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

[Onedropbeat]

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?

Depends on who you know.
Many of my friends buy or have company cars and some privately lease (end up with a nice car without a massive cash sum being used).

It doesn't matter what most people do it is what suits you and your budget that matters the most.

I buy on PCP, I buy cars around 18 months old and change them every 2/3 years when there's a decent amount of equity in it and add some cash into the new deal to keep the monthly payment low. It works for me, I'm a single parent, so only one car in the house and I need a car for work, I like to have a relatively new car with a warranty, but nothing big and flashy.

PCP should have a minimum value guarantee so if you get to the balloon payment you can hand it back and walk away or refinance. I do know people who've been stung with finance and got to the balloon payment in negative equity, so you have to pay attention.

I’ve done a mix.

Some bought cash.

One bought new on 0% PCP, got a above market PX price, paid balloon with a 0% credit card. I loved that car though.

Current car purchased with 2% bank loan paid off in 2 years if that. 4K on the clock, at year old and about 30% cheaper than new. Have had it 10 years.

I’m planning on buying a new (used) car in the next year as I need a bigger car, my current is beginning to have issues, I’m driving more and what gizmo’s. Probably a mix of loan, savings and/or 0% finance depending on what’s cheaper.
Plan to pay in 2 years and keep car for 10 years unless I win the lottery.

Spent very little on them and because I knew I would keep them until they died, never worried about the odd scratch or parking dent

This is my main reason for not wanting any sort of finance agreement, I don't want to worry about my car getting marks all the time.

I'm desperate for a campervan though which make about the least financial sense ever :-)

I’ve only ever saved and payed outright for my cars

Bit of Both. DP spent about 18k on his last car. He put 8k cash and spread the rest on finance for 4yrs.

@IsAnybodyListening

Bit of Both. DP spent about 18k on his last car. He put 8k cash and spread the rest on finance for 4yrs.

Surely that's just finance with a big deposit?

We've only ever owned one car, but we bought a 3yo car, put up about 50% cash and had a bank loan for the rest, now paid off. Will most likely drive it into the ground. A car is just a useful workhorse for us.

Not sure what we'll do next as it'll either be a full electric or a plug-in hybrid; we'll have to see the state of the technology and what makes sense when we start looking.

@Chicchicchicchiclana

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

Same.

I should say I’ve never paid more than 12k for a car. Averaged out probably £5k as I’ve driven a few old bangers.

My first car was 700 with a 0% finance plan from my Nan (offered not asked). Old banger isn’t a strong enough word for that thing but I loved it.

I've always bought cars outright as you end up spending a lot more with the interest. Usually not a new car - they depreciate so quickly that it's false economy IMO. So usually around 3 years old. Although we did buy a new one this time as we got some excellent incentives (all electric) like 7 years free warranty, no tax, money off the charge pod and an extra £3000 off for being within the first 1000 to order. I think this time if we hadn't been able to pay outright we would have possibly thought about finance as we save a fortune ditching the fuel.,

We’ve had a lease on our last 2 cars. We paid £270 a month and £325 a month both for three or four years. This includes all servicing and the cars didn’t need MOTs. We like to have as least stress at all to do with cars as have both have unreliable card when we were younger and poorer.
At the end of this lease we pay pay £7500 and will own the car. We’re doing this as my DH is retiring in the summer and we want to cut down monthly costs.

No I buy outright when they're about 4 years old and use them until they die! We tow a caravan and with kids and a dog the car is a workhorse rather than anything pretty.

We buy with cash, but also have old cars that are nothing special as we can only usually manage to save £3k or so. We’re currently saving for our next car as our current car is 14 years old. Next car will be 7/8 years old or so.

Everyone else I know has finance on cars and brand new fancy ones, but I don’t see the point when we don’t really use it much.

Also we keep our cars for ages. The other car is a 10 year old Volvo and it's still going strong. When that goes we'll replace that with electric too but for now it's great for long distance and towing/carrying stuff about.

Shopping around for a loan to cover a second hand car is almost always much, much cheaper, particularly if you have kids (who aren't going to understand that the car needs to stay immaculate)

Last time we did that we got a small loan from sainsbury's.

You do have to bear in mind potential repair costs, but you'll have to have a very bad year in terms of repairs needed to cost as much as a year of PCP for a new car.

Also, don't be afraid of buying very small cheap cars (£500 jobs!) If they are very reliable makes. Our second car is a 15yo Ford that costs basically nothing to run and is extremely reliable.

I think most people do, if they have nice new cars! I know of so many people with very expensive cars that their income would never stretch to without finance.

I personally wouldn't. I'd rather have an older/not flash car and own it outright (which we do, with both of them). I can't imagine also taking on a finance agreement and laying stupid interest for an item that will only depreciate! Seems mad to me but each time their own. I'm not bothered about cars, if they're your thing then I guess it matters more to you.

I’ve always gone for second hand cars and paid cash.
The thought of finance terrifies me.

We bought for cash at around £17k. Planning to run it to the ground- by far the cheapest way to do it if you can.

I've PCP'd cars in the past but right now I have older ones; one bought for cash, the other effectively the same ('twas actually on a charge card which I paid off at the end of the month, I did it to get the Avios).

I prefer running older but more unusual cars, so I tend to buy things that are five to ten years old, but with good condition and history, and keep a slush fund for ongoing preventative maintenance. It seems to be working as a strategy; my old Saab cost me £1,500 to buy about five years ago and has never cost more than £500 a year in servicing and maintenance since then (and quite often a lot less). And it's now 16 years old. Overall, it's been more reliable than the brand new Audi we PCP'd before it.

We buy with finance or PCP. Got two cars on pcp at the moment, one full electric one hybrid.
We've tried to route of buying old cars outright but we both have long commutes and found we were spending horrible amounts on repairs and worried constantly about breakdowns. My DH works on cars for a hobby so we save some money doing DIY but he'd end up doing stuff all the time which was exhausting around his work, so we decided older cars weren't for us. Also because we wanted electric/hybrid they're just too expensive to buy outright for us, but their running costs are minimal. We do spend a lot on PCP but for our peace of mind, plus getting to enjoy a nice car every day, it's worth it to us. With my full electric we are hoping to buy it when the PCP ends, or at leas take out another loan for the remainder because they don't deteriorate in the way normal cars do (less mechanical parts to fail) but will evaluate the quality of the battery at that point as that is currently expensive to replace.
Most people I know have HP or PCP on at least one vehicle.

I agree re sub 1k cars especially if you know the owner.

I once bought a stop-gap car of about 750 from a back street garage and managed to PX it for 1.2k on a new and used about 6 months later.

Both our cars are leased. We prefer to have new reliable cars after years of running old bangers and the payment we make over 3 years is equal to the devaluation of buying it outright for cash. I wouldn’t want to tie up that amount of cash by buying it outright upfront.

Cash where possible. We buy as new as we can afford at the time and keep it until it becomes uneconomical to fix.

Current Ford Focus Estate cost £14k when 6 months old, that was more than we usually spend, but had a small inheritance which helped and needed the estate for our first dog.

Now 8 years old and no problems with it yet. We have a pot saved to replace at some point, but expect current car has a good few years in it yet.

When we were younger and didn't have savings we mostly bought cheap run arounds for

@girlofnow

Research it, but I thought it was acknowledged that you should never buy a new car with cash. I think finance is actually cheaper when you take into account depreciation.

Only if you are the type of person that 'needs' a new car every 3 years. If you pay cash for a new car and keep the car, it's cheaper.