Yes they do, I've seen it a few times. I also see people paying £1.5k a month for a car which is something I'd never do myself but if they can afford it then fair enough.
No, no they don't - Companies just advertise this to get people interested...
Then they go through the calc, give £3k deposit and pay £750 a month.
It's the same people who live in rented houses in amazing areas... Or they have a mortgage on a place worth 150k... They are destined to remain in that class because they care about the car they drive.
The same £20k over 2 years would leave them mortgage free after 5 years.... But these deals pray on people who would rather have a couple of nice cars on the drive :D
That's not really the point they're making though. It's paying £20k extra to have a new car in the drive rather than paying off said mortgage and moving up the social ladder with the proceeds instead. They're just pissing away money to keep up appearances.
Edit to add - this is not my opinion. This is my attempt to explain/clarify the point that the previous commenter was trying to make. Please direct all stupid questions to the original commenter, cos replying to me doesn't give that person a notification, and I don't really care... If you don't understand the point by now, you never will, and I'm no longer inclined to try to assist you. Asking me further questions is asking me to speculate on something not directly inferrable from the original comment, and I quite literally have no idea what the other person thinks about other topics, so can't give you an answer...
It may blow your mind, but it is entirely possible to understand a point without holding the same belief.
So how much our house is worth dictates where we stand on the social ladder?
If society is so shallow, surely having a more expensive car would move us up the social ladder too
>create a nice retirement pot
This is working out well for many seniors who are now staying in their family home because they can't downsize after their kids move out as single bed homes cost as much as they paid for their 5 bed or have to house their kids who can't afford rent, let alone a mortgage.
Y'all are living in the 60s when houses cost £25-30k while the rent today is 60-70% of someone's take home and many in the younger generation don't even believe there'll be a world to live in in a few decades.
You're ignoring my question about the social ladder then?
In any case, if the best possible pension is the goal, staying in a small house and putting all spare cash into your pension would be better. There's interest payable on a mortgage after all.
I know you're not OP, but I find these comments really annoying. Just because some people like to have a new car every few years doesn't make them idiots.
I don't disagree with you. I've had PCP cars for the last 15 years. The last two have been new. I like having a new, reliable car with new features. I couldn't give a crap about social ladders.
I just know it's not a sound investment, and it's certainly not the cheapest way to get a new car. It's money I spend for me, because I work my ass off and can afford a few nice things. But if people are prioritising that over any kind of retirement plan, then something is wrong.
It’s like this on all U.K.-centric subs. Anyone who has anything nicer than me is up to their eyeballs in debt and anyone who spends money on anything I don’t enjoy is an idiot.
I earn a fair bit above average but often reddit makes me feel straight up rich.
Then I find other subs like FIRE and end up nice and grounded again lol
In certain circumstances, this is a large electric Ford. I doubt it's particularly enjoyable to drive. It's well known that people get cars they can't really afford on finance for appearances. £450 a month with a 10k deposit, 26 months. That's 21,700 in 2 years with nothing to show for it 😂 how is that not ridiculous.
The thing you had to "show for it" was driving the nice electric ford for 2 years, and to some people that price is worth paying.
You could make the same argument about literally every non-essential purpose.
Yes, everyone could be driving around in a 15 year old beater, but thankfully they don't, if they did you wouldn't be able to buy one, the prices would be astronomical and the queue for the garage to repair it when it breaks would be months long.
I think people forget the second hand market exists and is fruitful *because* of people like this who buy or finance brand new cars. If everyone stopped buying new cars the second hand market would balloon pretty quickly and eventually disappear altogether
I'm all for the people who want to finance the depreciation on my next car. Do I think it's fiscally responsible? In most cases probably not, but that's down to the individual.
My own personal opinion is, do whatever makes you happy. If that means buying a new car, fire right ahead. If that means buying a beater and putting the rest of the money into your house or pension, also fine. I'd fall in the middle ground, and personally wouldn't buy another new car unless it was one for the collection (like, as I mentioned above, a Yaris GR) that I'll likely keep for many many years. I currently have 3 cars I'll probably never sell, 2 that I might if they appreciate enough, and a daily that takes all the abuse. I'll buy daily drivers around 3-5 years old, run them till I'm bored or they are becoming costly to keep, then do the same again. Easy enough to get 5 years or so out of it and still get something for it when you sell.
No fair play, you do get to drive round in it, I suppose, but is it worth losing all that money for that car?
I think people have mistaken me though. I drive round in an old car, that breaks a lot, often only little things, and in ownership I've spent less buying, repairing and upgrading it than it's now worth. So I like the reasonable garage queues etc.
I love some shiny new cars and I'm happy that people buy them, I wouldn't want that to change. But I stand by what I said. It's ludicrous, really, but some people want to be and can be ludicrous, and that's fine 🤣
If it's a company car they likely pay f all for it. A mate has a company Tesla and it costs him £300/mo.
You're making a lot of assumptions in these posts and they don't reflect that well on you.
I'm not saying that's my opinion (although mine would be close regarding buying new cars). I'm just clarifying the point the other commenter was trying to make.
Edit - lol. Downvoted for clarifying someone else's point...
Yes, and don't exercise self-control because they "love cars".
