Financing a car purchase

LeightonP72

This has probably been asked a million times before but  I would like to hear some opinions on this.
I had to have my 12 year old Astra written off and the insurance gave me around £2k for it's value.
I'm looking to buy a family car  (nice size) that is  around 4-5 years old.
Firstly, any recommendations?
Secondly, what is the best way to finance it?
I have some savings of around £15k but want to leave that where it is. I was looking at a bank loan and paying it off over 5 years or was considering a car finance deal with whoever I purchase the car off?
Would be really grateful for any advice on model and financing it? 

Thanks.

DrEskimo

Plenty of cars will fit the bill as nice family size for toddlers. What sort of shape/engine/style you like? I’ve just had my first child and bought a Tesla Model S Performance. Great all rounder in terms of boot size, space in the back, and comfort, tech and speed when I’m commuting up and down the M40 most days. EVs work incredibly well for me as I do high mileage and charge from home, so only £20/month for over 1,000miles. You can get good facelift 100 or 100D for your budget with around 50-60k miles. 

Otherwise something like a Lexus RX450h if want to stay with petrol/hybrid. My dad has owned one for last 12years and whilst servicing costs are quite high, it’s been absolutely bullet proof. 

I understand you wanting to keep savings but I would strongly advise using at least half of it towards the car. You can quickly build it back up again with the monthly payments you were going to spend on the higher loan. Needless spending money to borrow when you have savings sitting there exactly for this type of event. 5yrs is also a pretty long time so would look to pay off much sooner as you don’t want an expensive loan hanging over you whilst you have maintenance and potentially repairs to cater for as well. 

LeightonP72

This is really helpful. Thanks.  
In terms of family car, it is now myself, my partner and 19 year old son.  My daughter is now married with a child.
Never really gave anything outside a Fiesta, Astra, Peugeot a chance!! I am looking at cars driving when I am out and about to see if anything catches my eye.
Just another question / observation. I can't believe how many people around by us have 1-3 year old cars.  How do you reckon they finance them?  The cars are incompatible with say the standard of their homes
Also I can recall my boss several years ago buying relatively new cars through a dealer and swapping them after 3 or 4 years.  He was as thrifty as they come.  What sort of deal would he have had?



  

Altior

LeightonP72 said:

This is really helpful. Thanks.  
In terms of family car, it is now myself, my partner and 19 year old son.  My daughter is now married with a child.
Never really gave anything outside a Fiesta, Astra, Peugeot a chance!! I am looking at cars driving when I am out and about to see if anything catches my eye.
Just another question / observation. I can't believe how many people around by us have 1-3 year old cars.  How do you reckon they finance them?  The cars are incompatible with say the standard of their homes
Also I can recall my boss several years ago buying relatively new cars through a dealer and swapping them after 3 or 4 years.  He was as thrifty as they come.  What sort of deal would he have had?



  

About 20% of all new vehicles registered in the UK were supported by benefits (PIP). That covers much of the cost of running the car as well as helping to fund the initial 'purchase'. 

If not using Motability (PIP), they are likely taking a short term approach, and supporting them with some type of expensive finance. 

There's no real short cut to getting a new car or nearly new car on the cheap (outside of benefits).

Often the most prudent option is what you're considering, purchasing a car outright just after the manufacturer warranty has ended. So the worst of the depreciation has been footed by the previous owner, and you still have a relatively new vehicle.

Of course cars can go wrong at any time of any age, so it's always somewhat of a gamble buying a used car out of manufacturer warranty. But certain models are more of a gamble than others.

As an example I bought a 4 yo vehicle in 2018 for £8K and just sold it this week for £3.5K. I did face a couple of big repair bills over that time. I sold a brand new car I bought in 2014 in 2016 for £12K and it would be worth £8K+ on the market right now. The brand new car was back at the dealer a couple of times for some warranty work. 

In terms of financing the purchase, in your shoes I would buy outright using a budget of about half of my savings. Many more years ago (about 2010), I bought a three year old used car that had a list price of £42K for £9K, it was cheap as it had already done 70K. But most of those miles were m/way miles and I sold it two years later for £7K, and the only costs I had during ownership was the standard maintenance. If you don't do a huge amount of mileage that's an option to get a newer model, buy a used high miler that's likely to have been pounding the motorway (not a likely taxi!) that has a good reputation for reliability. 

