If you have a car on finance, why?

[Cupboarddoorknob]

Genuinely curious and not a dig.
I’ve only ever owned three cars, my first car my parents bought for me was an old banger, then the other two I’ve bought myself one for £6k which I saved for and then ran it until I realised repairs were silly and sold it on for £3k to cut my losses, I used that £3k and a bit of savings to buy my now car which cost between £3 and £4k and seems to be doing well so far. DH has always bought his cars cash as well.
We have friends who have up to £1k a month going out for car payments, all the while they are stressing about their outgoings, not able to save, not living in poverty obviously but it strikes me as total madness to have this monthly expense on a depreciating asset, even if it does bring a level of enjoyment.

I haven’t now as my car is paid off but I have previously chosen to get a car on finance as I needed a better car than I could afford outright with young children. I got it for the guarantees and protection buying through a dealership offered. It wasn’t an expensive car, about £5k and three years old but it would have taken too long to have saved for at the time I needed it. Currently my car is paid off but I’d get another through finance if I had to.

I'm not sure I get it either. But then I'm not really into cars. I just want one which is reliable. I sold my Nissan Micra for £4k as it was too small for a pram and brought a Honda Jazz for £6.5k...so especially paid £2.5k for it. It was 8 years old I think, low mileage. I've had it for 6 years so far and never had any problems with it, just new tyres and brake pads. Whereas my friend is paying about £350 a month for her big black whatever it is on finance and she has had lots of problems with it.

I do, I suppose, see why it would be nice to get a new car every 3 or whatever years, but I feel like I'm saving lots of money instead. Maybe when my Honda dies...

I've always bought outright except my latest car. 2017 Aygo bought new for £12k. Got £2k scrappage for my old Ford Ka that was worth <£500. £10k PCP at 0% over 3 years, £150/month plus balloon at end. No brainer.

I have two cars. One which I had paid off through finance and the other is financed. It is very expensive and, I like a nice car. I earn a good salary so I sort of think why not. But, probably not sensible.

Honda Jazz’s are apparently indestructible!

Had a car on finance. Get a monthly car allowance from work so essentially I use that. Just paid the balloon payment and now own the car outright. Had a low interest rate to be fair too.

I have had 3 brand new cars bought on finance, and 4 older cars bought outright. My new cars have been reliable and under warranty so stress free driving.
I think the problem is people who get a new car every year and the finance builds up so much your monthly payments are extortionate. I kept all 3 of mine for the full term and nearly kept my last one as the mileage was so low, but a brand new car cost the same amount for me on finance with new warranty so it was stupid to keep the old one.

Yes I bought a Mazda 2 earlier this month on PCP car finance, that's the way I got all my cars. Buy new, have a fixed monthly payment, and have little to no problems for 3 years, then swap for another after that.

1. Fixed cost. With monthly repayments for a car in warranty, you'll not have any shocks like a new gear box etc.
2. Sometimes the finance deal is better than buying outright. If the interest rate is 5% and I can get 10% return on my investment, well I'm better off financing. Also, large finance contributions, zero % apr offers, etc.
3. Liquidity. I'd rather have the lump sum and a fixed monthly outgoing than no cash and additional monthly surplus that I'll likely fritter away anyway.
4. Some people want the reliability of a newer car. Imagine a 50 mile commute with a car that they don't trust?
5. Salary sacrifice schemes for electric cars are incredibly efficient, especially if you're close to the 62% tax trap/nursery fee cliff edge etc.
6. Some people are financially irresponsible and want to keep up with the Jones's and just have to have the latest thing. I suspect this reason is the target of your post.

Because I didn’t have £13k to spend!

Youngest has one on lease can get a new one every 3 years it doesn’t work out a million miles away from how much you would lose on depreciation

I dont have a car on finance but I Lease one instead so basically rent it. £450 a month and I'll give it back after 3 years.
Why? Because I can't afford to buy one outright. I could save for one, but then I'd be without a car for the time it takes to save which I can't do. I rely on my car and can't be without it. Leasing means the car i have is reliable. No MOT needed etc.
Leasing a car is the same as renting a house. Financing a car is the same as getting a mortgage on a house.
Have you bought your house outright?
Pretty self explanatory I would say.

Those who ask nosey questions, why?

We've owned 5 or 6 cars outright and had bad luck. Cars chosen for their reliability and eventually something goes wrong, so you end up throwing good money after bad.

We do lease a 'fancier' looking car now. Chosen for its safety rating and the space it offers for camping or accommodating extended family/children's friends. We can afford it, I do think would that money be better invested in something else? However the peace of mind of a car in warranty and not having random 5k or 3k bills for us is worth it. Plus the practicality of the car itself. There would be no point owning it outright because in time we'd be in the same position it would fail and you never recoup your spend (unlike property).

That doesn't mean, I don't wish cars were cheaper, on the whole they are exorbitant. But that is all cars, and we would only save about £100 a month by having a less 'fancy' car but sacrifice on safety and space, which is to my mind worth the extra spend.

But you own it for it then to be worthless anyway? It's not like a house that goes up in value is it. No matter which way you look at it, the money is being a thrown away.
We need a decent sized car as we have 2 kids, go camping a lot, visit family that a far away and have to take a lot of stuff. A banger that could fail at minute is just not practical for most people. So then it comes down to buying and owning a decent car which would cost thousands, or leasing/financing one.

