To wonder why people finance cars they can’t afford?

[MonkeyTrap]

Just that really. I saved hard to buy my car, to replace a car over ten years old with 150k miles on the clock. Nothing flash, just reliable and 18 months old. Which was luxury to me.

But it seems so many people finance their cars and ironically, those that can’t afford it drive out a sleek brand new one and those that want to pay outright rein it in.

Think the option to finance everything, sofas, holidays, cars, home improvements is just pushing up the prices where people seem focused on the monthly and not overall price.

I don’t think the OP has an issue with people taking finance out if they can afford it. But why take finance out on an expensive model when you can’t afford the repayments easily if you could have taken finance out on a cheaper model that was still reliable?!

I find it very odd the amount of people on here who are saying they don't have to worry about things going wrong with a lease car. If you buy a new car it has a warrantee so any problems are covered. For example, kia have a 7 year free warrantee. If that's the reason for doing it, it's false economy.

We saved hard, bought our car outright - as you say, financially prudent. After the first year we've had nothing but trouble and 4 years on are going to try and sell it and lease one. With two small children we need something reliable, were super sensible and now have a car with no air con, one door that doesn't work and that has needed goodness knows how much spent on it just to keep it roadworthy. No we're going to rework our budget and hopefully get something on 0% finance.

It goes against my hatred of being in any kind of debt, but we need something safe and reliable.

@oohyoudevilyou you don’t rent your mobile phone. You pay for it in instalments. At the end of the term it is yours. Any sensible person then enjoys seeing their monthly phone bill half because they’re no longer paying off the cost of the handset. But people are idiots and decide to get another new phone after 18/24 months just because the provider tells them they’re “due an upgrade”. What “due and upgrade” actually means is “we want to sell you another new phone even though the one you have still works just fine”. Conversely, leasing a car leaves you with nothing to call your own at the end of the term.

It’s flawed logic to think that, just because you can’t get on the housing ladder, you might as well spend everything you earn each month rather than saving. It’s just an excuse for poor financial management and with that attitude you almost certainly won’t ever own a house. Also, surely we save money for things other than deposits for houses?

The rush can afford to fix and old car when it goes bang, the poorer can't. I do think there's something in this behaviour relating to unforeseen costs, and unexpected bills.

People use PCPs because the price of the car is often a lot cheaper. I had saved up to buy my last car and hoped for the hefty discount for paying cash I'd always managed to secure in the past. I was offered a hundred pounds or so but no more (used Car Wow to be sure). If I used a PCP I got a lot more off, a few hundred, plus £500 to do the deal by a certain date and £500 loyalty bonus, So over £1400 in all. I spoke to the dealer about this and they told me to buy the car using the PCP and then cancel the agreement within 7 days. My purchase will show up as a PCP in the records but in fact I "really" made a cash purchase. nuts.

My NDN buys everything at Brighthouse, some people just don't understand interest rates etc. We need to change the school maths syllabus to reflect the complex financial world we now all live in.

What does it matter to you how others spend their money? It isn't pushing prices up for you. You do sound envious the fact they drive better cars than you. So what. There will be always those with more or less than you.

Your life will be so much more enjoyable if you stop focusing on what others have and you don't.

I agree with you. Nothing wrong with having a car on finance, you need it, it's easier to pay a few hundred pounds a month than a few thousands in one go.
Most of us wouldn't have a home if we didn't have a mortgage! Same thing.

Over-stretching yourself to have a show-off car on the other hand.. is rather pathetic. Some people do believe they need the car to show they've 'arrived", each to their own.

My DB is considering leasing a car as his close friend does this. He already has a classic car which is difficult to drive and in the process of being sold but he couldn't afford to buy the car he'd like outright otherwise with the proceeds of the soon to be sold car.

@MonkeyTrap Well I would never buy a new 'straight off the forecourt' car, because they lose about 15% of their value as soon as you drive it off the forecourt. So if you bought a Fiat 500 today for £15K, and tried to sell it on Friday, you would probably only get £12K to £12.5K (if you were lucky.)

We have a car that is 2011, and when we trade it in, in a couple of years or so, (in 2021-ish,) we will probably get a 2013/14 car. Never bought a new one, never will.

As a few people have said though, some people lease, as it's less hassle for them, re; repairs and maintenance etc...

All that said, if people want to buy brand new every time, so what? Many people waste money on smoking, boozing, 'name-brand' clothes and shoes, fancy electrical gadgets, (macbooks, big TVs, games consoles etc,) clubbing, foreign holidays, golf, fishing, football, gym (and other 'sporty' stuff,) that costs a fortune. So people are spending their money on having a new car? Can't see the big deal really. As I said, most people spend money on what some would deem as frivolous things.

My neighbour has about 150 bedding plants in her front garden that she has been lovingly tending to and watering all summer, and they look beautiful. I heard her DIL say the other day 'what the bloody hell have you wasted all your money on these daft flowers for?' All the lady said was 'well I like them.'

The DIL smokes (spends about £35 to £40 a week on ciggies,) and has a go at her MIL for spending maybe £45 on bedding plants that will bloom and look beautiful from late April to early October.

As I said, why judge what people spend their money on? As long as other family members/other people are not affected/going without essentials, then it's no big deal IMO.

