AIBU to buy a nearly new car outright?

[Aroaringfire]

I know this might seem silly but I can't tell if I'm being 'old fashioned' or if people are mansplaining to me. It's not meant to be a goady thread about having money, more getting cold feet about big purchases.

Essentially, I have a job where I use my own car for work and it's part of the contract I have one. When I first got into this work a few years back I and DH went halves on a budget car to get me started. Since then I've been putting money aside each month for a new car. I'd anticipated that for a deposit, but budget car has lasted a lot longer than I expected, plus I got a promotion two years ago and I've been using the extra money to add to the pot. I'm lucky that I've now got 9k in my car fund.

My work miles mean high mileage, and it's variable mileage which I can't control. For that reason leasing is out, and PCP doesn't seem a good fit. PCP deals are aimed at people doing less than 12k a year. Mine is usually 15-20k and while I know some will finance, they charge a premium for doing so - definitely not eligible for the tempting advertised deals. Hire purchase seems pointless if I've got the funds as the deals aren't comparable (they're usually just list price plus interest, and interest for HP is usually 12-14%)

So the way I see it I could buy a budget brand car that's less than three years old. I could then keep putting money aside each month and in 5yrs time buy another car the same way. A bit like what I'd be doing with hire purchase but without the interest.

I've mentioned this to some male members of my family and pretty much been told I'm an idiot. That noone buys cars outright these days, they'll see my coming etc. Either I should get the latest popular brand on PCP or I should buy an old saloon workhorse that's already done 70k for a couple of grand.

I totally get that most people buy cars on finance, and if I buy outright im never going to get a big fancy car, but surely for my individual circs this way makes sense? I don't need a big car, nor can I risk a gas guzzling liability. Im not bothered about newish for the sake of it, just something i can be confident will be reliable and last me a good few years, and is efficient/ cheap to run (particularly important when work mileage isn't generous!)

I was brought up not to use credit so I'm aware that that influences my spending compared to some peers, but i think I'm being logical - please tell me if I'm wrong.

Nope.

I will buy my next car outright. Its cheaper long term. AND if you do a lot of miles none of those leasing/finance deals will seriously consider you or give you anything like the headline per month cost. If you are doing over 10,000 miles a year or definitely by 15,000 it doesn't make the same economic sense (if it ever does).

I think what you've done is very wise. I dislike debt and the one time we bought a car through finance it ended up being very expensive because we had high mileage.

This is what I do OP, that way the car money is there for the next car or if disaster strikes for any other emergency. I also like the security that if my financial situation hits the skids I can live in next to nothing and still be able to drive (essential for the work/hours I do)

No, this is how people used to buy cars - save up, trade in, buy next car; save up, trade in, buy next car; rinse & repeat.

A lot of people will advise you’ll get a better deal secondhand on a 2-3 year old car, and this is probably true, but if you want the security of it bring new and under manufacturer warranty (& no MOT etc to worry about) then it’s fine to buy new.

Yes, not paying interest is always a winner. Buy cash. Especially when PCP deals are 10%+ APR. One thing to watch out for is that selling it for cash will lose you more money than PX, when the time comes to change your car.

By the way, debt in itself is not a bad thing, not wanting to have debt is never a good way to think about purchases. But in this instance buy cash because the math will add up.

I wouldn’t talk about stuff like this to opinionated family members-it has quite literally nothing to do with them. Do what you want to!

I’d never had a car on finance-I doubt anyone would know that through because I don’t discuss it and it’s nothing to do with anyone else.

Your thinking sounds very sensible.

It's what I do. I've never borrowed money for a car. I had old bangers when I was young and then bought from savings once I had a job and had got some savings under my belt. I'm in my 40s now and have never bought a car another way.

I bought a 3 year old focus for £8000 outright and I’m very happy to have a nice “new” car (by my standards anyway) without any of the little niggles happening yet, and looking forward to another couple of low-hassle years without the pain of £300 a month leaving my account!

We always do this. We buy nearly new and part exchange or sell when the car starts to go wrong ie £100,000 miles or so. I don't understand the argument against this.

I'm doing the same - a relative has a car on pcp and when it runs out I'll make the balloon payment - I like the car and I know how much I need to save already!

