Proof the banks are keeping us in debt.

matttye

CLAPTON wrote: »

Plenty of cars in the 2k bracket; reliable, cheap to run, cheap to insure : no need to buy an expensive car.

if one already owns a car then anyone with two brain cells knows they will need to replace it in due cause: so they should start to save for that future car.
I'm sure you do.


as I've already said, a consolidation loan is simply a way of shifting debt around and not new debt
obviously, once in debt it is best to pay the least interest possible and if shifting debt around achieves that then so beit.
just resolve never to get in debt again.

I've just used half of my savings as a deposit to finance a new car on PCP.

Why? Because I can afford the repayments + to put a healthy amount away in savings each month and I'd rather have a car that will last me 10 years than rand(2,5) years. Used cars are a lottery.

I do a lot of mileage in my new job (new position in the same company I've worked for for five years) and need something reliable.

I can make unlimited overpayments without penalty which I'll take advantage of.

Wilkins

Essentially, this is a matter of how one perceives consumption versus investment. Against the simple rule that borrowing for consumption is bad and borrowing for investment is good, it must be admitted that there is a considerable grey area.

A car loan is a classic case where it could be either, depending on the car and the circumstances of the borrower.

Antimoron

Being able to afford repayments does not translate into being able afford something.

Baffles me how many people don't get this.

If you over borrow tens of thousands and are able to pay a few hundred to it every month, that does not mean you can afford it, or that it's a good idea.

It only means you've stretched out the length of time you'll pay that "affordable" couple of hundred a month. and most important, pay a great deal of interest over time.

Monthly repayment means jack all

Thrugelmir

matttye wrote: »

I've just used half of my savings as a deposit to finance a new car on PCP.

Why? Because I can afford the repayments + to put a healthy amount away in savings each month and I'd rather have a car that will last me 10 years than rand(2,5) years. Used cars are a lottery.

You are paying 10% interest for the privilege.

Myself I prefer to pay cash and buy a 15 month old car with only 5,000 miles on the clock for £4k less than current retail.

PCP is the way garages now do their business. The salesmen couldn't believe that I didn't want PCP. Hooked on credit as a society.......

matttye

Antimoron wrote: »

Being able to afford repayments does not translate into being able afford something.

Baffles me how many people don't get this.

If you over borrow tens of thousands and are able to pay a few hundred to it every month, that does not mean you can afford it, or that it's a good idea.

It only means you've stretched out the length of time you'll pay that "affordable" couple of hundred a month. and most important, pay a great deal of interest over time.

Monthly repayment means jack all

So are you saying that almost everyone who takes out a mortgage can't afford their home?

If you're taking "afford" in the absolute literal sense then any kind of borrowing is likely to display a lack of affordability otherwise there would be no need to borrow.

Thrugelmir wrote: »

You are paying 10% interest for the privilege.

Myself I prefer to pay cash and buy a 15 month old car with only 5,000 miles on the clock for £4k less than current retail.

PCP is the way garages now do their business. The salesmen couldn't believe that I didn't want PCP. Hooked on credit as a society.......

6.8% interest.

If I had the money to buy the car upfront like you then I would've done so.

CLAPTON

matttye wrote: »

So are you saying that almost everyone who takes out a mortgage can't afford their home?

If you're taking "afford" in the absolute literal sense then any kind of borrowing is likely to display a lack of affordability otherwise there would be no need to borrow.





6.8% interest.

If I had the money to buy the car upfront like you then I would've done so.

yes, of course, some-one buying a house on a mortgage can't afford the house otherwise why would they borrow?

and of course houses are sometimes re-possessed

however the equation has to take into account that the alternative to buying is to rent

and of course houses tend to appreciate in value unlike most other debt funded products

matttye

CLAPTON wrote: »

yes, of course, some-one buying a house on a mortgage can't afford the house otherwise why would they borrow?

and of course houses are sometimes re-possessed

however the equation has to take into account that the alternative to buying is to rent

and of course houses tend to appreciate in value unlike most other debt funded products

I think that's a strange way of looking at it, albeit accurate if using the explicit definition for afford. I would say that someone who can afford mortgage repayments can afford to buy a house.

bigadaj

matttye wrote: »

I think that's a strange way of looking at it, albeit accurate if using the explicit definition for afford. I would say that someone who can afford mortgage repayments can afford to buy a house.

Yes but affordability isn't a black and white issue.

A good example is the current situation, assuming neutral interest rates of 5%, itself an arguable thing! then mortgage rates at 7% would be possible. How many people now wouldn't be able to afford that?

Thrugelmir

matttye wrote: »

If I had the money to buy the car upfront like you then I would've done so.

Was my choice to save. Makes ones money go far further.

matttye

bigadaj wrote: »

Yes but affordability isn't a black and white issue.

A good example is the current situation, assuming neutral interest rates of 5%, itself an arguable thing! then mortgage rates at 7% would be possible. How many people now wouldn't be able to afford that?

I may not be getting what you're trying to say, because it seems black and white to me. You can either afford to pay back what you borrow or you can't.

When I say this, I mean that you do of course need a little bit of wiggle room in your budget for unexpected increases in bills, interest rates, unexpected repairs etc.

Thrugelmir wrote: »

Was my choice to save. Makes ones money go far further.

I agree and that's my philosophy about most things.

I've stepped away from that for my car because I need something reliable for work and I'd rather have one that will last for a long time, than have to keep finding a used car every couple of years.

I'm intending to keep this car for about 10 years, and I'll overpay on the car finance to try and pay it off in about half the time, so should save on the interest. It's quite a low rate anyway.