How likely is this?

gizmo111

Horseygirl123 wrote: »

OP - I have two daughters and they are both very headstrong and when they wanted newish cars nothing we could say would change their minds. My youngest daughter laughed her head off when I suggested she look at my sister's Ford Ka which she was selling and said she wouldn't be seen dead in it:o

Anyway she bought a four-year old Corsa when she was 18 and it was nothing but trouble. When she decided last year to buy a newer car costing £8000 I thought she was mad but when I realised how much she had spent on trying to keep the old car on the road each year I understood how she felt.

Her salary is £18,000, she already had a loan with an Orthodontist of £3000, and a credit card bill of £1500. She banks with the HSBC and they did give her a loan for £8000. She sold her old car which paid off the credit card bill.

She is actually very sensible and has no problem in making the repayments. If she was to be made redundant (unlikely) she would get enough to pay her loan off.

I was surprised she got the loan and I suppose you're only young once so why not have what you want if you can afford it.

Interestingly, the new car was cheaper to insure

Tghis is exactly the scenario here - car is costing her to repair every month only small things at the moment but she is fed up of the unreliability. If the worst came to the worst an she cant repay I could step in for a couple of months until she got a new job or sold the car. Shes going to apply this week anyhow as HSBC have a good deal on this month.

AFK_Matrix

Getting a new car is no guarantee that it will be trouble free at all. If she absolutely must get the loan but HSBC refuse her don't let her make lots of applications elsewhere as this will damage her credit record.

gizmo111

Loan accepted by HSBC at 5.9% over 24 months - £7000 in her account now.

somethingcorporate

It's unfortunate that young people see taking massive loans out as a right of passage.

More than 7 months net salary on a car as ugly and common as a KA is literally mental but each to their own. My sister did the same when she had a good job in her early 20s. Her in her late 20s wishes she had been a bit more sensible.

People that buy new cars tend to be the financial illiterate - she'll have good qualifications for being the next chancellor.

gizmo111

Quite frankly I'd rather she spent her money on a car loan rather than on drink, drugs or being starry eyed about a wedding dress.
Neice of mine a year older has been leasing a car for the past two years at £240 a month - now that is stupid!

AFK_Matrix

Nice that you think she may do that! But if what you said earlier is true that she was saving 500 a month then she was being sensible with her money and wasn't blowing it. Just a shame she's had a silly moment and got the loan because she couldn't wait and save up.

gizmo111

AFK_Matrix wrote: »

Nice that you think she may do that! But if what you said earlier is true that she was saving 500 a month then she was being sensible with her money and wasn't blowing it. Just a shame she's had a silly moment and got the loan because she couldn't wait and save up.

be nice if she fancies a wedding dress when she meets a decent boy.
Shes very sensible with money, worked part time since 16 paid mostly by herself for driving lessons and all the associated high costs , bought first car - 1st insurance was from 18th birthday present, has managed to have at least one holiday abroad with feinds each year as well as weekend breaks away etc. Now on her 2nd car as 1st one died literally at MOT. Insurance alaways paid up front and working/studying for a good career. Credit card always paid in full - but spends never usually more than £150 anyway.


Total interest on HSBC loan is £416 over 2 years reducing with overpayments. In the next 3 months she'll chop around £1600 off th balance and plans to pay £350 per month instead of the £309 contractual payment. If the interest was really high then it would be a different story I guess but this is OK.

somethingcorporate

gizmo111 wrote: »

Neice of mine a year older has been leasing a car for the past two years at £240 a month - now that is stupid!

Really? how much do you think the depreciation on that new Ka is going to be over the next two years?

I doubt it would be much worse than the lease costs of a new car.

[Deleted User]

Purchasing a brand new car is always a poor financial decision because of the value loss, if you buy a brand new car for £20,000 by the time you drive it off the lot it's going to be worth significantly less, by the time it's a year old it's going to be worth up to 40% less...

Purchasing a brand new car on credit is a much worse financial decision because of negative equity, if her life falls apart for any reason she can't sell the car to cover the debt, because the debt is worth more than the car. Debt isn't bad but debt you can't pay is awful.

Poor financial decisions aren't always poor life decisions, sometimes money really isn't the most important factor. If the value the car provides her in enjoyment, flexibility and happiness is worth spending a few thousand pounds then it's not the end of the world.

Depending on the terms of the car lease your niece might not be stupid, she might be more financially sensible than your daughter. If she has the ability to end the lease at any time (if the car is returned) it means if her life falls apart then she is without liability. This is important when young because young peoples lives are rarely stable.

The most important consideration when taking on debt should be whether or not it can be repaid; part of that consideration is what happens if things go wrong in life? With a mortgage you can normally sell the house to cover the debt, with a new car loan... not so much.

Olza23

gizmo111 wrote: »

Loan accepted by HSBC at 5.9% over 24 months - £7000 in her account now.

Hi hope she likes her new car regardless of it being sensible or not!

Just a note cash is not king in a dealership and I cannot stress enough to at least look at nearly new cars as they have taken a massive hit in regards to depreciation.

If not haggle very very hard at the dealers and I reccomend drivethedeal.co.uk

Any questions feel free to message me..