@Yaflamingalah

I’ve made a decision that when I eventually get rid of my (17 year old!) car I will lease one. The main reason is that I don’t trust new cars with all the bells and whistles - meaning that once the warranty runs out a whole myriad of things will start to go wrong with it, which I wouldn’t be able to afford to replace. At least with a lease car I can give it back after 3 years (when most warranties end) and it is the garages problem.

Can't blame you really. I feel that cars post 2010 seem to be more expensive to repair than ones made prior to that. We had an old mid 1990's ford fiesta in the early 2000's, and in the four years we had it, I don't think I spent more than £500 on repairs and MOTs.

Yet, the 2011 car we have (we got it in 2017,) has cost us £700 in 2 years/2 MOTs so far. And a friend of mine has a 2013 ford focus, and has spent £950 in repairs/on 2 MOTs since she got it.

So as cars seem to be getting more expensive to repair and maintain, it does make you wonder if it's worth leasing long-term. Only problem is that you are usually restricted on the miles you can drive per year. Me and DH do 16K to 18K miles a year, and I don't think you can do more than 8K to 10K in a year on a lease car (if you do, you have to pay penalties.)

I agree with a pp that cars are money pits, and you never know how much repairs and MOTs are going to cost. I know a couple of people lately who have had to put the car repairs on their credit card, as they didn't have the £950-£1100 needed for the repairs. The cars are only 4-5 years old!

Also, whenever the mechanic/repair garage tells you what needs doing and what it costs, you have to take that as gospel, because many, many people NEED their car. And some - not all - mechanics and car repair garages, rip people off/add extra money on.

My next or next but one car will be a lease. I am not buying a hybrid, especially not second hand. Battery life is so much less than petrol/diesel.

Until then 2nd hand all the way - our "newer" car is 10 years old 150k miles, other is 15 years old and 70k...

Disposed of 09 with 205k miles to get 05 ...

However with all the changes in rules etc leasing a hybrid/electric car looks like it will be essential soon!

Because they're adults who made a valid choice and can presumably afford the payments. Surely it's just reverse saving? You still spend the money each week you would have saved but you get the car now.

0% finance can be great.

The rich can afford to fix and old car when it goes bang, the poorer can't. I do think there's something in this behaviour relating to unforeseen costs, and unexpected bills.

If "the poor" didn't spend a couple of hundred a month on leasing, they could be saving that as a cushion for their next car or repairs, etc.

It's them spending all their monthly on "monthly this" and "monthly that" which means they have no savings!

Because it's easy to get a new car every 3 years, some people don't want to deal with MOTs and issues as the car gets older. Personally I'd rather take out a loan and then own the car at the end of it, but I get a car allowance so technically it's not my money anyway. That's how I treat it as the car depreciates! But when I didn't have the allowance I bought cheaper cars and just ran them, as I don't need the validation of owning a new car.

My feeling is that people can afford better cars on finance than they would be able to afford on purchase, so they do it for the 'flash' value.

I'm like you - I am completely unfussed by what I drive. I save up and then buy a new car every 10 years or so in cash - it's never a glamorous model but it gets me from A to B! I'm pretty sure it works out a fair bit cheaper.

'Are we denying theirs a huge amount of debt caused in part by consumerism in this country'?

No, 'we' are not. But not everyone has the luxury to save hard. A car can be an essential item needed instantly and I don't see much difference in tightening your belt to save for one monthly verses pay credit for one monthly, particularly with 0% interest deals.

I have mine on finance because there's no way I could afford to buy a car outright. I get 5 years warranty and roadside assistance and I'e got a service plan as well so I don't have to worry about that. It'll go back after 3 or 4 years so I don't have to worry about it being out of warranty.

Our sofa is also on finance. Why would you pay cash up front if you can get 0% finance? We could have done but it didn't seem worth it.

We have a car on finance, could afford to buy one but there are benefits to finance, we have a brand new car, no mot, no road tax, free service, no depreciation of value, we hand it back within 3 years and get another new one, works for us. Had a few cars we owned previously which were just money pits you pay for that all up front but its not what op talking about youre talking about a lease op talking about debt

@bingbongnoise My brother is a mechanic and yes he agrees older cars are harder to fix, because of electronics.

I spent the over £500 on fixing my electronic locks for my 2005 Ford Focus. At that point in time, I longed for wind down windows!

I accept that I may have been fortunate (and have only ever driven Japanese cars) but 30 quid for an MOT once a year seems infinitely less hassle than worrying about mileage and damage on a lease car

We avoid losing out from depreciation by buying cars that are so old they won't depreciate any further!

And old cars are simpler so cheaper to fix, plus they don't have the complex electrics that are so prone to going wrong.

I'd be intrigued to know what the environmental impact of car manufacturing is. I wouldn't be surprised if keeping them running turned out to be greener than to get a new one every 3 years.

I've had two new cars - one with a loan that paid for it outright and one with finance. At the time it was expensive but just about manage to afford them. I liked having a car I knew would start first time, get me to work and have a good safety rating. I'm now on maternity leave and have a 20 year old Honda. The only way it works for us is my DH buys the parts and fixes the car himself, otherwise it wouldn't be economical. However, in an accident it is not as safe as a new car. I can see why people would pay for a newer car and they've prioritised that, but for us I'd rather use the money on days out, savings etc.

@GPatz

I’m not talking about a run around, but debt for the sake of a flash car!