Keep_pedalling

LeightonP72 said:

This is really helpful. Thanks.  
In terms of family car, it is now myself, my partner and 19 year old son.  My daughter is now married with a child.
Never really gave anything outside a Fiesta, Astra, Peugeot a chance!! I am looking at cars driving when I am out and about to see if anything catches my eye.
Just another question / observation. I can't believe how many people around by us have 1-3 year old cars.  How do you reckon they finance them?  The cars are incompatible with say the standard of their homes
Also I can recall my boss several years ago buying relatively new cars through a dealer and swapping them after 3 or 4 years.  He was as thrifty as they come.  What sort of deal would he have had?

Your boss was probably leasing his cars and possible through the company as well. 

LeightonP72

Altior said:

LeightonP72 said:

This is really helpful. Thanks.  
In terms of family car, it is now myself, my partner and 19 year old son.  My daughter is now married with a child.
Never really gave anything outside a Fiesta, Astra, Peugeot a chance!! I am looking at cars driving when I am out and about to see if anything catches my eye.
Just another question / observation. I can't believe how many people around by us have 1-3 year old cars.  How do you reckon they finance them?  The cars are incompatible with say the standard of their homes
Also I can recall my boss several years ago buying relatively new cars through a dealer and swapping them after 3 or 4 years.  He was as thrifty as they come.  What sort of deal would he have had?



  

About 20% of all new vehicles registered in the UK were supported by benefits (PIP). That covers much of the cost of running the car as well as helping to fund the initial 'purchase'. 

If not using Motability (PIP), they are likely taking a short term approach, and supporting them with some type of expensive finance. 

There's no real short cut to getting a new car or nearly new car on the cheap (outside of benefits).

Often the most prudent option is what you're considering, purchasing a car outright just after the manufacturer warranty has ended. So the worst of the depreciation has been footed by the previous owner, and you still have a relatively new vehicle.

Of course cars can go wrong at any time of any age, so it's always somewhat of a gamble buying a used car out of manufacturer warranty. But certain models are more of a gamble than others.

As an example I bought a 4 yo vehicle in 2018 for £8K and just sold it this week for £3.5K. I did face a couple of big repair bills over that time. I sold a brand new car I bought in 2014 in 2016 for £12K and it would be worth £8K+ on the market right now. The brand new car was back at the dealer a couple of times for some warranty work. 

In terms of financing the purchase, in your shoes I would buy outright using a budget of about half of my savings. Many more years ago (about 2010), I bought a three year old used car that had a list price of £42K for £9K, it was cheap as it had already done 70K. But most of those miles were m/way miles and I sold it two years later for £7K, and the only costs I had during ownership was the standard maintenance. If you don't do a huge amount of mileage that's an option to get a newer model, buy a used high miler that's likely to have been pounding the motorway (not a likely taxi!) that has a good reputation for reliability. 

Thanks for the really helpful reply.  After driving for over 30 years it really is a gamble isn't it? A robust after sales warranty is essential but it doesn't stop things happening beyond that.
That comment about purchasing a high mileage newish car is really interesting. I work from home 4 days per week and the commute on the other day is only 30 miles in total there and back.  Just always associated high mileage cars with an increase in the likelihood of problems.  

DrEskimo

In my humble opinion, people who buy new cars on finance/leases are spending far too large of a proportion of their income on cars that are famous for plummeting in value. I like my cars, but always avoided finance/lease after trying it once. The depreciation and interest costs were hard to swallow and I couldn't wait to sell it and get out of it. It also changed how I viewed the car, knowing it wasn't 'mine'. Now, as above, I buy used and keep for however long I need.

Whilst not UK based, Dave Ramsey from the US has a few good rules of thumb I like:

• Don't spend more than half your annual income on a car
• Pay in full upfront with no finance
• Don't buy brand new until you have a net worth over £1m

There's not many aspects in life where we are quite so willing to put large sums of money down knowing it will be worth less than half that in just a few years time. Somehow putting it into a monthly cost makes it 'feel' better. There's a reason credit cards, finance, BNPL are popular, and there is also a reason they are incredibly profitable....

