What's the thoughts on car financing?

ellersb

I've always bought cars outright after a bit of saving (most expensive was 1200). However, because of that price and because we use estate cars, the car is always old, tends to be in a high car tax bracket and guzzles anything and is a bit knackered.
So, a lot of my colleagues (and friends I'v found out) do this car finance thing, where you pay a certain amount a month, the car is basically rented from the garage and you swap it in for a newer model after a few years.
Are these worth it? I wouldn't want to pay more than 150 a month I guess, so would need to shop around (day of dealer visiting I guess), but is this more economical than buying a older car and maintaining it? What are general thoughts?

MX5huggy

but is this more economical than buying a older car and maintaining it

No.

Yes they save say £100 to £200 on tax they may get 40mpg over your 30mpg but they have depreciation say £5000 in the first year then £2000 then £1500. Maybe they don't buy NEW new so they have less depreciation.

RDG

Financing a car will never be more economical then buying a cheap car and keeping it on the road for as long as possible.

Your options are leasing or PCP/HP.

When you lease a car you are paying for the depreciation of that vehicle. At the end you have nothing to show for the money spent but you did drive a shiney new car for 2-4 years.

With PCP you pay a deposit and then pay monthly for the car. At the end of the arrangement you either pay the remaining balance (a few thousand pounds), trade it in or hand the car back. Again you have been driving a shiny car.

Hp is where you pay a deposit and then buy the car over the period. At the end of the agreement the car is yours.

All of these methods you loose money as the car depreciates. With an older car it will only loose a very small amount over the time you own it.

£150 per month isnt going to get you much car without a big deposit especially if your after an estate.

ellersb

Thanks for the replies. I wouldn't be looking for new new, maybe 2-3 years old.
Maybe the magpie in me is wanting to drive a shiny new one
It might be cheaper to just clean mine!!
I just worry constantly about finding a car if my one suddenly conks out on me and there's no money in the kitty...

skateykatey

I lease my car through a company called Ling; it's been mentioned on here a few times so I'm not a lone advertiser!

I didn't pay a huge deposit (about 200 -300GBP) pound have got a brand new car for about 130 a month.

However, I don't own it and there is no option to keep it at the end of the term (3 years). There is also a mileage restriction of 30k over the term of the lease and I obviously have to look after it.

It may seem like madness to some but it works for me; I know that I'm covered by the warranty if something goes wrong with no tax to pay and no MOT to worry about, the fuel consumption is also more economical now and my insurance is also cheaper. I work full time in a pretty safe job so know that I can commit to the monthly outlay.

My work commute is short so the mileage thing isn't an issue.

For you though, 150 a month will not get you an estate. I chose the cheapest car (C1) and it is basically a roller skate on wheels but, as I've stated above, it's fine for me.