I’m in a rock and hard place/ I need a substantial car. I do so much mileage (self employed, about 2.5k miles pm) so would wreck a car in mileage racked up and in its value within 3-4 years) so would end up needing to pay out thousands for a new car plus repairs so frequently- PCP means I hand back and get new every couple of years.

I also need to be able to tow, so if I get a smaller cheaper car on pcp I’d need to buy a second towing vehicle or a horse box, and the associated running costs with that.

so I end up paying alot pm in PCP (£700) but I really can’t see any other way around it and I thankfully can recoup some via write off via business.

id love to not have a monthly payment but despite going round in circles with this, I think its the only real option for me. New cars mean no bills for fixing etc and it’s reliable for my work which is huge concern.

If you buy on fiance you can get a better, newer car, which (hopefully) is more reliable. We have paid cash for 'old bangers' and we often end up with costly repairs that ruin our plans and are stressful and highly disruptive. Can totally see the logic of paying more to avoid that. It's really hard to know when you buy a £3-6k car if that won't end up being more expensive in the long run because they tend to have problems.

However, when it comes to phones I have no idea why people get £1k phones on finance when a £200 phone is just as good...

Yeah, 3-6k was going to get you a less risky car in the 2010s than it is today. The sort of reliable second hand runaround people are willing to take a risk on is much less accessible now.

Seeing some people talk about the savings they've made with finance or leasing, I looked up a leasing scheme that is apparently available to me through salary sacrifice (it's not by my employer, but they've signed up to it)

I got a quote for one of their smallest cars (hatchback, most were SUVs, and they only have electric vehicles). With my mileage (including business mileage) it would be nearly £500 a month for 3 years! That's nearly 15k. And that's with the savings. And the range wouldn't cover what I sometimes need in a work day.

I think I'll stick to my second hand petrol cars for now!

Second hand cars aren’t cheap anymore and you run the risk of paying a lot in repairs and dreading the MOT every year. You might pay £10k cash for a regular 2nd hand car and after 3 years, if you’re lucky and had no repairs and it’s not cost you anything, you might then get £3/4k for it in part ex.

So you’ve lost £6/7k in depreciation and you’re also having to then save up another £6/7k to spend another £10k on a car. For what it’s cost over 3 years (£12 -£14k), you can get a new car on PCP and never have to worry about repairs, MOTs and get a brand new car every 3 years.

If you buy a cheap second hand car and are lucky that it never goes wrong and you keep it for 10/15/20 years until it’s run into the ground, it’s more financially viable, but many people want the security/ reliability/ no additional costs of a new car.

FWIW, I’ve never had a PCP deal, always paid cash but I absolutely get why brand new cars on finance can make more sense. If you’re talking about people spending £1000 a month + on a fancy car they can’t afford while struggling to pay other bills, then you have a point, but for your average car, it can work out cheaper having a car on finance.

This. We have a brand new EV on 2 year finance. We can afford it for the first time.

Time will tell if we decide to do it again after the 2 years. Love the car though

We shop around for good deals and go for fairly basic but decent cars. My current car is £160 a month and our family car is around £300. The dealer put in £3k deposit. I like having a new-ish car and prefer having a chunk of savings available in cash/investments rather than tied up in my car. I also like being able to hand the car back at the end of the 4 years (or earlier if our lifestyle changes) without the hassle of selling it.

We had the savings to buy our cars outright, but can easily afford the monthly payments so don’t mind paying the interest for those reasons.

Yes, and also if you are time poor and don’t have a reliable mechanic nearby having an older car can be very draining. I’ve got rid of oldish cars because they spent too much time in the garage being repaired, usually minor inexpensive things but all the inconvenience was worth investing in a newer car for my sanity!

Yet I've had old cars and never experienced that. One of our current cars us 17 years old and never broken down - just the annual MOT and service to replace tyres, brake pads and other consumables. A previous car hit 195k miles, again, nothing more than MOT and routine servicing. Those were bought new and carefully driven, properly serviced.

Even the older second hand cars we bought when we were just starting out weren't problematic. First car cost a couple of hundred and lasted 2 years without breaking down before we PXd it for one a little bit younger (still around 6 years old) which never broke down either.

I suppose it's a risk if you buy an older car as you don't know how well/badly it's been driven and whether it's been properly serviced, but like I say, we've had brand new, and old cars, between the two of us over 40 years of driving and maybe only broken down a couple of times.

The average lifespan of an average car on the road today is 13 years, and the roads aren't blocked with break downs!

It was never anything that would have left me stranded. Stupid things like the sunroof started to leak so the footwell had a massive puddle most of one winter. Or the boot catch wouldn’t lock. Or the bonnet catch was temperamental. Or the coil springs needed replacing.

All stupid things but means a trip to the mechanic when you don’t know! One spring it felt like the car was in the garage more days than I had it to drive, all for annoying little things.

My current car I bought on finance, I was 2.5 years old when I got it over 10 years ago. It took me 8 years to pay it off. But it is still reliable at 13 years old and I don’t plan on replacing it any time soon. The previous car we bought outright but it was only about £2k and was already 10 years old when we got it. Worse thing we ever did!