for treating financed cars as unaffordable?

[Youraveragelass]

I was having a discussion with friends about cars, having issues with mine at the moment, and it has made me question my thinking around cars. There are some beautiful cars on my estate, and while I’d say I can’t afford one, I could afford the monthly repayments but I just couldn’t afford (or want) to put £100k down to buy one outright. That is the extreme of course, and I could buy something secondhand, which I do, but I can’t ever see me going beyond my means for a car.

This seemed to be such alien thinking to my friends, they didn’t understand why owning it outright matters to me. It’s made me reconsider how I think about finances more generally. I’ve never had anything on finance, and the idea has always made me feel uneasy. My default has always been that if I can’t afford it outright, I don’t have it.

I guess, I just wanted to know whether I’m being unreasonable to hold this view and need to lighten up on such strict viewpoints or whether I’m not being unreasonable to be cautious about a depreciating asset.

I had to Google a couple of the cars prices before I posted this and unbelievably, they are not cars I would consider “super cars”. The Range Rover one of them has is coming up at a starting price of £105k! Add on extras and I dread to think the actual cost. The Porsche Cayenne is another really popular one which is upwards of £80k.

Yes I don’t get the snobbery re Skodas either, they’re pretty equivalent to VW. My wealthy in laws had them and loved them. Loads of other options anyway.

I think this is where my mind runs to when I consider any form of debt. I also think that taking on some debt would make it easier to add to it, what’s an extra £100-200 a month but then you end up in a situation where your monthly income comes in and the money goes straight back out and I would hate that!

My late dad had a thing about. buying a new car every three years. In part because he cared what the neighbours thought. The last, a Toyota, was passed to us when my mother had to give up driving. It’s now 21 years old with 150,000 miles on the clock. The only major work was to replace an alternator. We park on the street in London so the bodywork is quite battered, but apart from an annual service and the odd tyre it costs us very little. We have saved a huge amount over the years. Luckily we don’t care what the neighbours think.

I used to be taken the mick out of in a previous job for my car but it was a second hand owned outright. The car park was full of audi's, porsche and jags.

Then there was a massive industry downturn and within a month or so the carpark changed dramatically plus lots more spaces!

I also have a friend who complains she is struggling wants to move but cant afford it etc etc.....they have 2 cars on finance in excess of £900 a month and just refinanced again 🙄

I will never do it we save up and buy what we can afford we know when they are on their way out so we trade in before getting to right off point.

IME it's not normal for a new car to be high cost at the end of a loan. I tend to keep my cars for 12-15 years - around 300,000 km or more. I get a new one when cost of repairing is more than the value of the car.

You get deprecation on a car you own but that’s factored into the lease price each month. A loan isn’t quite the same thing if it is with a bank. Leasing can be great but we bought a 6 month old ev with a whacking £23,000 off the new price. Leading was based on the list price and, even with depreciation, it was cheaper to buy. We have the money though. No money - buy a reliable brand and hope for the best! There’s no cheap way to own a car or run a car.

This is exactly why I'd never lease a car either!

I've just bought a 2nd hand (1 year old) car. It was well under £20k and I've still got plenty of warranty left - and I'm hoping to keep it for a long time. I only bought it because my other car was written off a couple of months ago, and I got a lot more money from insurance than I would have if I sold it privately. thankfully I was unharmed, and I obviously can't recommend this method of disposing of a vehicle as it could have had a very bad outcome

I'd far rather own my car outright, as I've previously been made redundant and would hate to be in a position where I suddenly couldn't pay the lease...

We have considered leasing, but always work out the total costs over the period of 'ownership'. The cheap leases often seem to be on very low mileage, and when we have factored in costs incurred when handing back a car have always steered away and bought either new, if the deal was right, and preferably with 0% finance, or paid for outright from our savings, or a few months old. We usually keep our cars for at least 6 years, and try to take the decision with our heads. Our current car, until next week is a Skoda Octavia, which we bought new in 2017, but it was a showroom model with a lot of extras. It has been absolutely brilliant. We are only selling now as the mileage is nearly 80,000 and although there is nothing wrong with it, we don't want to get any big repair bills on an older car. The car cost us £18,000 on 0% finance, we have got £6,000 trade in, so it has cost us £12,000 for over 8 years, so £1,500 a year. £125 a month. Never let us down, only 1 big bill for the cam belt change. Our daughter is on her 3rd Mercedes in the same time and her costs are an eyewatering waste of money to us.

I think it depends on the type of finance. I tend to think lease cars aren’t worth it, but getting a very low interest loan to pay for a car over several years and own it at the end might be a sound financial investment if it allows you to get what you need new (buying a car new and maintaining it being, normally, the most cost effective way to get a car). When we needed a 7 seater we could get a second hand one that would last, a new one outright that we’d grow out of (3rd row not suitable for teens) or a new car on finance that would last, had better mileage and a few useful features the second hand cars didn’t. We’ve had 6 years now, paid it off last year. It’s still a lovely car, our nearly adult kids and their friends are still comfortable in the back. It was a good buy - less risky than second hand, which we might have had more problems with, and has lasted in a way the smaller new car wouldn’t.

