Cars on finance, how common is it?

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Just this really. Wanted to understand how common it is for people to have a car on finance as opposed to pay upfront. Only ever had old cheap car that we paid with our savings. So many people we know with similar incomes to ours seem to drive much fancier cars and I often wonder how they afford it. I wonder if it’s more normal than I think to but them on finance and also interested to know how easy is it to get a 0% interest rate?

Really, really common. I work in financial planning & deal with clients assets/liabilities every day. More than half have car finance, and the amount can be eye watering. I've two colleagues & another friend who've just bought new cars, on finance between £25000 & £100,000. None are wealthy. Most trade every 5 years for a newer car & more debt.

We drive older cars, no debt.

0% finance usually means a higher price or other hidden costs. It is not free.

I imagine more do than don't. I have always bought a car that's 18-24 months old, driven ot for 8-10 years and have paid cash. The dealership is always surprised. I have run the figures and it's cheaper than finance but only if you keep the car for many years which presupposes having a new shiny car is unimportant.

I’d say common too. However unless you have big savings and you need a loan to buy a car, leasing it or a PCP means you are getting a newer and (in theory) more reliable car. In my household we have one newer ‘fancy’ car and one that is very old. It’s mostly luck that the old one costs very little each year. They essentially do the same thing.

interest rates on car loans are going up now, so the 0% rates are likely to be promotional on certain models. Or you may need to put down several thousand as a deposit for a lower rate.

When my older car stops running I would not want to get car finance for a second vehicle, as although it has benefits, you do get into a cycle of keep having the debt - unless you can make the balloon payment at the end of the term (PCP).

It is common but personally I have never understood it and always saved for a new car. Pay upfront and are immediately saving for the next one.

Our car is 10 years old but still works fine. I don’t want a massive expensive car however wouldn’t mind upgrading to a nicer model in a year or so. We recently bought a home and we are saving for other things so couldn’t easily save up and fork our £10K (minimum!) for another car so I am thinking whether putting down say £4K for a deposit and then do the rest on finance is something we could consider

Yea very common. It’s not common for people to save up £65k cash for a new higher end car yet plenty are sold aren’t they? Also consider some people get car allowances/ salary sacrifice for cars through their employer

its expensive though- I’ve only ever seen 0% on new polestars which are high end. If you want to spend £10k you’d be better off getting a 0% credit card of regular loan

people who take out leases or car finance aren’t trying to do it in the cheapest way, they usually have other priorities

There's probably some good industry data available if you google - you'll never get a representative answer from MN.

But what other people do isn't necessarily best for your circumstances as it's a matter of deciding whether it's worth it to you and what affect it will have on your finances.

Eg if you walk to work or need to get public transport and don't have a huge disposable income, it would be pretty silly to take out car finance, but if you absolutely need a reliable car and can make the finances work, then it might be the least worst option even if it takes what seems like too much out of your disposable income.

If you had £50k in cash you’d be mad to buy a car with it when you could invest that £50k and expect to get a return greater than the finance interest rate.

Only if you can afford to pay the financing from disposable income I'd have thought.

I'd also think that if money has to be thought about twice, a £50k car is foolish.

I buy a good 2nd hand car outright. The present one was £23500. I've had it for about six years and put £250 into a regular saver every month - £18k sitting there for the next car, plus interest and I reckon I'll not replace for another 4 years so that will grow to £30k plus interest, plus the residual value.

The Finance and Leasing Association reckoned in 2022 that 84% of new car retail purchases were on consumer credit, although the true figure is possibly higher as it wouldn't include alternative methods such as 'subscription' purchases.

My last three cars have been bought new with cash and only for the most recent one - a Dacia - did the salesman not treat me as if I'd walked in sporting two heads.

We previously always bought our cars, most of them have been ex-demo models, and we've kept for about 7 years or so. However, 3 years ago I wanted to try an electric car, but there was no way we would pay the high costs, particularly while the technology is still rapidly improving. I took out a lease, and we were so impressed, we've just done the same for a replacement car.