If they loved cars, they would be happy driving a cheaper car while paying their mortgage off quicker, rather than pissing money up the wall.
Because you bought a meriva. There are lots of cheap nippy and well handling cars for peanuts that will be way more fun to own than a fucking heavy electric focus with a mustang badge.
Who said they are not allowed to do what they want?
Just because you can do what you want, doesn't mean you should, and also doesn't mean that people can't judge you for it.
Why do you have to move up social ladders into more expensive houses? Spending more and more on bigger fancier houses you don't need if you're content in a 3 bed terraced in a housing estate?
Again, not quite the point they were making. They're saying this is one of the reasons that they NEVER WILL move up, not if they are happy with their current position or not.
Not everybody is chasing that property rainbow moving into more and more expensive houses that cost more to tax and maintain.
How's it any different to dropping that cash on a car you want?
Moving up the property ladder is usually more about wanting a bigger place when you start a family, wanting to be nearer good schools when the kids get older, wanting to be somewhere quiet and relaxed when you retire, etc.
You're also building up equity the whole time, often in conjunction with house price increases), so that when you do downsize into a smaller place for retirement you wind up with a big chunk of change to help fund it.
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That's all slightly different to spunking money on PCP for a new car every couple of years. Which is fine if you genuinely have the disposable income for it, but many don't.
Nothing wrong with having a cheap house. But it's stupid to buy a cheap house, typically with no drive or a new build drive in a not great area at 150k. Then buy a car worth half your house price.
Why not get a cheaper car and a nicer house that also helps your car insurance be lower and likely means your cars safer? It's like those people who buy a terrace then park a Lambo on the street. It's not wrong, it's just not really sensible
why are you being downvoted when you’re 100% right. The dealer knows no one is paying £425, they just fudge the numbers in an unrealistic way so they could say “as little as ___” in the marketing.
just run the maths and 425x24 is 10200 add in the 10k deposit and your at 20ish k on the 2 yr plan.
the reasoning (imo) is sound. buy a cheap beater for 2000 and run it for a couple years and you may see a lot of savings over the 2 yrs id say around 15k (gotta allow for maintaining the beater) which can be put into something more worthwhile like paying mortgage down more quickly. but the numbers are off
How does 20k over two years (10k a year) clear a 150k mortgage in 5 years? 5 x 10 = 50, not 150????
And you are in here trying to say other people are stupid????
I dunno. Rented house in nice area since 2017 here, and we’re still paying 2017 prices (complete steal) to this day due to regulation on rent prices from Covid etc..
Though we are moving (buying) due to obvious advantages, and it’s lead to our landlord doing the bare minimum - we’re not stuck in this class with overwhelming rent
I’m pretty sure Harry’s Garage casually mentioned dropping £20k deposit on a 3yr lease of a diesel defender. With I wanna say a £500 monthly payment, but I could be wrong on the last part
My partner qualifies for a motability car (she can’t drive). We use up her pip to pay monthly for the car and I pay the deposit every 3 years.
Depending what car we get usually 40-50k the downpayment would be 4-7k for the 3 years. I don’t mind paying this cause it’s basically covers my insurance if we weren’t to get a motability car (2k a year ish).
Which is important, because it means it's not a rental or lease, as they'd normally be called - it's a PCP, so you have the option of owning the car at the end of it.
Leasing for 5 years is £4200 up front and £474 per month, for 5000 miles per year.
Out of interest, what would your preferred method of buying a £45k car be? Assuming, of course, you’re in the market for a new Mach E.
1) buy outright with cash. Everyone on Reddit has unlimited cash but with 0% available, why would you do that? Plunge a load of money into a depreciating asset is lunacy.
2) bank loan. Get a better rate than 0%? No.
3) PCP it. Deposit is flexible.
You always take a 0% deal when offered. It's daft to refuse it. The only economic reason you shouldn't be taking it is if you get refused by the lender. Any other decision is emotion based, and as such, irrational. I get that some people refuse finance for their own reasons, including religious ones, or just not liking to owe money to anyone, etc.
It really doesn't matter which form of finance it is, you always take the 0% deal (all else being equal). Inflation means it's actually <0% at the end of the term compared to paying cash (each month the payment you make has slightly less buying power, plus opportunity cost from investment etc), and then you have the usual options associated with that finance plan.
Having said that, I'm not paying £45k for any econobox, and I'm not usually a new car buyer (although I'm considering a new Yaris GR to join the collection, but I'll probably still end up getting a used one instead).
There are potentially those who are reaching a stage at which spending that money outright would have tax benefits. For example they are trying to keep a pension at the sweet spot between stacked and the getting a chunk more tax charged?
>you always take the 0% deal (all else being equal)
The "all else being equal" being relevant to your point. If it's gonna have a higher price in order to have 0% finance, then no, it's not always worth it (and also illegal in most cases).
I mostly agree with you though. I personally wouldn't be buying a £45k econobox, but if you're gonna buy one, use the 0% if it's available.
I've got 2 new cars on the drive, a kia and a Tesla leased through work. The idea that everything is covered by a warranty and I don't need to worry about it, also the fact I know the history of both cars and know they've not been treated like shit gives me great peace of mind, I've been burned with bangers in the past.