Our car is a ten year old C-Max, bought at 2.5 years, ex-Motability, only had 5k miles on the clock. It now has c45k. We traded in two older vehicles - it was £12.5k, including them. So far it's been £130 per month on that basis. Cam belt etc has been the only big bill, but Fords are relatively cheap in the workshop. Fingers crossed that continues. I wouldn't consider finance as there are too many variables.

I would never choose to have a car on finance and I certainly wouldn’t lease one. I want to own it if I’ve paid for it for years! My last car was on finance and had a catastrophic engine failure with just under 3 years left to pay. Paid to rebuild the engine, kept it for a few more months, then paid off the rest of the finance and part-exed it. Now got a far less fancy car but one that suits our family better and we own it outright.

None of the above would have been possible without financial support from DH’s parents! We’re not in a financial position to buy decent cars outright but sometimes you need things more urgently.

Free will and all of that.

We have a lease car. Nothing super fancy and we could afford to buy it outright but we like being able to change every couple of years and not having any worries if problems develop. It’s our luxury, mortgage is paid off and we are financially comfortable so it’s a no brainer for us.

It rather depends on your definition of wealthy I suspect. All those shiny new Range Rovers the royal family use are leased from Land Rover. For many UHNW individuals the every day cars - be they Range Rovers, Bentleys, Mercedes of the like are simply leased. But the fun stuff and classics are generally purchased.

I bought my car at 6 years old , 8 years ago for 5.3k. With the way second hand prices have risen, it has barely depreciated at all - I reckon it would go for £4k based on what's on auto trader. So at the moment my car has cost me just under £200 per Year in depreciation. So no one is going to be able to persuade me leasing is good value. Yes I have the cost of tyres etc but my car is small - it needed 4 new tyres last year and the total bill was £200. It's a great little thing and I intend to run it for as long as it is prepared to serve me for.

@Namechange568899542 Most of us with bigger cars use them for more than that! Our Discovery has taken dc and all their stuff to university, on numerous holidays as we’ve had 3 Range Rovers and 2 Discoveries, as well as taking othes around as we have 7 seats and we visit family where we could use one car. We do country horse events and these cars are great for off road too. Tesco and school? Yes, but so much more use in life. Not that we’ve spent £100,000 on ours.

My car is a 65 plate. Cost me £10000 second hand. I'm another one who's scared to lease, mainly because I don't know where people find the monthly payments. It took me years to save for my car and, hopefully, by the time it dies, I'll have saved enough for another 2nd hand one.

Having said that, all new cars look the same to me now. Just square boxes. My car is zippy looking and has character. I don't it to ever die.

@RawBloomers New cars are most likely to depreciate the quickest. Some highly desirable cars keep their value well but others lose a vast amount when you drive them off the forecourt. Many EVs plummet. Always look at neatly new. Having said this, some car prices are holding up well.

For those leasing, the amount of depreciation affects leasing costs. If you have money in the bank or prefer to own you car but it, but f you earn money but prefer a worry free car, lease one but you pay a lot.

No, £100k won’t be anywhere near getting you into a new supercar. You’ll want to double that at least.

We have less than 2k in savings so we just couldnt afford to to get a reliable car outright. We took a car on finance and then when it came to the final end payment of 10k we took out a bankloan, in a few years we will eventually fully own the car. I'd rather it this way, than have bought the only thing we could afford and then have loads of repair bills/it only last a few years.

People that dont agree with cars on finance; do you feel the same about mortgages? Only buy a house if you can afford it outright?

The issue with buying nearly new is that you don’t know how the car has been treated or behaved before you got it. Buying new minimises maintenance risk and if you plan on keeping a car long term (10+ years) the initial depreciation loss can be less significant than that maintenance risk.

It's really simple. If you buy a car outright, you pay one lot of profit, to the car dealer.
If you buy on finance, you pay two lots of profit, to the car dealer and to the finance company.
Some people are happy to do that because they want the car immediately & can't be arsed to save up. And some people see a car as a status symbol.

I'm with you.OP. I'm on a budget and need a tidy, reliable, low hassle car so I buy for cash, 2yo, low mileage for about £14k and keep them for 10 years. Works out £117 a month for the car. And I put aside £120 a month so that when it finally dies, I have cash to buy the next one.

But people can do as they choose with their own money.

The main day to day car I drive cost over 100k to buy. I own it outright however it has depreciated over the time. There are pros and cons, I always think MN has a view it throws around that luxury cars are all financed. Often financing a car is a smart choice despite what MN says. I own this one because I quite enjoy it and i don’t mind that it gets older ever year. Normally “renting” a cars use for a few years the switching for a newer option works well for lots of families.

I think you shouldn’t stretch yourself for car, however financially it can make sense to not own it. Just like in many countries renting is the norm and if you fall down a financial YouTube spiral you can actually see that in some countries owning a home is not quite the appreciating asset we have here.