Lease new vs PCP nearly new

Grumpy_chap

It is quite shocking that even something boring marketed as an "aspirational" family car, such as 330e M-Sport touring, default options on PCP are £700 per month (including the upfront deposit) or 85 pence per mile just to "not own" a car for 4 years!
Tesla model 3 performance is £780 / month on the same basis.
We are being "conditioned" by the marketing to accept these types of unaffordable prices as the "norm" and individuals failed if they can't get the same.
We really do need a "fight-back" by the influencers.  I don't think I have ever seen anything from the financial guides that set the simple basic type of rule of thumb that @DrEskimo indicated.  This is so needed for so many types of products.  It would be good for many individuals if there was a significant tightening of new credit availability.

AdrianC

Grumpy_chap said:

It is quite shocking that even something boring marketed as an "aspirational" family car, such as 330e M-Sport touring, default options on PCP are £700 per month (including the upfront deposit) or 85 pence per mile just to "not own" a car for 4 years!

£44,000+ list price.

What's the 4yr balloon?

Grumpy_chap

This is the "default" option returned from BMW website if selecting the 3-series touring and clicking for a PCP example.  I am surprised BMW pick this as it is an expensive (but 'green') option and most people would go more mid-range.  Full figures presented:

Still shocking numbers for a car that is not that special.
40k miles over 4 years.

AdrianC

So OTR of £51k, with balloon of £18k. That's £33k of depreciation that somebody's got to pay for...
Only £3,500 finance costs, for borrowing £50k over ~6 years... 2.9% APR

It's not the financing that's expensive. It's the depreciation.

It's also the mindset that thinks that a £51k car is something that Joe Average has some kind of right to be able to afford, simply because it's on tick with headline monthlies that aren't stupidly scary.

Grumpy_chap

AdrianC said:

It's also the mindset that thinks that a £51k car is something that Joe Average has some kind of right to be able to afford, simply because it's on tick with headline monthlies that aren't stupidly scary.

Quite right, but I think even the monthlies are scary at £600!
Absolutely, the marketing by car companies and TV channels portrayal of what life should be like are unreal and conditioning people into thinking a 3-series is "normal".

There needs to be a fight back from the influencers like MA, MSE, CAB, to realign everyone to realistic expectations - it would prevent so much heartache.

Sadly, there seem to be no "rules of thumb" as @DrEskimo suggested (though I have also always used the 50% annual income as max purchase price for a car).  I also only have a car if I can afford it from money in the bank and not excessively deplete rainy day fund.  I don't think I am necessarily normal. 

DrEskimo

AdrianC said:

So OTR of £51k, with balloon of £18k. That's £33k of depreciation that somebody's got to pay for...
Only £3,500 finance costs, for borrowing £50k over ~6 years... 2.9% APR

It's not the financing that's expensive. It's the depreciation.

It's also the mindset that thinks that a £51k car is something that Joe Average has some kind of right to be able to afford, simply because it's on tick with headline monthlies that aren't stupidly scary.

I think it doesn't help that there is little context with how much a used car run for many years costs in comparison, since that's not done in a 'monthly' cost, but rather requires the purchase and sale price, along with all additional repairs and servicing over many years to be added then divided by the months of ownership.

I think if people took the time to do this they would realise a used car bought and run over a 3-5yrs would cost the equivalent of around £100-150/month in total, even when you consider the additional costs involved.
Not to mention no contractual obligations on use.

AdrianC

Grumpy_chap said:
...and conditioning people into thinking a 3-series is "normal".

Even just "a 3-series" isn't that stupidly expensive.
A 318i SE Touring is £33k list, not £51k list. The difference in list price is the same as the balloon on the more expensive choice.

On a 40k mile contract, that list price difference is 45p/mile.

Grumpy_chap

DrEskimo said:

I think if people took the time to do this they would realise a used car bought and run over a 3-5yrs would cost the equivalent of around £100-150/month in total, even when you consider the additional costs involved.

Oddly, when my car had the service and MOT, I did assess the costs (which came out too high this year at £1,250) as being 3 - 4 months of payments / depreciation at £300-400 monthly if I had a new car.  Though, it probably was really time that the old car was a "scrapper" this year, but I'd gone so far before the final bill materialised.  At least now I have a car good for another 12 months and no costs likely to arise.

thegentleway

I don’t get how people are willing to throw so much money out of the window in depreciation to drive brand new cars. Especially on a money saving forum But please don’t talk them out of it: it’s brilliant for the second hand car market. I bought a 3 series for £4K and did nearly 150k miles in it before I scrapped it.

Grumpy_chap

I did some searching for "rules of thumb" as to how much a car can cost related to salary.  I had not realised the two equally valid, but different approaches to this:

1. Spend on a car as a proportion of monthly income, i.e. monthly PCP.
Total motoring costs no more than 20% of salary and the actual car cost no more than 10%
https://www.carmoney.co.uk/blog/what-car-can-i-afford-based-on-my-salary   
The 20/4/10 rule came up in several articles, mostly from the USA but I don't see that this is significantly different as a principal in UK.  20% deposit, 4 years finance, 10% of monthly salary max payments
https://www.conceptcarcredit.co.uk/how-much-of-your-income-should-go-towards-you-car/

2. Capital purchase as a proportion of annual salary, maybe better suited to "cash" buyers:
From 10 - 15% of salary depending on the importance of a car:
https://www.warrantywise.co.uk/blog/how-much-of-your-salary-should-you-spend-on-a-new-car

I like the fact the articles give some guides between income and salary, so £25k you can afford a Focus, £50k you can afford 3-series / X3.  The profile of vehicles on the road would rather suggest a lot of people must spend a lot more than these "rule of thumb" guides (whichever approach is taken), which is maybe why the "rules of thumb" are not popular and not widely known or used. No-one will like being told a "rule of thumb" that they cannot keep up with the Jones's and no car dealer or finance rep is going to push these "rules of thumb" to down-sell you a car.  Sadly, the "system" is geared towards forcing you into a car you can't afford, go hungry instead. repossession and depression.