Should I Buy New or Am I Being Seduced By Scrappage?

Inactive

chambta wrote: »

I think it's yours that needs explaining to be honest. How would people would be able to purchase houses without a mortgage?

A mortgage is a different ball game, it is money spent on (a) something that we all need, and (b) a long term appreciating asset.

I agree with others, paying interest on a car is a mugs game, especially when you are doing such low annual mileage.

chambta

Inactive wrote: »

A mortgage is a different ball game, it is money spent on (a) something that we all need, and (b) a long term appreciating asset.

I agree with others, paying interest on a car is a mugs game, especially when you are doing such low annual mileage.

The poster makes no distinction between which assets interest is paid on.

For what it's worth I won't be anyway at the price I'm going to be paying now. Looking to pay £6kish. Think I'll take a trip to AvailableCar's place as they seem to have a good reputation and reasonable prices on 2-3 year old cars.

mitchelkitman

IMHO it is indeed worth looking at all the possibilities on a cash-flow basis
ie New car, 2k scrappage
Sell car, buy second hand car
and Sell car buy bike (no only joking!)
Do investigate if the 2K scrappage is a REAL saving, as it may be that you can get a huge discount (about 2k or even more) AND sell your old car - Beware of all the conditions with some discounted 'new cars' being offered eg are they pre-registered, or (IMO worse) 'fleet pre-registered, where the selling company holds onto the V5 for up to 6months (surely illegal, and I'd certainly avoid) Good Luck

chambta wrote: »

My car now qualifies for scrappage due to the extension recently given by the government and I was planning to replace it anyway as we have a new baby on the way and I want something bigger and more reliable.

I don't drive more than 4000 miles pa due to (at present) being able to stroll to work although it's possible that could change.

I was looking at getting an Astra/Focus sized car 3-4 years old in the £5,000-£7,000 bracket.

Now all of a sudden I could have a brand new Seat Leon 1.6 from my local dealership for £9999 or a Citroen C4 for under £9k from another.

Am I being silly considering spending more than I was for the number of miles I do or will the resale value later make it worth thinking about?

In terms of financing the deal I'm fortunate to have built up enough cash to ensure borrowing isn't a necessity though I'm likely to choose to borrow some (cheaply as bank staff I can take loan @ 7.3%) to keep cash back for a house move that's also on the horizon.

Thoughts anyone?

tali

chambta wrote: »

The poster makes no distinction between which assets interest is paid on.

For what it's worth I won't be anyway at the price I'm going to be paying now. Looking to pay £6kish. Think I'll take a trip to AvailableCar's place as they seem to have a good reputation and reasonable prices on 2-3 year old cars.

You including mortgages is somewhat disingenuous.You still have not explained your rationale

ACID

how much is an Alfa Gt on a scrappge scheme?

AdrianHi

Inactive wrote: »

I agree with others, paying interest on a car is a mugs game

Relative to not having a car at all, everyone "pays interest" on a car.
If you spent £1000 on a car today it will cost you approximately £20 in interest per year.
The rational behind this is that your £1000 is not in your savings account anymore where is was earning, for aguments sake, £20 a year in earned interest (2% net flat rate).
Someone who borrows £1000 from a bank at 8% APR pays £42.31 interest charges in a year (so 4.231% flat rate to compare with savings interest rate).
In order for the bank loan to be a good idea the person concerned needs to have no better (cheaper) source of the money and be able to make the payments without diificulty. Next the extra £22.31 it costs them needs to have some kind of value to them. It might be because they can save £100 a year in fuel and perhaps £35 in car tax, a net profit of £112.69. Or it might be because they are willing to pay £22.31 a year for the better newer car.

Borrowing for a car is not automatically a mugs game. Not understanding what the real average monthly expense of the car all things considered and how that fits into your income and then borrowing beyond your means possibly at too higher interest rate... would be a mugs game.

andygb

I would not touch a new car, even with the scrappage allowance, because I believe that the main dealers raised prices to allow for this. Then there is the problem of depreciation. I bought a 2001 Mondeo with 27000 miles on the clock five years ago for £2300. I have spent a total of £1200 in servicing and maintenance/repairs in five years. It is economic and smooth, has lots of space, and still looks as good as when I bought it. It now has 90,000 miles on the clock. So, at 4,000 miles a year, it would have taken you around 15 years to do my mileage since I bought the Mondeo, all for £3,500. You will probably lose that much money in depreciation in two years (if not less) on the Seat.
There is nothing to be gained from deliberately racking up debt on anything other than your mortgage, unless of course you are trying to justify the purchase of something which you cannot afford. Unlike a property (which generally go up in value, present times excepted), a new car will always depreciate as quickly as a rock being thrown over a cliff.

Inactive

AdrianHi wrote: »

Relative to not having a car at all, everyone "pays interest" on a car.
If you spent £1000 on a car today it will cost you approximately £20 in interest per year.
The rational behind this is that your £1000 is not in your savings account anymore where is was earning, for aguments sake, £20 a year in earned interest (2% net flat rate).
.

That presumes that all funds are kept in an instant access savings account, in reality most people keep their everyday funds in a current account that attracts no, or miniscule interest, anyway, on this occasion I think that you are splitting hairs.


Anybody financing a new, or newish car will be paying a relatively high interest on a rapidly depreciating asset, which in my book is a " mugs game ".

andygb

Inactive wrote: »

That presumes that all funds are kept in an instant access savings account, in reality most people keep their everyday funds in a current account that attracts no, or miniscule interest, anyway, on this occasion I think that you are splitting hairs.


Anybody financing a new, or newish car will be paying a relatively high interest on a rapidly depreciating asset, which in my book is a " mugs game ".

There may even be a third way of losing your money (May be not), but two ways of doing it is two too many for me. This is MSE after all.

chambta

Tali; Given huge numbers of people pay interest on car purchases (I hesitate to say the majority as I simply don't know) does that mean all those people are wrong?

Interested to know in your opinion on this.