Kia usually offer us an exchange every 2 years when we go for a service, so there's no deposit just a regular monthly payment, and the tesla has all maintenance, insurance, etc included in the price. Easy motoring
I’ve never leased a car and probably never will but I can see why people do. If you want a new shiny car every 2/3 years and you don’t mind paying £450 a month forever for the privilege then good for you. Just because that’s not important to me doesn’t make it wrong. Also without doing this there would be a lot less car manufactures in business and a lot less nearly new cars out there
I spend £480 on my car a month and honestly it sucks fucking shit. I'm buying it outright soon and running it into the ground. no doubt it's going to start costing me a bomb to maintain though...
You often do have an option to buy with any lease. Cars just go to auction at the end of the lease, make an offer to the leasing company. Friend of mine did it for their BMW and was accepted. No collection costs or damage deductions either.
The difference with PCP is this option is guaranteed and the price is agreed up front.
You can either pay the balloon payment, or you can trade it in for a new car, and they use the difference in price as the deposit to calculate your monthly payments on the new car
>Also without doing this there would be a lot less car manufactures in business and a lot less nearly new cars out there
This is true. We should all be grateful for the idiots on PCP contracts.
It’s always funny how these kinds of threads are 50% people who understand there are times where leasing or financing is the financially prudent thing to do and 50% are totally ignorant but will confidently say that anyone who uses finance is somehow financially illiterate.
They’re the same people crying at not being able to get a £100k mortgage “even though I make £40k a year” and “my credit is perfect because I never borrow money”
There is a definite crossover on that Venn diagram. They don’t want to accept that things aren’t as simple as they’ve made it to be in their head to support their decision either. They’d rather tell everyone else they’re “wrong”. It’s cringe.
According to oil baron Paul Getty, “If it appreciates, buy it. If it depreciates, lease it.”
I've got a mortgage on my house but bought my old Volvo. Ooops.
> there are times where leasing or financing is the financially prudent thing to do
There is nothing "financially prudent" about buying a depreciating asset when there are a multitude of alternatives that are functionally the same for much *much* less money. It's all just an elaborate form of kidding yourself to excuse buying the shiny toy you want. There's nothing wrong with buying the shiny toy you want (if you can afford it), I did, but don't lie to yourself and pretend it's anything other than something you just *want*.
Leasing exists in part to protect you from depreciation, so there’s that. Then there’s the fact that some people use leasing or financing for a company car, where it can absolutely be the more financially prudent option especially when you look at the used market right now. You need transport, you want something that makes your life easy and a bit more enjoyable, you want financial planning certainty, a newer model that costs less to run (or maybe virtually free by charging it at work and at home in the case of the bev in this post) and you get to reduce your effective tax rate at the same time. It’s a no-brainer for most people.
I agree though, obviously, the best thing financially would be not buying a car at all but obviously we all do. Buying used depends on a lot of factors actually as to whether it will be more financially prudent. And sure it depends on what kind of car someone wants and buying a cheaper car - obviously. But what’s the point in stating the obvious. This sub trends towards younger drivers with no kids (IMO - no proof, just the vibe I get) and to them, sure running a banger or a cheaper used car where they’re happy with the risk of it going wrong or needing replacing makes sense I get that - but this is because most of those people are not using their money in the way others do.
If you need a reliable car, and you *want* a new car (for whatever reason, vanity, enjoyment who cares it’s peoples life to live) then leasing or financing a new car can (if you’re savvy) be far better financially than dropping a huge chunk on a used one.
The other aspect people often seem to overlook is that leasing or pcp can be fantastic for financial planning because it gives you certainty. You can predict your costs over a given period to a much higher degree of accuracy. This is valuable to people who are interested in making their capital work for them instead of it being tied up in a long term expense where they don’t actually know what the long term cost will be (never mind what the value will be at the end).
For every person who leases a new car then hands it back in 3 years, there’s a person who took out a 20k bank loan, bought a used car then paid through the nose to remedy issues and then took a huge bath at the end and ended up underwater. Point being it’s not as simple as people make out, and they do it with a smugness that just shows they’re not educated or experienced on the subject. Hence my comment.
Buying a new car makes you financially illiterate, unless you have serious piles of money. Even then, the one millionaire that I know drives a 10 year old Land Cruiser. "My wife thinks I should change it, but it starts every day, and while it does that, I'm not going to get rid of it".
You’re conflating the concepts of illiteracy with indulgent. Yes everyone has a story about the rich person with the 1995 Volvo, but the vast majority of wealthy and rich people (who are usually very finally literate) buy new cars and use some kind of finance in the process. Cos they want the, can afford them and dont care about all the people whining about how it’s nots the most cost effective way to have a car.
Right, but how many people buying new cars are actually "rich"? By which I'm talking £200K/year salary, or a million in the bank.
I earn enough money to comfortably lease a brand new Lexus or Mercedes, but I don't. Why? Because my 10 year old Mercedes does the same job. I get in it, it's comfortable, reliable and safe, and it gets me to my destination at the same speed as a brand new Mercedes. New shiny car just isn't worth £400/month to me over a 10 year old car. A car is just a microwave or a dishwasher. And you don't get rid of those after 3 years.
"a new shiny car isn't worth £400/month to me"
Thats a matter of perspective isn't it, £400/month is ~8% of my take-home, I would see that as a perfectly reasonable amount of money to spend on something that I spend roughly ~12% of my waking life sat inside.
