How do lots of people afford the brand new luxury cars ?

[Stroganoffo]

Keep seeing 22 plate Mercedes, Audi , BMW and tesla, when I was little these were quite rare as only the wealthy had them. Now it seems everyone has one considering the average wage isn't that high and the cost of one is 50k. I have a good wage and still don't want to fork out lots. How are people affording them. Is it all on credit ? Aren't people worried with everything else going up and the cost of living crisis ?.

This

PCP has some of the lowest criteria going.

"Do you have a pulse?" Yep. Credit approved!!

PCP accounts for about 80% of new cars sold allegedly. Hardly surprising given the low monthly payments and easy access to a new car that most can't afford to buy outright. They're geared to extract the maximum return in profits/sales so has to be easy to obtain.

Generally speaking there is no point in owning a car outright as it will depreciate in value

If you want to run new cars all the time then this may be true. But if you buy a 2 year old car and keep it till it’s 10 that’s a lot cheaper than paying monthly. 2 years at 400 a month plus 2k is 6800 for the first year.

If driving round in expensive brand new cars is important to you then fair enough and you have to pay for the depreciation somehow, but it cannot be described as financially smart whether on lease or bought outright.

Exactly - these threads always contain at least on statement like -
Only a financial idiot would buy a depreciating asset like a new car outright.
But owning a car isn't like Sir Fucking Alan Sugar buying a new office block. Unless you are very lucky you're still paying for new car depreciation - just in a different way.

It depends on residual value, rate of depreciation, etc. It needs to be calculated on an individual basis. My car was 2k a month to lease but depreciation in the first 3 years was 60k so I was quids in buying outright.

Not so much these days.

I bought my small city car brand new outright four years ago (with the benefit of a £2k scrappage scheme). I've just checked and with its low mileage and the second hand car market as it is, my car is now worth almost double what I paid for it. If that's depreciation, I'll take it thanks.

@MissConductUS I agree with your post. I bought new last year, nothing flash, a super economical hybrid, but before I did, I checked out lease options and couldn’t find anything, even a little corsa under £250. I ran the figures on my new car vs lease and yes, of course included depreciation, and it came out the same when inputting a realistic mileage not the stingy allowance the headline price includes. I double checked with a pal who always leases and they confirmed what I had found re: lease costs. Certainly at the modest car end there weren’t super deals to be had. I‘d rather order my own and not worry about mileage and any potential damage at handover. Depreciation is dead money but so is cash paid to lease companies.

I imagine the majority of new cars are leased or on pcp. They can afford the payments but don’t have the money available to pay for the car upfront. They can’t technically afford it but leasing an expensive car makes them feel like they can.
There are still people rich enough to buy them outright.

That’s like saying if you don’t have the cash to pay for a house outright you can’t afford it. Which is clearly bollocks.

I know some of the people on higher salaries at work (NHS) are doing salary sacrifice to avoid more money going into their pensions as the tax bills on the theoretical pension money can be astronomical. £1000s of pounds tax that needs paid upfront because inflation is high.

Everyone has different ideas and what works for them. Personally I wouldn't let "what ifs" rule my life or my car or whether I wear my diamond earrings everyday. I do buy adequate insurance though that has never let me down.

Debt, finance or leasing

They’re not comparable but if you want to compare them then go ahead. Most people driving new cars can’t afford to buy them outright. If you’re driving a £50k car and don’t have £50k in the bank then you can’t afford it.
A bank has the right to call in a mortgage at any time so I imagine lots of people can’t truly afford their houses either.

A mortgage is a debt too!?

Precisely. So it’s exactly the same as paying for a car on finance. Obviously people who pay for their possessions in this way, whether car or house, can afford them. Presumably you think you can’t afford your house if you have a mortgage?

I think you don’t own your house if you have a mortgage !

The difference being a house appreciates in value over time. You can borrow against your house . Not your car!
I’m sorry if you don’t understand the difference!

That’s odd because it’s your name on the deeds. Appreciation or depreciation is an entirely separate issue. I’m sorry you’re so confused.

Your name might be on the deeds but the bank owns it!

Then why isn’t the bank’s name on the deeds?

I have no idea ?! Why don’t you Google it !
You sound upset ! Has no one explained finance to you before . The bank owns your house until you pay off the mortgage? Your name may be on the deeds ?? I’ve no idea - I’ve never seen deeds before ??

That’s a shame. My deeds are in a drawer in my house with my name on them. It was added when we bought the house because it was my house from that date, not the bank’s. My apparent lack of understanding of finance has led me to paying off my mortgage. I expect you’ll see your deeds when you pay yours off. ☺️