done to make life easier and more affordable to the consumer.

When we looked at PCP vs buying a car outright using finance, the PCP car was going to cost us much more. The balloon payment at the end was astronomical, the mileage terms were ridiculously small. The charges for even minor defects to paintwork (fair wear and tear like gravel comes up from the road and nips the paint) were high. The whole thing to us seemed to be turning car buying into a mobile phone style contract but with hefty additional payments.

I don't know enough about them as a product to give any solid opinion on the whole package, but for us we got the impression it was designed to keep people continually upgrading their cars whilst never actually owning anything (the MOT/service etc aren't free because it's in the price).

There's even been some stories hitting the press where people have been all "compo sad face" because they've been met with 'unexpected charges' at the end of their plans, except they were all written there in the plan.

Leasing.

Frankly its a pain to own a car. Expensive depreciating 'asset'. Leasing is just easier all round.

I had a PCP that was cheaper than paying cash. No deposit, Interest free so the money sat in my bank account earning interest instead, if it was cheaper to pay cash I would have done, but it wasn't. I also got free breakdown and servicing with PCP that I wouldn't have got paying cash and I sent it back in pretty shabby condition with bumps and scrapes all over the car, but the assessor said it was almost all fair wear and tear and I got a bill for £60 which was a huge relief as I was expecting it to be hundreds. I paid £130 pm for 3 years for use of the car, and it worked out great for me.

Frankly its a pain to own a car. Expensive depreciating 'asset'. Leasing is just easier all round.

That is precisely what leasing is though - you are paying the depreciation cost during the most costly period - out of the showroom.
Leasing can be 'easier' yes, because someone else sources the vehicle and then takes care of you selling it again at the end (although you never actually own it at any point). However, the odds are stacked in the lease company's favour when it comes to the actual value after 2 - 4 years depending on the lease period.

There are some subtle other factors that can make leasing favourable, but the ultimate thing to remember is that the lease company are buying a new car, lending it to you and need you to cover the cost of depreciation (plus some profit). If you have servicing included, that's added into the price too. It's not free.
Servicing varies, but typically about 300.00 a year. So 25.00 a month would cover that.

When I left England 45+ yrs ago people living on what was known as council house estates never owned cars as a general rule, but when I moved to the U.S. I noticed many Cadillacs - with all the bells and whistles - parked outside ‘project’ housing in the ghettos.

I am now noticing immigrant field workers/labourers driving more types of expensive cars and pickups. Some people have different priorities I guess.

I too considered and moved away from leasing.
At £300 per month over 3 years that is £10,800. At the end of the 3 years I have nothing. If I purchase a car for £10,800 - admittedly not new ( actually probably the lease car that has just been handed back) I will still be driving it after 3 years( and more) have no monthly payments to make.

I lease a premium car. I have had older cars and all they do is cost me a small fortune in maintenance and repairs. I don’t want to drive a small basic runaround, I just don’t. I like automatic, I like a leather interior and I like a high seating position. I also like aircon and sat nav. I don’t need all those things but I like them and I spend a huge amount of time in my car. I also can’t bear the thought of using a huge chunk of my savings to buy a car and pay maintenance on top. So I worked out what I was happy to spend a month on a car, £250, how long I keep a car on average, 4 years, and searched and searched for months to find the best deal I could for what I wanted and ended up with a really lovely car. Big deal, have savings to pay out the rest of the lease if nec but don’t really envisage a point where £250 a month is a problem.

I think if I lived in a less than perfect house I’d want to drive an expensive car . It’s tough not having the same choices as the middle classes .

My old (5 year old) car was bought on a loan which I paid back at £190 a month over several years. It was getting to the age when it would need things replacing, the road tax was reasonably high and I was concerned about getting stranded. I was going to sell it and buy another one, at a similar price per month. I now lease a brand new car for £200 a month instead.

It's not a BMW but its a good car, I don't pay road tax as its a lease, I don't need an MOT because its new, servicing and insurance are reasonably priced and I don't have to worry about it leaving me stranded like I did with my old car. As a single mum its important that I have a reliable car.

I'm also lucky to have a nice house, due to having bought at a good time and getting it for a steal. So to look at me you'd think I was doing ok. I'm not!

Op, stop paying so much attention to other people's business, it makes you look like a cunt. HTH.

It sounds like you know the square root of fuck all about these people's finances and just wanted to start a goady thread about how the working classes like to buy flashy status symbols they can't afford.

If you can afford it (and this is not always the case, just a typical case), you are usually better to secure a new, or almost new car yourself, and then treat as you would a lease... keep it 3 years, then sell, then repeat the same), the downside is that you usually need a loan or the actual cash to afford the initial outlay.

The plus side is that any profit from part-ex after depreciation is yours.

Most people don't want to take out the initial 30K loan for a prestige car (remember though, that in reality you're not going to be spending all that 30K) you are using that to buy the car, then sell for 20K in a couple of years. It's to get you into the prestige car price band to start with.

Virtually all cars lose about 50-60% of their value over the first 3 years, but some prestige models fair better than lesser ones.
So if you lease a car worth 30K, you can expect to have to pay about 5K per year leasing (15K over 3 years)

People love nice cars, why not if you can make the payments. Parking’s getting harder round here though as the cars get bigger and bigger every year but the road does not. That’s what I worry about. Some of the houses get obscured by cars parked outside which is a shame if you like to look at bricks and windows rather than shiny metal.

This isn’t a new phenomenon.... In working class areas of Nuneaton in the 90s/early 00s when I was growing up, people had flash cars outside their houses. This was before house prices shot through the roof so they we’re often a massive % of the house value... new BMW outside £40k run down and small house

It is a reasonable question. I do wonder about it myself. Can’t help but think it is part of our current “must have” society. Like having the newest mobile or biggest tv and being unable to just make do.