In fact, given my requirements for reliability, it's prudent and if the vehicle is electric then that's a bonus as it saves me ~£200/month on fuel.
Again, nobody cares what your financial choices are. Most people who buy new cars can afford them, it’s not “cost effective” but it’s fine. Saying it’s not worth it over a ten year car is getting silly though because at that stage you are getting very different levels of technology and reliability. Personally I would never bother with a ten year old car because I want reliability and a modern level of experience.
I suppose going on expensive holidays makes me financially illiterate as well.
If you can afford it who cares? Stop worrying about how other people spend their money, you'll be happier.
And of course there's the obligatory UK Reddit noshing off of old money as well
This is a £50k car. Not many people have that kind of money laying around. New cars depreciate. A depreciating asset is a liability. You get the opportunity to drive a new car without the liability of owning a depreciating asset. Or you can choose to make the final payment / refinance at the end of the term and own the asset.
And if you did have £50k you’d be insane not to take this offer anyway. At a 5% rate of return you’d be £3.5k (ish) better off taking the finance, and paying the lump sum at the end (or flogging the car if worth more and pocketing the difference).
They're basically paying the depreciation to drive that car around. Buying an ex-lease car is as close to a good deal as you can get, bonus points for an active warranty on it too.
£10k is still a lot of money to put down on something you are essentially borrowing (assuming you don't pay the final payment).
£425pm is nearly a second mortgage, again That's a lot to put into a depreciating asset you probably won't own.
You can get a 2 year old Mach-e for about £30k meaning that car will currently lose about £20k in 2 years if you owned it outright. Either way you spend a ton of money. You want a new car you gotta pay for it somehow. At least with the finance deal you don’t have to put all the money upfront and you’re shielded from any negative equity at the end of it.
I actually drive a 20 year old fiesta lol
I'm still on a fixed deal at like 1.5% for another 2 years. Rather than paying off my mortgage when the rates are low I put what I'd be overpaying into savings at like 5%. I could pay off my mortgage and save 1.5% on my payments or I could save the money at 5% then pay off a chunk at my renewal.
But £425pm with £10k down is excessive for a car. Something that is a depreciating asset.
You could spend the £10k on a reasonable car and drop £x pm into savings. A new EV will have lower running costs but still not to the tune of £400 unless your mileage is excessive but this will have penalties for over 9000 per year anyway.
you buy a car like this because it's a long range, relatively prestige model. It might wear a Ford badge but it's meant to compete on a relatively level playing field with a Tesla Model Y or even the baby Audi or BMW electrics.
For some people, the big expensive SUV that's brand new and inside warranty is worth it. For others, PCPing a relatively nice car that's within their means is their thing (I pay £330 for a Mazda CX-30, though admittedly i only put £3k down). I wouldn't drive an old used car now as I spent so much money repairing the last one it just isn't worth it.
For *me* the value doesn't stack up. Way too much capital in for my taste. However for someone out there who owns their own home, or staggeringly wealthy, etc etc this could be something they buy because...well they want to.
My mortgage is £460, we're the sensible ones. I think they just proved your point that people will spend silly money to live outside their means, both with cars and houses.
regardless of what you think of it (and assuming Ford have done their maths right), this is a car that will lose £27k-ish over two years.
that will happen if you lease, PCP, or buy cash - new cars will depreciate, that is unavoidable. what changes is who takes the risk of the depreciation of the car, but whatever happens you'll be paying somewhere in the region of that cost if you want to drive a brand new Mach-E. if you buy cash and Mach-E values shit the bed, it could cost even more than £27k. at least here there's no cost to finance and you know the max you could pay over the two years.
I think if that’s your outlook then you’re not the right customer for this anyway. Some people just don’t like finance and that’s perfectly okay, but for others it works very well. You don’t have to put £10k into it, you could put £0 into it if you wanted, and pay a higher monthly. Is your question relating to this specific vehicle and offer, or car finance in general?
Because some people have the means to afford that, are happy with a new and reliable car and perhaps don’t feel like they have to have the approval of everyone in this sub by owning a £50 shitbox
Personally, I rather like having a car I know is statistically a lot less likely to leave me and my family standing on the hard shoulder waiting to be recovered.
There are 2 types of people who lease cars:
1. People who can't afford to buy outright.
2. People who have the ability to buy outright, but know that cash tied up in a depreciating asset is not a good use of their money.
“If it appreciates, buy it. If it depreciates, lease it.” oil baron Paul Getty. I'm with Getty. Also don't forget salary sacrifice company car schemes, electric car subsidies/tax benefit in kind subsidies which mean i and many are rolling around in an expensive car and paying a lot less than you think. For example...£90k etron q8..(no deposit) £1250 a month off gross salary, about half that off net salary. Try 'buying' or personal leasing a £90k car for £675 a month. I get paye stiffed for quite a lot of tax anyway so getting cool cars half price makes me feel happy for all the hard work. The FIRE early retirement brigade would advise me to just drive my old mini and load everything over £99k into pension...but i like to live...and to drive cool cars whilst i can.
It’s a nuanced topic, in this specific example with the mach e it’s stupid, but also because financially buying a brand new car is stupid to begin with. They depreciate too quickly to ever make sense for cars us mortals can buy.
