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 don't see much difference between saving up for a car, or getting a loan and repaying it. You're £300 out every month either way and hopefully your new car doesn't cost so much to keep on the road.

I'm not a fan of PCP or leases, I'd rather get a loan and buy a car outright. Then once the loan is paid off it is a nice bonus cash wise every month.

We spent £20k cash on lightly used second hand cars twice. Both of them had catastrophic failures and cost us thousands to rectify. Now we lease cars that incudes all repairs and warranty, it has cost us less than repairs plus depreciation of the cars we owned outright.

Excuse my ignorance but what is the advantage of using finance over just getting a normal bank loan? I was wondering why people essentially go for a long term hire rather than owning a car or am I missing something?

For example last year we bought a four year old Golf at a cost of £14,000 ish - we traded in our previous car for £3000 and then took a bank loan for the remaining amount. It costs us around £290 a month over three years in loan repayments and at the end of the loan period we will have a seven year old car worth maybe £7000 which we could use to trade in for a new one or keep for a few more years. In the mean time we own the car so are not concerned about keeping it spotless, we can drive it as much as we want and do what we want with it etc

Because I like to drive new cars, so lease and swap every 3 years. I can afford it. No, I don't want an older cheaper car instead, I have driven old cheap ones long enough.

Do you realise that even a standard hatchback like a vauxhall Corsa starts at 20k new? Second hand cars are obviously less, but that's still going to be a hefty chunk of money for a car that's say, 3-5 years old. Older than that and you have to start weighing up how much life is left on the car and when the more expensive repairs will start to kick in, or how reliable it will be.
I have been able to buy cars outright, I saved up for my first and ever since put enough in an account each month for the next one, treating it as though I had a monthly car payment essentially. But it's entirely understandable why people aren't buying outright, especially if they are needing a bigger, more expensive car.

The interest rate I pay on my car loan is far lower than my money earns in a savings account. It is definitely lower than the average rate of return on my long term investments in things like stocks. It would be insane to pay cash for a car as it would cost more money to buy outright.

I buy a new car on PCP approx every 3 years. We’ve paid off the mortgage and it’s my one indulgence. I never get stuck with a car that’s worthless/unreliable and enjoy that New Car Feeling each time.

We currently drive a 15yr old small hatch back, with 125k on the clock. I’ve had it since 2k miles & it’s done me an absolute turn. I refuse to jinx it so you can make assumptions about reliability 😂 But it’s got me this far!

When it eventually packs up, I’ll have to spend £20k to get something similar & do the same again. (I’d rather invest that money). This one had cost me half that. I can’t bare the thought of finding that kind of money & spending it on a car when people treat them so badly (door dings / keying / parking knocks etc). So we have resigned ourselves to the next car being leased. 1 months money down, 36 month agreement & throwing the keys back at the end. It will be more expensive long term, but the convenience of the warranty & no maintenance exceeds that for us. We won’t be getting anything fancy though.

I was totally unconvinced on this approach until I saw how expensive used cars are these days.

I have wondered about lease cars but usually just buy mine around 5 k. My issue with lease is the mileage limit. Is this not an expensive problem?

My DH gets a car allowance as part of his salary. He is not allowed to have a car older than 5 years old and there are a bunch of rules around the kind of car he should have - basically it needs to be a decent enough size that if required he could have a couple of colleagues in the back. We never previously had new cars but now, we are pretty much left with no choice but to take out pch deals. We bought a new car when he first took on the role and it will be paid off next year and that will be his 5th year. It would be madness to buy and sell brand new cars every 5 years so on the anniversary of our previously new car being paid off, I will keep that car until it dies and DH will pch another new one and do that on a continues cycle until her ever left the role

No, of course it isn’t, I guess as many posters have pointed out it all comes down to priorities. But really to me they are all just metal and rubber. But I understand it’s not the same for everyone. It just feels like throwing money away to me!

Being honest I would like a really nice brand new car but the only way I could finance that is a bank loan or £££ on lease and I know in my heart of hearts that's not a cost effective way to run a car.

Until recently me and DH shared a car that we bought brand new for cash. Nothing flash, a middle of the road reliable make and the only costs has been minor prangs (not all DH fault!) that still somehow cost loads to fix.

Anyway I wanted my own car so I've settled on a 2 year old approved used bought using savings. Means the vast majority of depreciation has already been paid and it's relatively new.

I put £200 a month into a car fund for the next one. I could spend similar on lease but at least I own something.

My car is on its way out of its usefulness vs cost to repair/reliability for me, I'll probably get £1k for it if I'm lucky. I bought it outright 6 years ago when I had a small windfall but due to various life circumstances I haven't got savings available to buy anything near what I need - something that can handle 25k+ miles a year reliably as I work all over the place. So when it goes I will use whatever I get for this as a deposit on a lease car and just lease one instead - I won't be getting anything flashy but you can get leases that include servicing and MOT etc as well so it'll give me peace of mind that at least that's covered.

Depreciation

MOT

getting a new car every three years

no brainer

Also there is often a significant outright payment to the tune of several thousand pounds, which people must pay hence discounting the argument of “I had no money” for leasers.

This is it, once you’ve got one car you may as well put the same amount away as you’d spend on a lease and then at least you own something

• Because I can't afford a huge lump sum outright
• Spread the cost
• Fixed rate of interest
• If something goes wrong with the car the finance company will help me (because they own the asset) the bank won't care
• To keep savings in the bank in case I need them

I do have a £ buffer, but it's for things like the boiler.
I wanted a very reliable car. I had a good deposit and got the rest on finance. £266 a month for a second hand VW Golf. The 2 years of perks from the dealership have been good.
I am a lone parent living rurally and weighing everything up I felt this monthly out lay was worth it.

I'm 55 and after a life time of buying cars that 'will do' or do well for a few years and then need endless trips to the garage I decided I didn't want that any more.

For PCP deals there's a balloon payment at the end to own the car, is this what you mean?

With a lease deal you pay a deposit (can be as little as 1 month's payment) and then at the end you just hand it back - you'd only be paying a big chunk if you'd damaged it or gone way over your mileage I imagine. Hence why a lot of people just lease and then swap out for a newer car at the end of the lease, no big upfront payments.

Because my car broke down and I couldn't afford to buy a new one outright.

I think some people with poor credit may find it harder to get a bank loan vs a finance agreement, but happy to be corrected

I have a car on finance (personal loan not PCP so no I will own the car) because I do a LOT of mileage in my job, and my company gives me a £800 per month allowance to ensure I can do my job in a road safe vehicle. My finance is less than £400 for a 25 plate small SUV so the allowance also covers my insurance and wear and tear with plenty to spare so I still make money on the arrangement

There’s been multiple threads on this.
People buy on finance at all ends of the spectrum. If you’re well off you lease and replace the car every three years. Why would you buy? If you are poor you either need a loan or finance as it your only way to access a car - At least a new or newish one which is desirable for reliability. Some people want what they want and prioritise the car over other things in life.. everyone reasons are different.

This sounds like a good deal, to be honest I’d never heard of car allowances as part of employment packages before this thread!

There is a difference between buying a brand new car and getting a second hand one on finance.
Both are finance agreements, but are probably taken out for very different reasons.