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.

There are a lot of dealer deposit contributions around at the moment (generally £1-4k). If you can get one of those with a finance plan and pay it off immediately without penalty, it might be worth exploring. They are on new cars, not nearly new though. But if they come with a 3 year warranty the sums could add up.

@PlanDeRaccordement

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.

Can you please tell me where you bank as 12% on a deposit account is incredible.

I currently have a large house deposit sitting in a 30-day notice account and getting about 0.1%. Would love to know what banks are paying 120 times that.

Car finance deals are shit. You pay through the nose, limited mileage and god help you if you get the tiniest scratch.

As far as your mansplaining twat relatives go - "those who don't understand compound interest are destined to pay it all their lives".

I worked in fleet management for a while. Even high usage commercial vehicles are unlikely to need expensive repairs up to around 7 years of age, assuming regular servicing etc.

If you buy an 18 month to 3yo car outright and service it regularly, you can expect it to cost very little for the next five years, maybe longer- tires, brake pads, bulbs, wipers will always need changing every now and then.

I have a 6yo car that I've owned for almost 5 years. Paid £8000 for it. I spend £300 per year on servicing and MOT, and in five years have spent about £700 on tires, brake pads, bulbs etc. Just over £10k total. Same car on finance would have been around £300 per month. So £3600 per year. So I "broke even" at around the 3 year mark, if that makes sense, at which time the car itself was still worth about £4000 to £5000.

Its a no brainer.

@PlanDeRaccordement

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.

You have an account paying 8-12% interest? Bank of England base rate is nearly zero. Where are you getting this?

If you can buy outright, throwing away money on finance, particularly when it is tied into the mileage you do, which you are not in control of sounds mad.

I bought my current car about three years ago, it was just over a year old and had only done less that three thousand miles.
My only regret it that about six months after buying it, they installed a gazillion charging points for electric points near home.

from what I can see PCP is only cost effective if you always want to be driving a newish car and would upgrade every 3-4 years anyway. We buy 1-3 year old cars outright (when depreciation has done its worst) and grind our cars into the ground, and this is far more cost effective.

The leasing/pcp models are designed to keep you on a payment treadmill. You stop paying and you fall off - no car for you. If you own your car outright and come into financial difficulties then at least you have a car and no debt. If you are still paying for the car then you have to find money in your budget to keep paying no matter what.

We bought a year old car last time and will keep it for about five years before looking for a new one. DH gets a car allowance from work which would pay for a nearly new car outright over about three years. Keeping for five means that we’re quids in.

We buy cars between 1 and 3 years old and outright. We're saving for the next car all of the time. The savings fund is also useful as back-up rainy day fund as we could always have a cheaper run around instead of a 'naice' car if needed

Fairly new car without paying for the 'new' tag.

We don't like having credit or debt - another thing to have to balance and remember.

Thanks all, I'm glad to know I'm not the only one! I hadn't intended to discuss finance with family specifically, just it had come up in conversations about models that I was looking at and one of them suggested a more luxury brand that is out of my price range and that's how it came up. I wasn't expecting the reaction I got, and since then I had another family member get involved (after the first one told them that I was throwing money away ) DH doesnt drive and I had a bit of a wobble because its a sum I'm not exactly used to spending.

Re debt, I have a mortgage so I'm used to some now. But I worked minimum wage jobs for a long time before retraining which is why I haven't been in the habit of credit or allowing debt to accrue, as in the past I had no leeway to afford it. I do like the idea of keeping my fixed bills low if it's possible though. I'd rather be putting £300 into a savings account then into a DD.

I'm not going to buy brand new, I don't want to take on the high depreciation of very new cars. A three year old car would feel new to me - like the PP with the focus. I still listen to CDs on my current car

I would wait before buying any car at this time. I think that the price of not new cars will come down, given the large number of people that have or are about to lose their jobs and with more people wfh for a long time.

@PlanDeRaccordement where are you earning 8-12% interest in this climate?

OP I think you are very sensible. The ex demo idea is a good one. The car dealers/manufacturers do the finance the way they do because it makes more money for them! It's idiotic to think otherwise.

I'm not saying people who lease or use PCP are idiots by the way as everyone's circumstances are different. I'm using PCP because it works for me but I'm under no illusion that it's cheaper. In your specific circumstances you have sensibly worked out the most cost efficient way- don't doubt yourself because your "male relatives" think they know better than you.

@PlanDeRaccordement

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.

Where are you getting 8-12% interest please? My savings accounts are down at half a percent, maybe 1 if I'm lucky...

I have always bought cars outright. Why on earth not if you have the money there?

OP, absolutely buy outright, I always bought much older cars but my current one was 5 years old and £6k with 40k ish on the clock so I've been able to extend the warranty to ten years or 100k - peace of mind!

I think you are right. You earn rather than pay interest your way plus could Lee car for 10 years If you want no need to trade in after 5

No your being really sensible Op

Plus if you do way over the mileage for PCP its going to be very expensive. Much cheaper in the long run, plus if you cant afford the 300 a month you still have a car, you dont run into debt and can always keep your existing car for longer or buy a cheaper car.

Ive got several family members who work in car sales and all of them buy their cars outright, or do a PCP deal and then promptly pay off the car.

This the way I've been doing it since I got my first car back in 1985. I've slowly managed to upgrade slightly each time too as I look after my cars and keep them tidy in order to get maximum trade in price.

I started with an ancient Ford Escort in 1985 that cost me £1,200 and now drive a 15 plate Rav4 that cost £12k.

@itsblueisntit
I have a savings and investment account that I use to save for big purchases. (This account is not a U.K. account as I am in France.)
I then withdraw whatever I need. The money is invested in a mixture of cash reserves (currency trading), property and stocks, so I’ve been getting 8-12% interest on 5 yr average.

I think closest to what it is in U.K. is a stocks and shares ISA? but the tax and withdrawal rules are probably very different.

The only part of your post I object to is the idea of replacing your car in five years or so

I got myself an 8 year old Yaris for 3k that I hope will last at least five years. In fact, since my 9 year old Citroën lasted five years after I got it for £1.3k, I'll be mightily pissed off if it doesn't.

I will look into whether there's an option of finance deals without penalty though, I wasn't aware that could be an option.

I will hang onto my current car as long as possible but i can't keep it going forever. It won't be worth much part ex-ing so I'm going to pass it on to a family member who's learning at the moment, it'd be a decent first car. I must admit I'm excited about getting something more comfortable for my long distance driving.

You are being sensible, I have a friend who pays more than mortgage on a car and it's not even theirs at the end, wtf I can't understand

@thecatsthecats I'd have no issue with keeping it longer, but for me 5yrs is 80-100,000 miles, if it does keep going after that I'd rather not be taking it for long solo motorway work trips!

Just got a lovely Mercedes, few years old for that money. Will never buy new. Finance is the only option for some, but if you can eliminate debt and buy outright, do it it's a asset rather than another outgoing then!

Is there any obvious way to look for ex fleet cars btw?

Unless it's from a main dealer (e.g. Ford) get the AA or RAC to check it over for you. It costs £100-£200 and they will tell you if the mileage is genuine and the car is in good condition.

Well worth it.