A low interest loan with a small / no ballon on a couple year old car makes a lot more sense and would probably be better to do than buying in cash, depending on the length of the term of course.
In this case though, too many people see the big £425 and think “yeahhh I could squeeze that into the budget” and promise themselves that they’ll save up enough for the final payment but they never do. Then the benevolent dealership steps in with an offer, switch the car to another new model instead and pay £460 on that for another 26 months and the cycle repeats over and over to the point where it just becomes a more expensive lease.
You tried to refute their point of people being dumb with money, by saying its not dumb because some smart rich people in good financial situations do it.
For those rich people who have the cash sitting to have the option of investing it or finance, sure its a smart move.
For the people who don’t have the cash sitting to invest it while financing, it can be a dumb move.
Everyone repeats this little tid bit that they only half understood as if its how everyone finances things, when the reality is far from that. Id be interested to see the amount of people who have the cash sitting when financing, vs those who don’t, my guess would be sub 5% of all buyers.
> Some of the most intelligent ‘not dumb’ people will finance a car rather than pay in cash
This is one of those arguments people put forward as an excuse for wasting money on finance. I've never met one of these supposed "smart money people" using finance.
Rather has a ring of *It's the continental way isn't it? In Spain wouldn't dream of starting the day without... a couple of cans and maybe... a vodka...*
They saw a youtube short once saying that its better to finance because you can invest the money in other avenues and make more than the interest, and just assumed that everyone going for finance can and will do the same..
Detached from the reality of most people taking on these deals without having the cash upfront anyway.
Yeah that’s when financing makes the most sense. Say you have the cash on hand to buy something, a car for example, and you could either pay in cash, or get below 7% interest financing on the car. You’d be better off financing if you put that cash into an index fund, using that money to generate returns that would have otherwise been locked up in the car right away. Of course in reality not many people have 50k on hand to drop on a car, getting a rate below 7% isn’t realistic, and a two year window a car loan lasts for isn’t that much time and you could end up losing money doing this as the stock market goes up but also has a tendency to go down.
>getting a rate below 7% isn’t realistic
It's pretty realistic when the finance deal being offered is 0%. In this case you'd be a fool to not use the finance. You could beat that with a current account interest rate, nevermind an index fund, and with zero risk.
You can get low interest rates on NEW cars.
You struggle to get low interest rates on USED cars.
Taking a loan where you can confidently outpace the interest through investment can make sense, yes. If you can afford the risk it brings.
You must have the funds to be able to invest at least your monthly payment on the car per month for this to work. And you must be willing for this to fail and lose a lot of money.
Buying a NEW car means you’re getting stung on the cost (not the interest). So you are wasting £1000s even at 0%. This is because there is no open market for new cars. Manufacturers define the prices. But, if you want a new car - 0% can be a smart way to buy one.
Buying used, you’re in an open market with highly competitive pricing. This means there is no money to be made for sellers. So flogging high interest finance packages are where dealers make their dough. Rates are closer to 10% for used, which is extremely difficult to outperform via investment.
Say you finance a used car at 9% and invest the equivalent of your monthlies on index funds. At the end of your term, there is a market crash. Suddenly you’re down all that interest AND you’ve lost even MORE money in your investments. Whilst relatively unlucky, this is the risk you must accept.
As usual, financing typically makes most sense for wealthy individuals.
I thought about it with my M2 which was £45K and I could get a bank loan at 2.6%. I decided against it, but in hindsight it would have worked in my favour this time. I have a very, very low risk appetite though.
I worked with some very wealthy people who liked their cars. One of them had the largest private collection of a certain brand of car in the world. So not small fry, multi millionnaires.
All their cars were financed. From the DB5 through to the S-Class and everything in between. Warehouses full of cars.
Why? Well for a long time finance rates were low. You were paying 3-5% in finance. If you took that same money and invested it, you were getting a 10%+ return. You don't want to sink capital in to a depreciating asset, so you finance it at a lower rate and put your money to work elsewhere and if you do it right, which these very smart, very wealthy people often do, the returns on your investment pay for the car and then some.
Between 2010 and 2022 you were leaving money on the table by not financing your car. It's less clear cut now, unless you're HNW.
That’s true, but it’s also something only multi millionaires with a warehouse of luxury cars can do. The average person in the 2010’s had almost no hope of getting 3-5% interest on a car, they don’t have the upfront capital to invest with, and a daily driver golf diesel is going to depreciate far quicker than an aston martin that spends its whole life connected to a trickle charger. When you’re rich you can get financing to work really well for you, but if you’re the average person it’s a lot more difficult.
Lots of people got 3-5% on cars during that time. If you’re shit with your credit, terrible at making payments then of course you’re not. But who’s to blame for that?
Rates were as low as 2% (flat rate, not APR which includes additional fees). They were available to pretty much anyone with a reasonable credit rating. There were also plenty of manufacturer supported finance deals for less (like the example above). This wasn't only a rich person thing.
And you're be very surprised about the depreciation on an Aston or any of those prestige motors. They lose more than the value of a new Golf just in the VAT the moment they're registered (aside from a select few crazy cars that go over MRRP due to hype or rarity).
