Financing a car (young)

jimjames

motorguy wrote: »

Very hard to say, but if i were to walk round the office car park here, where 80% of people are on between £30K & £50K, i'd say the average car value is less than £10K.

Finance is not bad per se.

But financing a £20K car on a PCP deal thats going to take up at least 50% of your take home pay every month is crazy.

It's interesting if I look at the cars in our car park, the most expensive cars seem to be driven by those on the lowest salaries - obviously this is general and there are exceptions but it does seem that some of the more well paid staff drive older cars and are less worried about having a new car.

OP - remember that you're paying £20k + for that car. At the end of 3 years you'll be lucky to get £10k for it. In anyones book that is not an investment you'd want.

Trying to save for a house isn't something that can happen overnight so starting early will help that later - or least not burdening yourself with massive debt early one. Using your £6k to get something will mean you don't need debt but equally importantly will have already depreciated so after 3 years may still be worth £4k. £2k depreciation is going to hit you much less than £10k.

mrcurly1975

Look for 0% finance deals on HP. PCP will mean you are paying over the top for a car. Even if you haggle money off the list price it will be clawed back by the APR.

hgotsparkle

Madden wrote: »

Helpful post is helpful.

--

Thanks for your input guys, I appreciate you taking the time. The general consensus does seem to be avoid financing, I recognise this.

In regard to PCP, you're assuming that I wouldn't have saved the money by the end of the deal to buy the rest of the car? The payments would be so much less per month that the final payment of say 9k would be realistic, but if worst comes to worst I give the car back and the rest of the payments were simply to "rent" the car.

I realise it is a large commitment, however I am not proposing paying £500 a month for 36 months plus a £6k deposit, this is more like a £24k car. My fuel cost is less than £100 a month, insurance would also be way less than £1200 a year and surely (most) maintenance would be free due to manufacturer warranty, free servicing.

This suddenly frees up extra cash, of which isn't needed for anything other than saving. What would you consider to be a reasonable income to buy a £20k car on finance? Or is everyone of the opinion that finance is bad?

I understand some will prefer the route of saving for a house etc but I am looking at the car as a long term investment. Due to my current circumstances, moving out isn't on the horizon. You are also neglecting that the car can be sold afterwards?

I remember being told that your car should never account for more than 20% of your total income, you're going WAY over that.
You can get a very decent fairly new car for just over £6k, then all you would need to pay is fuel, insurance and maintenance costs.


Look at finance this way: would you rather pay in installments and risk not liking the car and being stuck with it/getting into a never ending circle of finance deals or own a car completely and if you get bored, sell/part-ex and own a new one?


Personally, I wouldn't take out finance on any car unless I was earning over £35k, but thats just me, and I'm not.

Madden

After reading your replies, it has certainly made me think twice. Thanks for all your advice.

I am not of the view that saving for the future is pointless but would probably also place more importance on my car than some on here. Each to their own.

Using investment was the wrong choice of words, I am aware that I'm realistically only ever going to lose money on a car, but the loss isn't as drastic if it is kept for a long period of time. A big chunk is lost as soon as it's driven out the showroom.

I could crucify those of you that smoke/drink for pouring money down the drain. Perhaps not to the same extent as you're not necessarily getting yourself into debt, but is this any better than losing money on the depreciation of a car?

Stoke

Madden wrote: »

After reading your replies, it has certainly made me think twice. Thanks for all your advice.

I am not of the view that saving for the future is pointless but would probably also place more importance on my car than some on here. Each to their own.

Using investment was the wrong choice of words, I am aware that I'm realistically only ever going to lose money on a car, but the loss isn't as drastic if it is kept for a long period of time. A big chunk is lost as soon as it's driven out the showroom.

I could crucify those of you that smoke/drink for pouring money down the drain. Perhaps not to the same extent as you're not necessarily getting yourself into debt, but is this any better than losing money on the depreciation of a car?

I don't smoke

I do drink... too much lol!

However the difference is alcohol, fags, drugs, food, anything like that is a single purchase, usually paid in full unless you're talking about the third one of those social experiences. Taking a car out on finance is a dangerous game for someone young, with a low paid job and who lives at home. Just my opinion, and what would I know, we're probably the same age give or take.

No idea what you fancy but there are plenty of cracking second hand motors about my friend.

jimjames

hgotsparkle wrote: »

I remember being told that your car should never account for more than 20% of your total income, you're going WAY over that.

The most I've ever spent on a car as % was probably about 30% of salary but that was a car worth £5k. I was lucky to be able to sell it again a few months later at very little loss and cleared the finance so I could buy a house. Having done that early in my career made me realise the dangers of blowing so much on a car. The most money I've ever spent was £10k and that car was 12 years old so depreciation is minimal, it might not be an investment but not far off it.

I guess as I've got older I've seen a car far more as a way to get from A to B as cheaply and reliably as possible. Spending less on a car means I can save & invest for the future, if I'd blown my spare cash on a car I wouldn't have been able to buy property or build an investment portfolio. Having that spare cash does mean I can do other things I want like holidays without worrying about it and still enjoy life.

Iceweasel

My car is VERY important to me, but I pay for it from hard earned cash.

The majority of cars over £20K are not bought by private individuals but by companies or people getting a sizeable car allowance.

Do you realise that you can find a good used 2 year old car at around 50% of it's price when new?

Consider looking at buying at 2 year old and selling at 5 year old to start again with a 2 year old.

Technology is moving too fast to buy a brand new car and keep it for 10 to 12 years.

Whatever car you are thinking of buying - look at what a 2 year old one is selling for - I guess £10 to £12K

£20K will get you a beautiful 2 year old BMW /Audi or M-Benz for example, with renewable warranty and service included.

scaredofdebt

PCP has been invented by the car industry to try to trap people into an endless cycle of paying silly money for the lure of having a new car every 2-3 years.

It's madness.

Buy a nearly new car for 30-40% off the new price, you'll still get the balance of the warranty and some other mug has lost the initial thousands in depreciation.

Get a bank loan for that if you really must.

Personally I'd get a decent 3-5 year old car, probably with higher spec, for a third of the cost or less.

Yes, I was the same as you when I was younger, nearly bought a Rover Fastback when I was 24 but had a reality check and instead used the monthly payments to rent a place of my own.

(When I found out the insurance costs and the price of new tyres for it!)

Good luck though!

Ultrasonic

Madden wrote: »

I am aware that I'm realistically only ever going to lose money on a car, but the loss isn't as drastic if it is kept for a long period of time. A big chunk is lost as soon as it's driven out the showroom.

As you say, you lose a lot of money driving a car out of a showroom. How long you keep a car makes no difference to this. Buy a car at two years old and you never pay the high year 1 and 2 depreciation. I'm not saying never buy a new car, but the 'keep it a long time' argument doesn't stack up.

This is MSE, so the nature of the responses that you have had so far is not overly surprising. But in part this is also because we get people posting here who have 'bought' a car on finance that they now regret and are trying to find out how they can get out of the contract.

Obviously it's your money so spend it however you want. People here have just offered you their opinions, which is what you asked for.

Hoof_Hearted

We have had new cars in the past and that new car thrill lasts a month or so. You can get a fantastic car for under £5,000 and a reliable one for less than £3,000. Have it properly checked out and save, save, save. If you want to take more risk, there are some very cheap, less desirable cars around at bargain prices. Years back, I bought a Honda Concerto for my son for £250. Three years of trouble-free motoring and he sold it for £300.

Whatever you buy, it will lose money. The more you spend, the more you lose.