Advice Wanted on New Car Purchase

TrustyOven

davidwood123 wrote: »

Depends what the car is. There are second hand cars out there worth millions you know

And in context, if someone is looking to buy 20k car and the only way they could do it was with a loan of some sort, it suggests they are cash poor / "eyes bigger than their stomachs".

Mogley

What is the APR on your £6k HP agreement? I would be tempted to settle part/all of this debt with a money transfer credit card @ 0% (usually a fee) and save on some of the interest. Make sure you pay off the credit card in the time frame and once all paid up, only then consider a new second hand car.


So now you have saved money on interest on HP and have £150pm salary increase to save somewhere (see savings board) which you can use towards the deposit on a car/house etc. in the future. I guarantee you'll think twice about buying an expensive car using hard earned savings.

k3lvc

TrustyOven wrote: »

And in context, if someone is looking to buy 20k car and the only way they could do it was with a loan of some sort, it suggests they are cash poor / "eyes bigger than their stomachs".

Maybe when you're talking about personal purchase/own cash but the waters are muddied when you throw in a car allowance from employer. This is usually paid on a monthly basis meaning lease/HP/PCP are simpler options and often a deposit isn't readily available

vacheron

PeacefulWaters wrote: »

Have you considered a cheaper car and saving money monthly so that next time you fancy a new vehicle you can pay cash? Or you can build up a house deposit?

£20k for a second hand car sounds nuts.

I was just talking about this this with a colleague this morning. The best part is that it isn't just your "next car", with some discipline you could pay cash for every car for the rest of your life!

By skipping one car replacement and putting the money aside to save for the next one, you are turning a lifetime of revolving negative debt, interest payments and fees into a lifetime of credit, positive interest, and a better bargaining position as a cash buyer.

Over your lifetime this single 3-4 year sacrifice early on will save you tens or possibly hundreds of thousands of pounds. That could be the house deposit you mentioned in addition to your new cars as well, and all for the sake of impatience for one new car replacement early on in life.


In my example:

• My first car was a boring 6 year old saloon bought in 1995 for £1,800 when I was 21.
• My next was a performance car bought in 1998 when I was 24 for £14,000. I used cash+PX+10k Halifax loan over 3 years (£350pm IIRC).
• After the loan was paid off I kept that car for a further 6 years and by saving the amount I would have been repaying during those years I have been able to buy all my cars without any credit ever since.

davidwood123

TrustyOven wrote: »

And in context, if someone is looking to buy 20k car and the only way they could do it was with a loan of some sort, it suggests they are cash poor / "eyes bigger than their stomachs".

Never had a mortgage then?

silverwhistle

vacheron wrote: »

• My first car was a boring 6 year old saloon bought in 1995 for £1,800 when I was 21.

You profligate thing you.:D My first car was a £100 banger (gawd knows how old!) at the age of 28. It meant when redundancy and then pension kicked in at 50 I didn't have any liabilities to worry about.

Your point stands though. Cars are pretty reliable if serviced. Understandable to want a more comfortable car if doing high mileages but I have no worries driving my 2009 run-of-the-mill Korean box to the Alps for my skiing holiday every winter (and do it in one day going).

TrustyOven

davidwood123 wrote: »

Never had a mortgage then?

No, siree! I'm saving for my downpayment.
Not really sure what your one-sentence reply was intended to achieve.

Do you really honestly believe that the two situations are relevantly equivalent or related?

Price: A house is many times more expensive than a car. It is harder to find the upfront cash for a house purchase as it is to find for a car purchase. Most people are therefore forced into the situation of obtaining a mortgage if they want to become home-owners.
While a person can be happy with a £1k car, they might not even be able to find a £50k house.

Need vs Luxury: A car is a luxury. Often, but not always, it's a necessity due to commuting or dissability or job hunting. The higher the price of the car, the less it is about necessity and more to do with luxury, because the element of choice is involved. A person can choose to go for a £50k car (thus selecting luxury) or they can choose to go for a £2k car (selecting necessity). This is a sliding scale. Wanting a 20k car is heading into luxury territorry.

Buying vs "auto loan": Mixture of the two above. A 20k purchase made with direct payment on debit card is not as bad as having to borrow from your future self (as per Monevator post).

What if someone is trying to borrow far too much money for their mortgage relative to their downpayment or disposable income?

We would be the sensible ones and point out the flaws in that plan.

Why can't we do the same about a car purchase on HP/loan/PCP etc?

freeisgood

The problem is...there will always be someone with a nicer flashier car than you...they are also probably only leasing it to show off. This is why I drive an oldish banger. It costs me nowt to lease/buy and I don't give two hoots about my friends very flashy expensive leased cars...even more so when I see how stressed they are when they dent them!