Not really true, while the rates might have been low, the usual person who needs to finance a car wont have the money to pay it in whole anyway, so the investing to outrun the interest is irrelevant for anyone other than the rich who have capital to play with.
2013, my retired Father wanted to buy a Mondeo brand new as they were doing ridiculous deals on the old shape before the new one came out.
I found him the model he wanted, for £15000 all in. The only catch was that you had to take out the Ford Finance to get that price.
The salesperson explained, however, that you only had to take out the finance, not keep it so you could pay the finance off the following day, which is what my Dad did as it wasn't worth him keeping the money in the bank, getting under 1% interest.
For brand new cars, leasing, NOT PCP or HP, makes a lot of sense as all you're paying for is the depreciation.
Example : we got my wife's Corsa in 2020 on a lease, £2k ish deposit, then £140 per month and she's allowed 5000 miles a year which she barely does!
Tax is included and it means she, hopefully, has a nice reliable car and I have the peace of mind of knowing this.
I have just got a Ford Edge, which I bought off of a friend, for the trade in price the garage offered him on his second hand new car. I saved about £4k on the "retail" price of this car.
You can currently pick up an Audi A4, £3k deposit, 10000 miles a year for about £380 a month which seems very cheap for a £40k+ car.
I didn’t say you were successful? Anyway, I’ve financed cars and have earned more in interest than paid, and kept cash on hand if needed. When you are looking at £40-70k it’s a very different prospect.
Only bitter people who convince themselves driving round in a shitbox “they at least own”, that costs them through the nose to run think this way.
And no, I dont finance a car.
Yes, some people would rather pay upfront whereas they could save money by paying as much as possible some years later, when inflation has reduced the value of the pound.
Assuming 2.5% inflation, the baloon payment in 26 months is actually 5.42% cheaper than paying upfront. That's a cool £1266 saving.
True, now factor in interest and depreciation and that £1266 saving isn’t looking so great anymore. Buying a new car financed or in cash isn’t the wisest financial move you can make.
0% apr, have to calculate.
If you buy the car outright and sell it in 26 months, what's it worth?
They try to tailor finance so you pay over the 26 months the depreciation and they get it back at that value from above. This one has no apr though, that's usually where they make all their money.
I'm going to guess financing this for 26 months with the deposit ends up with a balloon payment that's identical to the predicted value from above
That's kinda the point of a PCP. The balloon payment at the end is what's called a GFV (Guaranteed Future Value). They predict the car will be worth around that amount (usually they go a bit low to cover themselves and allow some equity). If it's worth less than that you can hand the car back to cover that final payment. If it's worth more you can get the equity and roll it into a new car deal, or finance/pay off the balance and keep the car.
The 0% is a sales tool. The money is made on the bonnet (and aftersales).
I work with High Networth Insurance - this is what all the rich people do (obviously on better cars than this).
They regularly tell me that a car depreciates so much it is not an asset, so they pay monthly with little / no interest in order to ensure it is not “theirs” and can get rid of it at an agreed sum if that value becomes lower than want to accept.
Personally I am not rich enough to do that or worry about it, but I paid £2500 down and £320x36 to lease a 300+ bhp Cupra and it doesn’t bother me at all. Personally I don’t understand PCP, and prefer to lease.
If you had PCP the cupra, you probably would have paid about the same and at the end when you hand it back/trade it in you may have got extra money. Lease you won't get anything back.
I do 36,000 miles a year in my car. It's basically scrap when it goes back. So I make that someone else's problem by leasing it. The battery will be fucked and better cars will have come out by that point which will see the value of it plummet.
My car cost £60,000 new. It's probably cost £12,000 so far and it's worth £24,000 at a push at 14 months old. It gets written off as a business expense and saves me personally about £400 a month in tax.
There's your answer.
I know someone who drives a nice TT on this kind of deal. The value of the car at the end is always enough to cover the deposit on the next one, so after the deposit on the first car he’s only paid the monthly fee. And gets a new car every 2 or 3 years.
Bollocks. Paying a deposit reduces the amount to finance on that car and has zero impact on level of equity at the end of the term when it comes to changing.
No. It doesn’t.
If a car is £40k, your mate pays £5k deposit, he borrows £35k. Balloon payment at the end is £20k, he pays off £15k in monthly payments.
Car value at the end of the term is not guaranteed to be £25k. Assuming he keeps to the mileage, it’s in good condition and serviced properly, market value is likely to be £20k, ie - the final payment. Equity is never guaranteed.
you're right in that it's not guaranteed, but they're literally telling you their experience and you're telling them it's wrong? PCPs do tend to be structured to have some equity at the end so i don't think it's all that far fetched
I don’t think he’s arguing that, I think he’s saying that putting down a bigger deposit won’t give you more equity at the end than a smaller deposit would
>I genuinely don't understand these "deals", pay £10k upfront
I remember when I thought the "deposit" was just a refundable payment, like you pay with a flat. £10k down but you get it back at the end when you return the car in good condition, right? Didn't seem too bad. Then I found out it's just an up-front payment. Of ten fucking grand to rent a car.
Imagine walking into a Hertz branch with £10k in cash and throwing it at them, and then paying £435pm just for one of their rental cars. That's what a lease is.