DH is considering doing the same when it comes to replacing his car (maybe this or next year). I like that I'm getting a reliable car, and we can afford the monthly outlay. I don't think electric cars are yet worth buying outright.

DH also has a lease salary sacrifice scheme through work, which is very common (although when we looked, it seemed we could get a better lease deal personally).

In UK cars on finance of one sort or another are more common than not. Often worth taking PCP for deposit contribution and bundled stuff like extra warranty/service plan then pay off ASAP.

This is easy when you have the initial 23k upfront and no pressing need for a car though, otherwise you’re stuck in a cycle of needing a car, paying for a shit car or having something like a lease payment and therefore not being able to pay for that and simultaneously save towards a future car.

Most people who lease or take a finance agreement on a car don’t have £23k sitting in an account which is why they make the choices they make.

I've never bought a car with finance. The current one was a 2.5 year old ex-Motability car, had less than 5000 miles on the clock.

We only ever buy late low mileage cars, current one was a couple of years old when we bought it in 2014, expect we'll replace later this year. We generally do our own maintenance, and eventually part with it when it's value is under £5k/mileage is approaching 200k, so we expect 10 years+ out of a car, the cost of buying this one equates to about £1000/year after recouping value when sold - so yes masses cheaper than finance.

This has been asked before on here and as far as I remember most people said they drive old bangers or buy new with cash and run them into the ground, only a few of us admitted to getting them through PCP so I’m not sure Mumsnet is the best place to ask 🤣, but anyway both my husband and I get ours through PCP, and have done for about 15 years, it works for us, we change cars every 3 years and will probably still be doing that into retirement 👍

We have never bought a car on finance, you have to make sure you don't scratch it and keep under a certain amount of miles or it can cost lots more. Our main car is a bit of a workhorse and does quite a few miles, our other car is very low mileage. Neither would be cost effective on finance

I traded in my older car and used 29k cash to buy my new one.

Only if you lease it and have to give it back.

I bought a 3 year old car on finance because the cash is better off in my account than the car dealer or the garage’s account.

Over the lifespan of the car it will probs cost me about £1k a year which is the same as when I bought an older car in cash and was constantly going wrong.

Finance is not good or bad it’s about how you use it. Paying some interest to have a better car sooner is worth it in many cases.

I am sceptical that the financed options provide a better deal, if you can purchase another way, they are obviously better for the dealer or they wouldn't be promoting them as much. Do people factor in the cost of gap insurance to cover the difference between the write off value compared with the outstanding finance? A banker friend once told me there is no such thing as 0% finance, somebody is paying somewhere, most likely you and you haven't noticed. My normal maxim's are, if something looks to good to be true it probably is, and there's no such thing as a free lunch.

90% are bought with finance. I read recently.

It swings in roundabouts at times. We have one of each. The leased car is £290 per month and allows 15k miles per year. We have this on a 1+36 month agreement. For us, it’s cheaper than buying new or nearly new. 3 years of trouble free motoring for £10,440. We would lose nearly double that buying outright.

We have done a mixture. I am not a car person particularly. I had a little runaround when I was younger and then bought a car off a relative that lasted me nearly 10 years. We then upgraded to a newly new electric and I am a convert. We took out finance as it was an easy way to get ready access to a large sum quickly. We then took additional borrowing on our mortgage for a short term at a relatively low interest rate and paid off the car finance. The debt will be gone in 5 years and it means we don’t have to touch savings.

I think leases are becoming more appealing though. The depreciation on cars is a bit nuts and more modern cars are just easier to drive.

That’s not true. My work did an internal training course and gave us a lovely free lunch.

I bought my car on PCP which worked for me at the time.

I wouldn’t even consider buying a car for cash, it doesn’t occur to me. I look online at what I can get for the monthly outlay I want and go from there. I could easily buy whatever I want but it makes no sense