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.

even the rich lease cars. The money you put into buying it outright, you could invest elsewhere and use the interest on that to pay for the monthly payments, keeping the capital. A lot of people get the cars via work schemes & through their business. If I buy my EV through my Ltd company then I reduce my corporation tax bill & pay a minimal amount in BIK. I don’t have to withdraw the money in dividends to pay for the car as the company is paying for it. I used to buy my cars 2nd hand and with a loan now I generally do PCP. I’m comfortable with payments & I can get a new car every 4 yrs. I got a very good deal on my latest car as it was stock they wanted rid of to hit government EV targets & I also had equity in my last car which paid the deposit. 2nd hand car prices have sky rocketed as well. My ex bought a couple if virtually new cars on PCP, think less than 5k miles on the clock/ex demo. I think if people are comfortable with the payments then what’s the problem?

But usually over the 4 years of a leasing deal you have in total paid for almost the purchase price of the car? You then have to hand it back whereas if you'd bought it in the first place you could then drive it for at least a further 4-6 years without paying any more, whereas if you leased you hand it back and have to carry on paying for the next car.
Its madness. Buy a 1yr old car - they feel new, a big chunk of the depreciation has already happened. Drive it for 10 years and it will guaranteed be a cheaper way of running a car.

I think there are pros and cons to both, no one is wrong or right, it’s just personal preference.
My boyfriend leases brand new cars and gets a new one every two years. He pays around £500 a month, which I find a bit silly. Whereas I have a 2015 car that I bought outright/own.

Pros for me: No monthly outgoing, feels much more arable, car is mine.
Cons for me: older model, less fancy/useful features, little things go wrong here and there leading to unexpected cost, sometimes pricey MOTs.

Pros for him: Brand new car, less chance of things going wrong, hefty monthly cost but no surprise repair costs, feels safer, high tech features, no MOT costs.
Cons for him: Large monthly outgoing that could be spent on other things. We could have a nice weekend away a month for what he spends on his car!

I lease my car. It isn’t fancy or a status symbol, a secondhand VW Polo. We have one car for the household. It gives me peace of mind in terms of servicing and options at the end of the lease. I don’t understand why that is potentially that worse than taking out a bank loan to pay for a car. The monthly costs are not high.

Do those in favour of leasing have substantial savings to fallback on? Own a house outright?

A job loss if you still have high rent or mortgage and utility bills and you have added a car lease into the equation is huge. Or do you intend to relinquish the leased car and stay home until you find a new job or use occasional public transport?

There’s many aspects to this, some mentioned already, but it’s worth bearing in mind what the actual value is in owning outright. I’ve always bought second hand and driven it for years. But at the end of that, I barely made any money back and essentially had a huge lump of metal. I’ve gone for a salary sacrifice scheme at work now, am driving a gorgeous car that is much better on the environment and much more enjoyable to be in, and will just upgrade as and when. Sure, I can’t sell it at the ‘end’, but I’m selling my old car for what, £1500 at best? I’ll take the new car thanks.

We don’t lease cars. We are in the process of saving to buy two “new to us” cars. We drive older cars because we can’t afford new ones outright. We have previously had a bank loan for a car, we would do that again I suppose.

Really, you have lots of wealthy friends and none of them have expensive cars? Sure.

Anyway, here in the real world where we are genuinely wealthy - most of our main cars are on lease. It’s irrelevant as to whether it’s a good deal or we’re throwing money away - to be totally blunt we have the money to throw away, and their is no concern for our situation changing. They are on lease because we will likely swap them for a newer model in a few years and the lease model keeps it simple with multiple advantages.

Our few real-world wealthy friends all drive Land Rovers, BMWs and Mercs (no Audis for some reason?) as their day to day drives. Not a Skoda in sight funnily enough . People want luxury, refinement, capability, power, prestige,
status, enjoyment - countless reasons beyond “driving from a to b”. How soulless. Most lease for sure, there’s an odd older Merc or Ranger Rover that’s owned outright and kept because the owner likes it/
for sentimental reasons, but overwhelmingly it’s lease.

As much as I could afford to buy cars outright I feel it's more sensible to finance a depreciating asset and make the money from capital.

My last two cars have been owned outright and over 3 years have cost me more than if I had gone new and financed

I would never buy a car. I much prefer to lease, it’s easy, it’s affordable and the costs to running and repairing it are next to nothing. Every time I’ve bought a car it ends up costing me a fortune in keeping it on the road. I can afford to buy but I can’t see the point.

