The thing about car purchasing is a mindset.
Car manufacturers have launched the various lease and finance plans because they can ensure a steady market for brand new cars with people who can’t actually afford new cars buying a new one every 3 years.
Its a successful marketing ploy that has told a generation that a) they deserve and need a new car b) that buying a car which isn’t new is more expensive in the long term and c) has built fear and worry about facing any kind of maintenance or on-going car costs.
Yes, most new cars are now bought via finance plans. People generally cannot afford the price upfront of a brand new car. However, whereas in the past, people had what they can afford, today a generation feel a new car is what they are entitled to and because finance is available, think about the short term and take it, even though over the long term they pay vastly increased prices compared to what they could have reliable motoring for. If people make these choices, they need to see the bigger picture - that is onto other areas of their finances. Paying £400 a month for cars means £400 a month not available for other things. That’s not so bad when it’s a holiday ri other luxury which takes the hit, but actually for lots of people now, it’s money they need for fuel bills or their weekly food shop. Yet still people take out expensive car finance and go for new cars through both a sense of entitlement and fear of facing ongoing costs. Who wins…the car manufacturers.
People need to take a longer term look at their finances. It’s not just about monthly affordability but long term spends.
Why is it people believe that buying a 4 or 5 year old car is a dangerous thing to do rather than a financially savvy one? A 4 or 5 year car that’s been well kept can be as good to drive as a new car. We aren’t talking about new vs a banger. A car bought at 4 years old and kept for perhaps 4 or 5 years will be cheaper motoring compared to paying for new cars across the period.
The trouble is that people live hand to mouth. They spend all their monthly money and never accumulate a chunk of savings. In itself this is partly due to monthly payments on cars and sofas and paying for maintenance plans up front monthly. What they need is a couple of £k set aside, so when the car needs an item replaced for £300 they can pay it. The thought of that needs to not strike fear into them, but instead they need to realise that occasional payouts of £300 for things that need replacing is CHEAPER OVER TIME than paying high monthky payments indefinitely.
People get trapped into monthly payments. It’s what the car manufacturers want. The monthly payments prevent them saving, so when the scheme comes to an end, they can’t afford to buy out the remainder of the deal or to buy a car outright, but instead have to start another plan. Yes, they get a new car which they like and are told they deserve and is needed for any self respecting person these days and will avoid maintenance costs which will cripple them, but essentially they can’t actually afford it. That’s why they feel poor in other areas and is a key factor that makes it hard for many people to get on the property ladder.
Escapimg the car finance trap isn’t easy once you’re in it. Accepting it is fine to drive a car for more years and not starting another plan when one is ending is the key. It’s the same with mobile phones. People start a new contract for an upgrade when they could stick with the phone they now own on a sim only deal for another 2 or 3 years without any problem. It’s a mindset and one where people live tied to finance and monthly payments for loads if stuff and find over time the impact is things like retiring 4 or 5 years later, renting for longer, not being able to upgrade to a bigger more suitable house….but they can’t see the connection between their wider finances and affordability and their choices to take finance plans.