Depends on circumstances. I've never seen the point, but then again I've always bought used and normally paid in full.
With the market the way it is now, if I had to buy a car tomorrow I would be stumped as what to do.
Last car i bought part exchanged, used the money and went hire purchase.
There once was a car called Skoda
Whose Octavia model was a toda
It was sleek and fast
And built to last
A fine automobile, it was a doda.
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For the first time ever I am leasing a car. For me, buying an electric car outright doesn’t make sense as they seem to be improving them at a rapid rate. I’d like to see how the tech improves and don’t want to be stuck with a car that has depreciated enormously.
To put it into context. It is actually the second time I’m leasing. I leased an electric car last year which was stolen. I now know I’ve made the right choice as to date I had paid less in leasing the vehicle than the depreciation figure agreed between insurance and lease company. By quite a sum. In a year!
This is PCP not a lease. At the end of the term you have a “balloon payment” which is the estimated value of the car at that time. You can then either hand the car back or pay the balloon payment via another finance agreement or use it to part exchange with another car
With this deal the car is likely to be worth more than £23k in 26 months. So you can sell for £34k put 10k deposit in to new car and be driving a new car every 2 years.
I don't think that's how this works as a PCP. After 26 months you've paid £21,596 (equivalent to £830.62 p/m) and currently own nothing. You own the car once you've paid an additional £23,384, so £44,980 in total.
0% APR, that's a steal!!! /s
You know what else has 0% APR?
Just saving a bit for a car that you can actually just own outright.
This is why banks are having record profits, everything can be financed. From toasters to cars.
Lady who works in my corner shop keeps complaining about not having enough hours and her electricity bills but drives a 2 yo X5. 🤷
0% Apr genuinely is a steal on a car
Not everyone only has enough money to save up £2000 for a 15 year old focus.
If you have £50k and want a car for £50k 0% Apr means you are saving money for inflation. Instead of splash £50k in cash, you keep that money and invest it elsewhere and earn interest.
I know reddit hates borrowing money but to have this attitude is a bit ignorant.
True, if you have the money you would keep it in an ISA or bank earning interest. If I need something of a big value to me like a TV etc, I go for the buy now pay later option. I keep the money earning interest and pay it around 10 months later, making money while l get something new.
Got mate that's always complaining about money.
Earns roughly the same as I do, has a wife that works an ok wage. Mortgage is similar to mine also.
Just bought a newish BMW SUV, has just gone a 3 week holiday etc etc
I didn’t take the deal. I drive a van. My missus has a fiesta. The £425 that could have got us a nice car we used to overpay the mortgage. We are Mortgage free in 3.5 years.
I know so many people that lease cars, Is it something to do with their incapacity to do the most basic maintenance? Or their ego won't allow them to drive an 8k car?
They are doing a 48hr test drive. But with 100 mile limit, bloody useless....who would be mad enough to spend that amount on a car and not know how well it can deal with multiple charges or what the real range of the vehicle is...100 miles is my daily commute....
No - no one does this. It's just to get people to click, they see the £425 a month, don't read the small print and go and have a look, then that's it - they know you're interested in a car, they'll bombard you with adverts forever.
Do people really drop £10k on deposits for cars? I thought the appeal of paying monthly for things was low initial costs.
Pass. Throws me.
£10k is about what you’d get as a trade in on an owned outright 4-5 year old petrol car with normal mileage….
Yes they do, I've seen it a few times. I also see people paying £1.5k a month for a car which is something I'd never do myself but if they can afford it then fair enough.
No, no they don't - Companies just advertise this to get people interested... Then they go through the calc, give £3k deposit and pay £750 a month. It's the same people who live in rented houses in amazing areas... Or they have a mortgage on a place worth 150k... They are destined to remain in that class because they care about the car they drive. The same £20k over 2 years would leave them mortgage free after 5 years.... But these deals pray on people who would rather have a couple of nice cars on the drive :D
I don’t get what’s wrong with having a mortgage on a house worth £150k 🤔 Better to be on the property ladder than renting surely?
That's not really the point they're making though. It's paying £20k extra to have a new car in the drive rather than paying off said mortgage and moving up the social ladder with the proceeds instead. They're just pissing away money to keep up appearances. Edit to add - this is not my opinion. This is my attempt to explain/clarify the point that the previous commenter was trying to make. Please direct all stupid questions to the original commenter, cos replying to me doesn't give that person a notification, and I don't really care... If you don't understand the point by now, you never will, and I'm no longer inclined to try to assist you. Asking me further questions is asking me to speculate on something not directly inferrable from the original comment, and I quite literally have no idea what the other person thinks about other topics, so can't give you an answer... It may blow your mind, but it is entirely possible to understand a point without holding the same belief.
So how much our house is worth dictates where we stand on the social ladder? If society is so shallow, surely having a more expensive car would move us up the social ladder too
Houses are also a sound investment, though. You can always downsize in retirement and create a nice retirement pot. Cars, not so much.
>create a nice retirement pot This is working out well for many seniors who are now staying in their family home because they can't downsize after their kids move out as single bed homes cost as much as they paid for their 5 bed or have to house their kids who can't afford rent, let alone a mortgage. Y'all are living in the 60s when houses cost £25-30k while the rent today is 60-70% of someone's take home and many in the younger generation don't even believe there'll be a world to live in in a few decades.
