Financing a car (young)

redux

Madden wrote: »

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?

The last 3 people I know who have spent £16 to £18,000 on a car are probably earning £60 to 100,000 per year, so are probably not using finance.

I agree with the tone of most of the replies here.

I can remember one of those people buying a fairly new car with a loan many years ago. The price was £5000. I worked out the interest would cost him £2500 over 5 years, and the car would very likely be worth less than that £2500 afterwards.

Ok, interest rates are lower nowadays, but you would still committed to writing off most of the value during the course of obtaining the asset.

Richard53

Since I can remember, my Dad always had new cars, about one every five years. Nothing wrong with that (they were pretty modest efforts, a Standard 8 and a Triumph Herald being the ones I remember). But it did give me a kind of template. I knew I would be driving round in bangers while I was young, but I always assumed that buying new was a sign of having arrived somehow, and something to aspire to.

A much older relative changed my mind. He said that the act of simply driving off the forecourt and onto the road instantly took 1/3 of the value off the car. Maybe not quite true, but it made an impression. That first hundred yards will be the most expensive journey you make, and you had better enjoy it, because you won't be able to afford it again for a while.

And that's with your own money. Getting into debt to do it makes even less sense.

TBH, modern cars are so good that buying a 2-3 year old car at around half the cost of new is almost a risk-free decision.*

* Inasmuch as any car purchase is risk-free, including new ones off the showroom floor.

BillJones

Madden wrote: »

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

As pointed out above, you are assuming that wealthy people can afford what they want, but it's not really true. I do pretty well, as a trader in an investment banks, but neither I, nor my colleagues, can afford everything we want. I'd like a new McLaren 650s, for example, but decided that it's silly to spend so much, so have a C63. I'd really quite like a P1, but can't stretch to one of these even if I did decide to.

The bloke behind me has an F1, a 458, and a Zonda, which is nice. I feel quite jealous of that He'd like a Porsche Speedster, an EB110, and a Ferrari GTO, and can't justify the cost, so doesn't have them.

Basically, I know just about no-one who can easily "afford" everything that they want, no matter how rich they are.

Hoof_Hearted

How nice that somebody asked advice, got it in spades, and actually took it. Well done OP.

mark5

I will point out I have a £21000 car on lease hire and the figures for me were more like £840 down with further payments of £280 x 35. The OP suggested £6000 down and 500 per month these figures are way to high for a £20,000 car on a pcp.

jimjames

redux wrote: »

The last 3 people I know who have spent £16 to £18,000 on a car are probably earning £60 to 100,000 per year, so are probably not using finance.

I would strongly suspect that the people you think are buying cash are actually using finance too. Often if you are earning that sort of money you are also spending higher amounts too so may be less likely to have £20k sitting in savings to buy a car outright.

Richard53

BillJones wrote: »

The bloke behind me has an F1, a 458, and a Zonda, which is nice. I feel quite jealous of that He'd like a Porsche Speedster, an EB110, and a Ferrari GTO, and can't justify the cost, so doesn't have them.

Basically, I know just about no-one who can easily "afford" everything that they want, no matter how rich they are.

Which only goes to show that human wants are infinite. No matter how much we have, we will always want more. The guy at the bus stop in the rain wants an old banger to get him about. The guy with the old banger wants a reliable mid-range car. The guy with the nice car wants a premium car, and so on. The revelations about Yanukovich's palaces in Ukraine show that even when your resources are almost infinite, you still keep spending (and the further you go, the tackier it gets). There is no 'enough'.

The secret is to be happy with less. Scale back your own aspirations, rather than kill yourself chasing the unattainable.

CKhalvashi

jimjames wrote: »

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.

Our fleet manager bought a £100k CL600 for £5000, and it's '02' plate, so not ancient either!

I doubt she'll lose a lot on it, and it's a rival for a new CL63; a brilliant car!

Richard53 wrote: »

Since I can remember, my Dad always had new cars, about one every five years. Nothing wrong with that (they were pretty modest efforts, a Standard 8 and a Triumph Herald being the ones I remember). But it did give me a kind of template. I knew I would be driving round in bangers while I was young, but I always assumed that buying new was a sign of having arrived somehow, and something to aspire to.

I change my car every 18 months to 2 years (current one is 18 months old with nearly 92k miles) because I'm a high-mileage driver, however I can afford to do it without borrowing, and am in a good position to negotiate decent discounts through the dealer network I use.

For someone to spend half their income on a car is IMO not worth it.

TBH, modern cars are so good that buying a 2-3 year old car at around half the cost of new is almost a risk-free decision.*

* Inasmuch as any car purchase is risk-free, including new ones off the showroom floor.

Mine will be coming up at about 60% of new price in September (I got a 27% discount new), and IMO it will be a brilliant car for someone for a number of years to come.

Look out that any car is serviced properly and you probably won't have an issue with anything at 2-3 years.

CK

Hoof_Hearted

Richard53 wrote: »

The secret is to be happy with less. Scale back your own aspirations, rather than kill yourself chasing the unattainable.

100% correct. As you get older and wiser, you realise that "things" do not make you happy. It's miserable being poor and in debt, no doubt, but once you have reached a manageable situation financially, don't put it at risk by over reaching yourself.

BillJones

Richard53 wrote: »

Which only goes to show that human wants are infinite. No matter how much we have, we will always want more.

That does seem to be the way.

Happiness seems quite independent of wealth once you are able to stay warm, dry, and fed, and I was certainly no less happy when I was dirt poor than I am now.

This is great, as it means I don't have to worry about being poor again, as I'd be happy then, too.