Altior

LeightonP72 said:

Altior said:

LeightonP72 said:

This is really helpful. Thanks.  
In terms of family car, it is now myself, my partner and 19 year old son.  My daughter is now married with a child.
Never really gave anything outside a Fiesta, Astra, Peugeot a chance!! I am looking at cars driving when I am out and about to see if anything catches my eye.
Just another question / observation. I can't believe how many people around by us have 1-3 year old cars.  How do you reckon they finance them?  The cars are incompatible with say the standard of their homes
Also I can recall my boss several years ago buying relatively new cars through a dealer and swapping them after 3 or 4 years.  He was as thrifty as they come.  What sort of deal would he have had?



  

About 20% of all new vehicles registered in the UK were supported by benefits (PIP). That covers much of the cost of running the car as well as helping to fund the initial 'purchase'. 

If not using Motability (PIP), they are likely taking a short term approach, and supporting them with some type of expensive finance. 

There's no real short cut to getting a new car or nearly new car on the cheap (outside of benefits).

Often the most prudent option is what you're considering, purchasing a car outright just after the manufacturer warranty has ended. So the worst of the depreciation has been footed by the previous owner, and you still have a relatively new vehicle.

Of course cars can go wrong at any time of any age, so it's always somewhat of a gamble buying a used car out of manufacturer warranty. But certain models are more of a gamble than others.

As an example I bought a 4 yo vehicle in 2018 for £8K and just sold it this week for £3.5K. I did face a couple of big repair bills over that time. I sold a brand new car I bought in 2014 in 2016 for £12K and it would be worth £8K+ on the market right now. The brand new car was back at the dealer a couple of times for some warranty work. 

In terms of financing the purchase, in your shoes I would buy outright using a budget of about half of my savings. Many more years ago (about 2010), I bought a three year old used car that had a list price of £42K for £9K, it was cheap as it had already done 70K. But most of those miles were m/way miles and I sold it two years later for £7K, and the only costs I had during ownership was the standard maintenance. If you don't do a huge amount of mileage that's an option to get a newer model, buy a used high miler that's likely to have been pounding the motorway (not a likely taxi!) that has a good reputation for reliability. 

Thanks for the really helpful reply.  After driving for over 30 years it really is a gamble isn't it? A robust after sales warranty is essential but it doesn't stop things happening beyond that.
That comment about purchasing a high mileage newish car is really interesting. I work from home 4 days per week and the commute on the other day is only 30 miles in total there and back.  Just always associated high mileage cars with an increase in the likelihood of problems.  

Modern cars are pretty good on high mileage, it wouldn't bother me on a car that has been maintained properly with main dealer stamps. You tend to find these types of vehicles being sold at the big car supermarkets. Often company cars that will have been well maintained and do any work that's flagged up as the people running them aren't paying the bills, and the supermarket works on high volume and lower margin. 

If you do less than 10K a year the age will catch up with the mileage and get toward the average. 

Personally I'm not keen on second hand warranties as they only tend to cover the items that don't go wrong, but you'd take a free one! 

My other tip is that dedicated owner forums are a great resource. Once you've decided your ideal model and budget, find a good owner forum for the model, and review the topics for known issues and repairs etc. They are more knowledgeable than most general mechanics as it's concentrated information. Certainly also a good point of reference if you own a model that develops an issue that is difficult to diagnose.  

Keep_pedalling

DrEskimo said:

In my humble opinion, people who buy new cars on finance/leases are spending far too large of a proportion of their income on cars that are famous for plummeting in value. I like my cars, but always avoided finance/lease after trying it once. The depreciation and interest costs were hard to swallow and I couldn't wait to sell it and get out of it. It also changed how I viewed the car, knowing it wasn't 'mine'. Now, as above, I buy used and keep for however long I need.

Whilst not UK based, Dave Ramsey from the US has a few good rules of thumb I like:

• Don't spend more than half your annual income on a car
• Pay in full upfront with no finance
• Don't buy brand new until you have a net worth over £1m

There's not many aspects in life where we are quite so willing to put large sums of money down knowing it will be worth less than half that in just a few years time. Somehow putting it into a monthly cost makes it 'feel' better. There's a reason credit cards, finance, BNPL are popular, and there is also a reason they are incredibly profitable....

Until this year I was a pay in full guy, but my latest car is leased. Payments are considerably lower than PCP over 3 years and I am pretty sure they are going to work out cheaper than the depreciation over the same period. There is also the fact that the large amount of cash I would have used on an outright purchase is earning interest. This is however for a new car where depreciation is high.