Buying a Car - How Do You Do Yours?

racing_blue

I am not sure about this, but I wonder if there is a divide between people who look at cars as an expense to be met from income, and those who look at them as an asset on the balance sheet.

I'm firmly in the balance sheet camp. To me, getting value from a car is all about the lifetime cost including acquisition, running it, and eventually disposing of it.

Someone at work was trying to persuade me to buy a RAV4 on finance, like them. They reckon it costs them £9k to run a brand new one for 3 years, then replace with another brand new one. I guess it never really features on their balance sheet, it's just an annual expense of £3k. 40% taxpayer, so needs to earn £5k each year to keep that habit going.

Whereas I'd hate that. I'd prefer to spend say £10K up front and depreciate on my balance sheet by 33% per year. In this way the car becomes more affordable the older it gets. Maybe there's the odd £400 bill every now and again - which I can well afford from all the £'000s saved over the years.

Not saying this is right or wrong, it's just the way I think of it. There are many ways to skin the rabbit, I guess this thread shows.

thescouselander

I think you're right. I look at access to my car as a service just like TV and Internet. For me there's no benefit in actually owning the car; as long as I have exclusive access to it then I'm happy.

takman

thescouselander wrote: »

I didn't say it was cheaper to have a new car. I was saying new cars are easier to budget for because the costs are known in advance.

You keep mentioning that new cars are easier to budget for due to the set monthly payment and lower repair costs. But I don't think that should be a deciding factor in whether or not to buy a new car because the kind of person who needs the security of a set monthly fee usually doesn't have much money in savings. So this means people who have less spare money end up spending more money on a new car. In reality they should be buying an older car which will cost them a lot less money overall.

jimjames

takman wrote: »

You keep mentioning that new cars are easier to budget for due to the set monthly payment and lower repair costs. But I don't think that should be a deciding factor in whether or not to buy a new car because the kind of person who needs the security of a set monthly fee usually doesn't have much money in savings. So this means people who have less spare money end up spending more money on a new car. In reality they should be buying an older car which will cost them a lot less money overall.

I agree. If £400 for repairs is an issue then paying out £200 per month for a new car isn't really a solution. You really need to work out a budget and make sure you save sufficiently to cover expenses, not just car but any unexpected bills. I'm also not convinced that a new car is any more reliable than an older, well serviced one. Seeing friends with new to 3 year old cars that are off the road with various issues it doesn't appear any better than running a 14 year old car with 250,000 miles that only needed routine servicing over the course of a year.

thescouselander

takman wrote: »

You keep mentioning that new cars are easier to budget for due to the set monthly payment and lower repair costs. But I don't think that should be a deciding factor in whether or not to buy a new car because the kind of person who needs the security of a set monthly fee usually doesn't have much money in savings. So this means people who have less spare money end up spending more money on a new car. In reality they should be buying an older car which will cost them a lot less money overall.

Covering the risk of repairs from savings is ok for very old cars as in the worst case you can just scrap them and start again. For newer second hand cars, say 3 to 5 years old, repair bills can run to several thousands of pounds and then the equation is not so simple; owning such an expensive asset is a significant financial risk in itself.

The way I see it buying into this sort of liability and then self insuring with savings is like gambling. Maybe it will pay off or maybe the arrangement will go awry; it's one strategy I suppose. Personally I prefer to know my outgoings and make arrangements for them to be covered; I guess my strategy is to head off the unexpected before it happens.

In my wife's case she has gone the self insure route and has had to dip into her savings for the repairs and now her savings have gone down but the risk of further breakdowns is unchanged. The car has already needed attention 3 times in the last six months so her savings are on a downward trajectory. Mine, on the other hand are increasing as I've planned properly.

takman

thescouselander wrote: »

Covering the risk of repairs from savings is ok for very old cars as in the worst case you can just scrap them and start again. For newer second hand cars, say 3 to 5 years old, repair bills can run to several thousands of pounds and then the equation is not so simple; owning such an expensive asset is a significant financial risk in itself.

The way I see it buying into this sort of liability and then self insuring with savings is like gambling. Maybe it will pay off or maybe the arrangement will go awry; it's one strategy I suppose. Personally I prefer to know my outgoings and make arrangements for them to be covered; I guess my strategy is to head off the unexpected before it happens.