We've never used car finance, always buying nearly new cars outright (this year for the first time we got a brand new one outright only because we got a great discount as it's electric). BUT if I used my car masses for work I'd be inclined to consider renting a car and offsetting it on my tax return.

It’s not widely known you can often buy the car using the dealers finance offer but pay it off straightaway without penalty so effectively buying it outright.

It is a good way of trying to get a better deal on the car - I got a free servicing plan and a higher part ex figure. The quote for paying cash was nowhere near as good.

Make sure you fully check all the small print though!

Especially when PCP deals are 10%+ APR.

PCP deals are only 10%+ if you allow yours to get ripped off.

One thing to watch out for is that selling it for cash will lose you more money than PX, when the time comes to change your car.

This makes no sense, it would be very unusual to get offered more as a part ex than selling privately.

Absolutely a good idea.

Look for an ex demo car if you can, it will have minimal mileage, will have lost most of it’s massive new car depreciation and plus you will get all the little extras thrown in. I bought one and it’s got a better spec that I could have afforded new.

Don’t get involved with PCP or lease, the underlining T&C are ridiculous and the finance companies will always want their pennies at the end of the day

I think some people are very opinionated about car finance being the best option because it justifies why they do it pay over the odds to drive a car they can't really afford

It makes sense to me and I’m a confirmed pcp-er! Unpredictable mileage is the key here and excess mileage makes pcp very expensive. And pay interest when you’ve got the money in the bank? That’s utter madness.

I think you’re being really sensible. Hone your haggling skills and you should be able to get something really nice.

I have cars on finance because it works out better for me - I don't do much mileage, like the security a new car gives me, and like to upgrade to the newer model after a few years. I also don't treat myself to much in life, so having a nice new car feels like my treat and something for me to enjoy.

However in your situation I would definitely buy second hand and I would look for something around £5k or £6k - you should still get something reasonably decent and depending on what car you want, if it's something modest like a Ford, Kia, Vauxhall etc you'll get a decent car for the money.

YANBU but it’s worth seeing what deals they might offer. I usually buy outright but my latest car they offered 0% interest if you put at least 50% deposit. So I did that and am paying the other 50% of price over 3yrs for 0% interest. There is no mileage limit. Meanwhile I’m coming out ahead because that money is earning 8-12% interest by staying longer in my bank account.

I've got a similar setup to you where I've opted out of the company car scheme and get a car allowance so that I can use my own car for work and the tax man also generously gives me money for the pleasure. I've always bought my cars cash, it just makes more sense to me and that way I know that if I lost my job I'd still have my car and wouldn't be struggling to pay for it.

Do whatever suits you.
I used to have a car on the Ford options plan, traded every 3 years for brand new. Did it for years.
Circumstances changed.
Paid the balloon payment and kept it a few more years then but a car a couple of years old outright.
The way things have worked with covid I'm glad I didn't have to find a couple of hundred quid every month

I’ve never used PCP. I have previously taken variable term bank loans out and repaid as soon as I could.

My most recent car was a year old ex-demo model and I was paying cash. The salesman did a very hard sell for PCP and, when I declined, had his manager come to speak to me to basically tell me how very silly I was being

I figure if you have two used car salesmen pushing something so heavily, you’re not the one who’s going to benefit most from it.

That's what I do op.

Although I hadn't thought of this option. Will bear this in mind in the future. Thanks sandla

It’s not widely known you can often buy the car using the dealers finance offer but pay it off straightaway without penalty so effectively buying it outright. It is a good way of trying to get a better deal on the car - I got a free servicing plan and a higher part ex figure. The quote for paying cash was nowhere near as good. Make sure you fully check all the small print though!

Yanbu my family and I always buy our cars outright

We tend to buy either ex demo/ fleet cars. Occasionally it's cars which have been owned by an elderly person who buys a new car every year but only uses it to go to the shops.

You are not Old Fashioned OP just very sensible with money. It's an excellent way to buy a car and still have the security of having cash put aside and no worries of a loan should times turn hard.

I would go for a Pre-registered or a car with at least one previous owner to avoid the big depreciation. My top tip though is haggle and don't be afraid to walk away, it's all to easy to get sucked in by the sales people.

Happy car shopping