Of course people own things. I saved up and bought my newish second hand car for cash. I wouldn't dream of leasing or buying on one of these PCPs, they cost a lot more in the long run. I also own my house.

I’m very much in the buying second hand outright camp. However I do worry that prices have gone up. I hope I can still afford to buy one outright when the time comes. (Saving a bit each month towards it to be a bit more prepared.)

My electric car costs £300 a month. The electric is about £25 a month. Absolutely brilliant value. My kids had an old Skoda bought outright. Great car, until it started costing a fortune to keep on the road at £90k miles.

And a lot of those people have more money than sense.

£190k household income here, and I’m driving a 2017 Fiesta. We are saving up to replace it with an electric car that we own outright in 2028, budgeting around £30k. But until we have that cash in the bank, the Fiesta is doing the job perfectly.

That’s not a lease by the sounds of it. More likely a PCP or similar.

@Shade17 you may be right, I don’t know the difference! All I know is I pay a very manageable amount a month to a car dealer and don’t have to worry about servicing etc and I can buy it, give it back or trade in for another at the end of the term

I bought a BMW new 8 years ago and financed a third of the cost over 3 years. I've now had 5 years where my car has cost me tyres MOT and service/ replaced the occasional part. Very cost effective.

I costed up what i was willing to pay in finance costs as its just wasted money.

Planning another 2 years unless something goes wrong with it then will do the same again but put more cash in as I want an X7. I'm getting them as big birthday presents.

Also get that some people don't live somewhere service and mot is easy. I just drop mine off at a nearby garage and walk home. Pick it up on my lunchbreak.

I leased once and was appalled at the extra amounts I had to pay back for mileage, wear and tear etc. The thought of doing it again made me anxious. I’ve gone back to buying second hand known reliable brands and running them into the ground. Just recently got a six month old ex demo which is under warranty for five years and I’m enjoying it easily as much as the luxury lease car I had.

People are far too comfortable being in debt these days.

We leased for years and so we had a brand new car every three years.

Our last lease was on a very luxurious E class Mercedes that we got on a really good deal for £280p/m ( we were all set to go for an X trail as we were regular campers at the time and needed the large boot) but this deal popped up and it was too good to turn down as it was almost the same price. It was a fantastic car.

After the lease ran out there was a problem getting new Mercedes cars imported and our order was suddenly cancelled after a 6 month wait and we were facing another long wait with no car.

So we went out and bought a three year old smaller and lower spec Mercedes and took out a loan. We are paying more for the loan payments on a three ( now 6 year old) A class than we had paid for the lease on the high spec E class.

We now plan to keep that car until it falls apart and will have a good few years of driving without a monthly loan repayment hopefully but will no longer have a lovely new car with the latest gadgets and tech on it.

Leasing definitely worked better for us.

Why best car in the world. It's starts never breaks down, easy to park and my last one gave me 20 years of good service and apart from tyres and wiper blades never cost me anything else and this one is 8 and costs £20 a year to tax.

This is an extremely valid point.
Read the small print would be my advice because you will be liable for the excess after the insurance pay out which is unlikely to cover the value.
Its a trap, you pay through the nose to drive a nice car, will never own it but they get huge money rolling in every month.
Insane

Strange, there seems to have been several similar threads recently about everyone having ‘£100k’ cars on the drive and discussing how normal it apparently is now. I don’t know a single person who has a £100k car, that must be quite rare. A £40k one, yes often, but £100k is rather extreme.
I have never had a loan for a car or leased anything, but I’m getting to the point where I think it might be sensible to take out a loan. My car is 15 years old and while it’s always been fairly reliable, repairs and MOTe are, naturally, increasing in both value and frequency and I just can’t be arsed with the hassle anymore. Plus we live in the middle of nowhere so can’t be doing without a car. Life’s busy and it’s another pull on my time and money. I’m currently looking at 5-6 year old Volvos for around £20k-£25k, and that seems quite posh enough for me!!

We bought an 80K car on finance in 2022 and paid it off last year. Expensive cars last so still going strong. Before that we had a 17k car, also on finance (0% available then!) and also paid it off over 4 years, still going strong as second car for the kids to learn to drive in. For us it was a way to get new, therefore reliable and doesn't to be in, and lasting cars without having to use savings and pay it off out of salary. Worked for us and at no point was it risky or unaffordable. Obviously the cars are worth far less now but we have no intention of selling them at the moment so, so what I guess.

My first car I bought cash new for about 12k and had it for 20 years!