In my wife's case she has gone the self insure route and has had to dip into her savings for the repairs and now her savings have gone down but the risk of further breakdowns is unchanged. The car has already needed attention 3 times in the last six months so her savings are on a downward trajectory. Mine, on the other hand are increasing as I've planned properly.

How much have you spent on car payments in the last 12 months and how much has your wife spent on car repairs I'm the last 12 months?. That really is the only way to compare the cost of the cars.

To put it into perspective let's say that you buy a brand new car and sell it three years later. Let's say you loose £6000 in depreciation. No car is going to need £6000 of repairs in 3 years!. I know people who have bought a shell and built and entire car from scratch for less than £6000!.

Ebe_Scrooge

thescouselander wrote: »

I guess you must have more time than I do then. New cars are definitely better than old though, in particular:

DAB Radio - OK, nice to have, but you can go to Halfords and buy one if you really want one. Personally, a mixture of Radio 2 + 4 plus some CDs works for me.
The ability to read out texts and emails. What ???
LED headlights lights (actually one best features on my current car) Why ? My standard ones seem to work OK. Or are you one of these that dazzle everyone even on dipped beam ?
Head Up display (also very good) ???
Keyless entry (really useful if you have young children) Another gadget to go wrong.
Better safety Like what ??? My safety is down to my driving ability, I ain't gonna hope some airbag is going to save me if I overcook it on a corner. Not that I ever have, in over 30 years of driving < he said smugly :-) >
More modern styling. Give me a Triumph Stag or an E-Type any day.

Lower emissions. Ok, I'll give you this one.

There's no way you can compare a 13 year old car with a new one.

My replies ( some, tongue-in-cheek admittedly, above ). I will just qualify - I loved my first car, a 1968 Mini Countryman, which was just soooo simple to work on, and had bags of character - and bags of problems, I can't deny it. Thing is, anything went wrong, I could fix it, no problem. Not like my current, so-called "modern" car :-(

jimjames

takman wrote: »

How much have you spent on car payments in the last 12 months and how much has your wife spent on car repairs I'm the last 12 months?. That really is the only way to compare the cost of the cars.
.

You're right. It's also the invisible cost as well that needs to be considered. So if you have a car that costs you £200 pm but when you sell it's only worth £10000 compared to a purchase cost of £20000 then you've lost that £10000 which is invisible until you sell - and even then if you P/X it might be hidden in refinancing costs.

There is no way any average car will cost £10,000 in repairs in 3 years. There are lots of reasons people want new cars but trying to justify it on costs grounds isn't one of them whether you call it budgeting or maintenance or whatever. Read the Bangernomics thread and you'll see how cheap motoring can be. My last cars have all been sold for more than I paid after a year or so and will minimal maintenance costs. That also includes a car that you probably wouldn't call an old banger although nearly 15 years old, a Porsche 911.

Obviously not for everyone if you need to have the latest gadgets and "modern" styling but certainly one way to keep motoring cost down.

thescouselander

takman wrote: »

How much have you spent on car payments in the last 12 months and how much has your wife spent on car repairs I'm the last 12 months?. That really is the only way to compare the cost of the cars.

To put it into perspective let's say that you buy a brand new car and sell it three years later. Let's say you loose £6000 in depreciation. No car is going to need £6000 of repairs in 3 years!. I know people who have bought a shell and built and entire car from scratch for less than £6000!.

The wife has spent something probably approaching £1000 over the last 12 months by now (including repairs, servicing and tyres). Given she could have leased a brand new car for around £120 per month the old banger is looking rather poor value for money. As I said, she gambled and lost - for almost the same money she spent on her banger she could have been driving a new motor and she (or rather I) wouldn't have had to deal with the poor reliability.

masterlumps

I go for something about 1.5 - 2.5 years old, so someone else has taken the hit depreciation wise, but it's still a decent car. I usually keep them for 2-3 years by which time they are ready to flip to the next level of second hand buyers.

I couldn't contemplate taking on finance for a car, when I buy something I want it to be mine.