Financing a car (young)

Madden

I never expected resounding support for finance from MSE

Rather playing devil's advocate here, but what are your opinions on financing say a 3 year old car worth £15k then? (with 5k deposit, 10k financed) This would be cosiderably less per month on a 3 year HP and removes the immediate depreciation factor of a new car.

Are you also opposed to this because of the continued commitment or would you be much more open to this sort of approach at a young age?

Still aware this is MSE and some will always opt for a cheaper car and buying outright, but having a nice car is a lifestyle choice. Without starting a huge debate..Just because the accepted norm is to prioritise owning your own home, should this take precedence over enjoying yourself in others aspects of life? Not everyone will earn £XXk a year and be able to afford everything they want comfortably. Such is life I guess.

jimjames

I'd certainly think a 3 year old car was potentially a better buy as someone else has lost the initial depreciation and after you pay of the finance you should have more remaining than from a £15k new car.

Potential downsides are being out of warranty and maybe more service costs but that probably depends on the vehicle.

Madden wrote: »

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 bought a car from the original owner who had it 12 years. They paid £19000 and I bought it for £900; they lost over £18,000 in that time so that's still a pretty drastic drop even keeping it - but if they kept it another 10 years they wouldn't have lost any more money.

Madden wrote: »

Not everyone will earn £XXk a year and be able to afford everything they want comfortably. Such is life I guess.

I think it is probably safe to say that the vast majority of people are not able to afford everything they might want and that it is invariably a choice between options so you aren't unique in that respect. Committing to an expensive car does then restrict which of those options are open to you.

Ultrasonic

I think I said something similar above, but seriously do try to start thinking along the lines of what sort of car you want rather than how much you can spend.

laidbackgjr

For me the reason to spend 15k plus on a car would be because I'm using it a lot, if your really spending less than a £100 a month on fuel, that's maybe 700 miles a month or just over 20 miles a day or maybe an hours driving a day? So you are thinking of spending over 50% of your income on something you'll use for less than 5% of a day.

Richard53

I can see where the OP is coming from. He's young, he's got no commitments, and he likes his cars. Others smoke and drink, so why not? A £20k car would give him a lot of pleasure.

On the other hand, I would endorse everything said above. You have no idea what your financial circumstances will be in 2/3 years time. You might lose your job, you may be forced to move out of the parental home, you might inadvertently start a family and have to hand over large chunks of your income to someone else. Or suddenly have to rent a flat. Life has a habit of throwing curve balls at you when you least expect them. If you are committed up to the hilt with a car loan, you are screwed. You will have absolutely nothing in reserve.

It will be a great pleasure for you, for a few months. After a year, it will be a millstone round your neck, and you will bitterly regret giving in to that desire for shiny new metal. Every chip in the paint, every bit of wear on the upholstery will remind you that you put all you had, and then borrowed some more, into something which is devaluing before your very eyes. And every month, the money keeps relentlessly going out of your bank account.

When you can buy a very nice, new-looking car for the price of the deposit you are thinking of putting down, spending that kind of money is utter madness. If you already had the £20k, go ahead and spend it how you like. But to put yourself in debt, and at the mercy of those you owe money to, when you don't absolutely need to ... madness. Get a cheap runabout, save the £500 a month in a high-interest account, and in three years or so buy the car of your dreams with cash. It will still depreciate like a piano falling off a cliff, but you will own it, rather than it owning you.

Hoof_Hearted

I have a solution. You are young and you want to have some fun. Why not buy a reliable, bomb proof car that is just great fun to drive and cheap to buy?

That is an MX-5. Great examples for around £4,000. OK, you won't be able to hear the radio, but sheer driving pleasure.

Madden

Thanks again for the advice all, I have taken it on board.

The idea of spending £500 a month (which is still not 50% of my income) was purely on a shorter term basis to limit the length of commitment. You could easily finance the same car for a longer period and pay a much smaller percentage of income each month. This doesn't really change the overall burden though.

I think Richard53 hit the nail on the head, at such a young age it is very tempting to spend now and save later. For now at least though, I'll stick to something without the need to finance.

27col

Madden wrote: »

Thanks again for the advice all, I have taken it on board.

The idea of spending £500 a month (which is still not 50% of my income) was purely on a shorter term basis to limit the length of commitment. You could easily finance the same car for a longer period and pay a much smaller percentage of income each month. This doesn't really change the overall burden though.

I think Richard53 hit the nail on the head, at such a young age it is very tempting to spend now and save later. For now at least though, I'll stick to something without the need to finance.

Very sensible and mature decision you have made there OP.

Richard53

Madden wrote: »

For now at least though, I'll stick to something without the need to finance.

Wise move. I'm at the other end of the age range, and in my time I have been poor and, well, comfortable if not wealthy. I have driven unreliable bangers when I was skint, and a couple of very nice cars when I have been flush. Mostly I have paid cash, but once or twice I have taken out finance when I just had to have something and I didn't have the resources.

I can say without a shadow of a doubt that the things you save up for and buy, however modest, give you far more pleasure than anything you have to borrow to get. It has taken me 60 years to get to this point, and although I am earning less today than I did when I was 30 (and a lot less than when I was 40 - circumstances beyond my control forcing job moves and a mid-life career change), I am financially happier than I have ever been. I don't owe a penny to anyone, and so any money I earn is mine to spend how I like. It's a good place to be.

If you absolutely must have a high-end motor car experience, why not splash out once in a while and hire a Ferrari for the weekend?

parking_question_chap

This is money saving expert, not money wasting expert.


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