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Original poster

Do most people use finance or borrow money to pay for cars typically?

161 replies

Onedropbeat · 23/02/2021 19:06

We have 2 cars, one is old but bought for cash so it’s just the maintenance required to keep it running that it costs us. This is creeping up with the older the car gets (13 years old)
It’s worth around £7k as a trade in or £8k private sale.

Our main family car is now 5 years old. Bought on finance with a balloon payment which is due this time next year

It’s a good car and not very costly to run at the moment as still relatively new and low mileage (to us)

Originally I planned on saving the money in a pot to pay the balloon and keep the car so that we are finance free on the cars

However, Covid means earnings and bonuses have dropped and vanished and so I won’t have all the money required by this time next year

Do most people use some form of borrowing for their cars?

At the moment it’s appealing to hand the car back, swap for a new one, and keep paying the same monthly payments which we can afford without having to worry about or dip into savings

But this will end up being in a perpetual cycle of finance for this car and I worry how long the original car will last before it’s more economical to replace for a new one

What would you do?

OP posts:
lljkk · 23/02/2021 19:12

Most people buy on finance I reckon.

Sorry, tired so not gonna try to figure out what I'd do. Will bump for you, at least.

tanstaafl · 23/02/2021 19:12

Bought on finance , but with a balloon payment coming up?

Is that a PCP deal OP?

Thislittlefinger123 · 23/02/2021 19:13

We've never used finance. Always bought cars 2 or 3 years old for cash and kept them until they die of old age 😆 But I'm very debt averse (except mortgage) so I've never bought anything on finance. Could you hand it back but buy a cheaper second hand one?

Chicchicchicchiclana · 23/02/2021 19:14

We don't but we only drive pretty old nothing special cars.

Thislittlefinger123 · 23/02/2021 19:14

Most people buy on finance I reckon Really? I'm surprised.

WowIlikereallyhateyou · 23/02/2021 19:14

Buy outright and save £300 pm towards next one, usually keep for two/three years and have something worth about £30k. At changeover time I normally have enough savings to cover the difference for the new car.

Effzeh · 23/02/2021 19:14

The most cost-effective option is to buy a car for cash and keep it until it becomes unreliable, unless you are self-employed as a limited company and can do some creative accounting with the company car/finance end of things.

Justajot · 23/02/2021 19:16

We've always bought with cash. But I think we are likely to move to leasing when electric cars are more common. The maintenance and battery issues are a bit unknown, so a lease including maintenance seems reasonable.

clipcloptrop · 23/02/2021 19:17

I always just buy my cars with cash.

DrDreReturns · 23/02/2021 19:19

I've always bought with cash, typically cars that are about five years old. But I'm not a car person. A lot of my colleagues lease new models.

TangerineGenie · 23/02/2021 19:20

Amongst people i know it's probably about 50:50.

Job uncertainty and lack of bonuses wouldn't be getting me signed up to a lease deal though, especially when right now you can't even go anywhere.

torquewench · 23/02/2021 19:20

I wouldnt buy on finance unless i was planning on keeping a new car and paying the balloon payment. The thought of handing over a load of money every month for something i dont or wont ever own is, to me, ludicrous.

riotlady · 23/02/2021 19:20

I bought my car cash for £2k but most of my friends use finance, as far as I know.

CatCup · 23/02/2021 19:20

Bank loan. Cheaper interest that car dealers finance.

NoSquirrels · 23/02/2021 19:24

In your particular situation I’d probably hand the car back, get a new one on same terms, keep saving up and then if 13-year-old car needs replacing use the savings and if it doesn’t buy the PCP car at the end of its term.

One way or another you’ll always have 1 car on some sort of finance if you want to run 2 cars, I assume? But you want to avoid having 2 cars on finance. So do whatever is most economical to avoid that...

bellagogosdead · 23/02/2021 19:26

Until dh started having company cars, we always bought with cash, but the cash was always borrowed from the bank iyswim?

Original poster
Onedropbeat · 23/02/2021 19:27

@tanstaafl

Bought on finance , but with a balloon payment coming up?

Is that a PCP deal OP?

Yes a main dealer PcP over 3 years (low interest rate so at least it’s not like the 10% apr ones out there)
OP posts:
Wtfdidwedo · 23/02/2021 19:28

We use bank loans with a couple of percent interest or buy cheap old ones with cash under £1.5k. I would assume most new cars are bought on finance/with loans as the vast majority of people (not on MN of course) don't have a spare £10k cash.

ceeveebee · 23/02/2021 19:28

Over 90% of brand new cars are bought on finance. For used cars about 33% are bought using dealership finance, and an unknown number using bank loans (probably about another 20% or so)

Original poster
Onedropbeat · 23/02/2021 19:30

@NoSquirrels

In your particular situation I’d probably hand the car back, get a new one on same terms, keep saving up and then if 13-year-old car needs replacing use the savings and if it doesn’t buy the PCP car at the end of its term.

One way or another you’ll always have 1 car on some sort of finance if you want to run 2 cars, I assume? But you want to avoid having 2 cars on finance. So do whatever is most economical to avoid that...

Thank you. That’s sensible

Ideally I’d love to run one car but even in lockdown we both go each day in separate directions and kids in multiple places

We do a lot of miles. We don’t fly so the cars are our means of transport to holidays even if that’s through Europe (tend to take the newer one of course)

OP posts:
lovelyupnorth · 23/02/2021 19:33

Last one bought for cash

Previous one on 0% credit card.

I try and avoid paying to borrow money. Other than our mortgage.

3CCC · 23/02/2021 19:34

Mine was funded by me, bank of mum & dad and the insurance payout of my last car.

None of our cars have been paid through finance. Main driver is responsible for that car. I.e not from joint accounts

LemonSwan · 23/02/2021 19:36

We always buy second hand cash. We are lucky though because someone we know is addicted to having a brand new finance car. He comes to us every few years and offers us the car for the final payment. Its a great deal for us as its similar to market rate for model, age, mileage but you usually get very naice interiors and full spec upgrade options for no extra cost. Also great we know the car has been looked after, know its service history, its owners driving style etc. Best of both worlds.

Username1917 · 23/02/2021 19:40

This is mumsnet so everyone will tell you they pay cash with their squillion pound savings they’ve saved on their median wage jobs.

In real life, the majority of people get cars on finance. So much so that the majority of dealerships now don’t offer any discount for paying in cash as the majority of their customers are finance.

NoSquirrels · 23/02/2021 19:45

I basically think there’s no really great way to buy a car unless you’re happy to buy very cheap for cash and accept the uncertainty on reliability and that you just scrap it if it costs more than it’s worth to buy another very cheap car.

If you want a reliable car you either pay cash outright (then need to save up again £x per month to do it again in x years), get a bank loan for £x per month for x years, keep it hopefully longer than paying off the loan and save up again a bit longer, then start again, or pay £x per month on finance for x years, hand it back and start again.

It all costs £x per month and your ‘asset’ depreciates so it’s your comfort level of cost-reliability that determines it.