AIBU to spend £20k on our first car?

[starksausage]

I’ve never owned a car before. I’m in my late 20s now. Don’t own my own home but have enough for a deposit. Been with DP for 8 years.

We need a car for various reasons now and have found a used one we like for £20k. AIBU to spend this much money? We bring home roughly £10k a month and this would cost about £500 a month

Do you want the commitment of £500 pcm for years? It will affect how much you can get a mortgage for. What if one (or both) of you loses your job?

I mean, people do buy £20k cars of course but it's a want not a need. Cheaper, yet still perfectly good, cars are available.

Spending 5% of your pay on a car is not crazy, although I’d question why you can’t buy it from savings if you are bringing home that much. If you are spending everything as it comes in then what will you now cut to cover that £500, plus insurance and maintenance?

It’s worth starting a savings pot so that when you come to replace it in a few years you have the option of not financing the next one.

Is that with a loan? In theory I guess you can afford your monthly payments..but have you done the maths on how much interest you’re paying in total? I presume the car cost £20k at face value? If it’s a loan, it’s not spending £20k on a car, it’ll be far more, so in the end you’ll be ‘under water’ paying out for a car depreciating in value. Also if you’re planning to buy soon, the monthly payments will impact on your lending options. I’d suggest buying a cheaper car that you can afford outright instead.
I’d suggest looking at what Dave Ramsey has to say about car loans!

Can you save up or buy a cheaper car and put it on a zero interest credit card? Car finance is notoriously expensive.

Yes, but do you need to get on finance?

You would be mad to get a loan and pay interest on it if you have enough cash to buy the car outright. Either buy with cash or get a cheaper car with cash is what I would do

Sounds crazy but your take home sounds enough. Personally I wouldn't have anything I couldn't pay for outright. I'd find something like that and put the £500 a month to a pension.

Compound interest would make that a very nice pension and might be the difference between your retiring much earlier than you might otherwise.

But if you want the car why not?

I think you’d be crazy to pay for it in finance. Surely with that (net?) income you can afford to save for 6 months and buy it outright?

but I presume you need something quicker. In which case, I’d buy something cheap and roadworthy in cash and then save hard to upgrade in a few months.

also, don’t forget budget for insurance, repairs, tyres wrecked potholes etc.

If you can afford it, go for it.

I mean your money your choice, but that would not be something I'd do. We have a bigger income a mortgage which is probably less than a lot of people's rent and hell would freeze over before we spent that kind of money monthly on a car. Buying new is for idiots or people who can burn money (mortgage paid if and a great income). The function of a car is to get you from a to b in some level of comfort with as little hassle as possible. 18 months old (or even older tbh) less 'prestige' brands will do that just fine and unless you are a family of five golf sized is good for most. You can meet those requirements for much less than 20k. It's not an asset (that holds value or grows in value), it's not an investment that will help you earn more (like a bit of kit for a business or a training course) so in 'money sense' terms you should spend as little as possible on it. If you want it fine, but you certainly don't need it and there is no financial justification.

Personally I wouldn’t tie myself to a £500 monthly payment, if you’re looking to buy a house in the near future this will impact your affordability for a mortgage, even if everything is paid and up to date.

I’d buy a car outright for what you can afford from savings so you’re not paying interests on a monthly payment.

You should probably buy something out of savings. Car finance is £££, a loan will be slightly less ££.

That said, 20k is pretty reasonable for a car. How quickly could you build your savings up again if you bought it out of your own funds?

£20k isnt that expensive for a decent but not fancy used car these days unfortunately. It choked me to pay £15k for a 3 year old VW Polo a couple of years ago….

Is the finance PCP or a loan? A personal loan will always be cheaper and you’ll own the car, PCP is a mug’s game.

As long as the payments work for you alongside your projected mortgage then do it.

We have never spent more that 10k on a car. Cash. Dealers must love you both. My hubby normally goes to a car auction and we do well. Our car is a vauxhall corsa looks good and cheap to run and gets ignored by the yobs surrounding us

Buy a cheap car. You are unlikely to spend £500 a month on repair bills. Use that money you save to get on the property market. Spend as little as possible on a depreciating asset.

With your earnings you would be foolish to get a loan which will be around 6% . The cost of your car will be significantly more after interest over the term of the loan.

Instead spend your savings now, and put £1000pm back into your savings pot earning at least 4%.

If you are planning to buy a house in the future, you need to save more than the deposit: costs of moving and any upgrades you want to make to the house in the first year or 2. Your house is an investment and you will be spending most of your life in it, whereas your car is just a cost of a utility and drain on your finances.

I wouldn’t be spending £500 a month on a used car.

I’m not averse to car finance like many people are, we have over £600 a month in car payments for 2 cars but the key difference is we are already home owners and this £600 is only around 5% of our monthly take home. Our cars are also worth a lot more than £20,000 so you must be putting down very low deposits or getting a rubbish deal.

No way I’d pay more than about £150 a month (if you have no other choice) if you’re looking to get a mortgage soon, it’s going to impact your affordability. Also if you have less experience driving, it would be better to build a few years no claims.

Depends on the car surely. A three year old EV, out of main warranty with five years left on the battery warranty, will be worthless in five years. A new Kia, will probably be worth 10k in trade after five years. So your 20k car might really cost you 10k. Depending on what you buy.

I can't believe you actually have to ask but as PPs have said, you'd be mad to go on finance for a £20k car if you bring home £10k pcm, but also, I wouldn't take on unnecessary joint debt with someone I wasn't married to. But that one might just be me.

Will it impact your ability to buy a house?
What will it bring to your life that a smaller, older, cheaper car can't give you ?

we bring home more than you and my car cost me £6000 when I bought it 6 years ago! It's still going strong

I would and have spent £20k (and more) on a car. I buy them new or almost new and keep them until they start letting me down, usually 10 years +

I wouldn't take credit to buy one.

That’s a reasonable amount to spend. But not on finance. Either buy it outright, or get something you can afford.

I agree. Also if OP is thinking about buying property, then they need to consider the impact the cost of £500 a mo th would have on their mortgage application.