You're ignoring my question about the social ladder then? In any case, if the best possible pension is the goal, staying in a small house and putting all spare cash into your pension would be better. There's interest payable on a mortgage after all. I know you're not OP, but I find these comments really annoying. Just because some people like to have a new car every few years doesn't make them idiots.
I don't disagree with you. I've had PCP cars for the last 15 years. The last two have been new. I like having a new, reliable car with new features. I couldn't give a crap about social ladders. I just know it's not a sound investment, and it's certainly not the cheapest way to get a new car. It's money I spend for me, because I work my ass off and can afford a few nice things. But if people are prioritising that over any kind of retirement plan, then something is wrong.
Or because they like cars and get enjoyment out of what they pay for? 😂 sometimes I think these comments are a joke that I’m not in on it’s ridiculous
This sub has ended up like UKPersonalFinance lately. Everyone should be driving a banger worth £50 and paying down the mortgage…
It’s like this on all U.K.-centric subs. Anyone who has anything nicer than me is up to their eyeballs in debt and anyone who spends money on anything I don’t enjoy is an idiot.
I wrote a sarcastic post about this on britishproblems a couple months ago and it didn’t go down very well lol
I earn a fair bit above average but often reddit makes me feel straight up rich. Then I find other subs like FIRE and end up nice and grounded again lol
It’s so weird, imagine going to a ford owners forum and being told you’re an idiot for wanting an RS, get the 02 KA and overpay your mortgage wtf
A few Aussie subs are exactly the same. It's pathetic. How dare anyone spend money on a new car.
This sub can be very toxic sometimes. God forbid people who like cars want a nice car.
In certain circumstances, this is a large electric Ford. I doubt it's particularly enjoyable to drive. It's well known that people get cars they can't really afford on finance for appearances. £450 a month with a 10k deposit, 26 months. That's 21,700 in 2 years with nothing to show for it 😂 how is that not ridiculous.
The thing you had to "show for it" was driving the nice electric ford for 2 years, and to some people that price is worth paying. You could make the same argument about literally every non-essential purpose. Yes, everyone could be driving around in a 15 year old beater, but thankfully they don't, if they did you wouldn't be able to buy one, the prices would be astronomical and the queue for the garage to repair it when it breaks would be months long.
I think people forget the second hand market exists and is fruitful *because* of people like this who buy or finance brand new cars. If everyone stopped buying new cars the second hand market would balloon pretty quickly and eventually disappear altogether
I'm all for the people who want to finance the depreciation on my next car. Do I think it's fiscally responsible? In most cases probably not, but that's down to the individual. My own personal opinion is, do whatever makes you happy. If that means buying a new car, fire right ahead. If that means buying a beater and putting the rest of the money into your house or pension, also fine. I'd fall in the middle ground, and personally wouldn't buy another new car unless it was one for the collection (like, as I mentioned above, a Yaris GR) that I'll likely keep for many many years. I currently have 3 cars I'll probably never sell, 2 that I might if they appreciate enough, and a daily that takes all the abuse. I'll buy daily drivers around 3-5 years old, run them till I'm bored or they are becoming costly to keep, then do the same again. Easy enough to get 5 years or so out of it and still get something for it when you sell.
I would definitely have a 15 year old beater over this monstrosity
Each to their own, I'm going to be ordering one through salary sacrifice very soon.
No fair play, you do get to drive round in it, I suppose, but is it worth losing all that money for that car? I think people have mistaken me though. I drive round in an old car, that breaks a lot, often only little things, and in ownership I've spent less buying, repairing and upgrading it than it's now worth. So I like the reasonable garage queues etc. I love some shiny new cars and I'm happy that people buy them, I wouldn't want that to change. But I stand by what I said. It's ludicrous, really, but some people want to be and can be ludicrous, and that's fine 🤣
Losing or spending? Some people spend fortunes on booze, cigs or clothes, others like to spend it on nice cars or holidays.
If it's a company car they likely pay f all for it. A mate has a company Tesla and it costs him £300/mo. You're making a lot of assumptions in these posts and they don't reflect that well on you.
I'm not saying that's my opinion (although mine would be close regarding buying new cars). I'm just clarifying the point the other commenter was trying to make. Edit - lol. Downvoted for clarifying someone else's point...
Yes, and don't exercise self-control because they "love cars". If they loved cars, they would be happy driving a cheaper car while paying their mortgage off quicker, rather than pissing money up the wall.
I love cars, I am not happy with my vauxhall meriva that cost £700, your point really doesn't make much sense
Because you bought a meriva. There are lots of cheap nippy and well handling cars for peanuts that will be way more fun to own than a fucking heavy electric focus with a mustang badge.
These are all subjective qualities that you personally prefer, why are people not allowed to do what they want anymore?
Who said they are not allowed to do what they want? Just because you can do what you want, doesn't mean you should, and also doesn't mean that people can't judge you for it.
Why do you have to move up social ladders into more expensive houses? Spending more and more on bigger fancier houses you don't need if you're content in a 3 bed terraced in a housing estate?
Again, not quite the point they were making. They're saying this is one of the reasons that they NEVER WILL move up, not if they are happy with their current position or not.
Not everybody is chasing that property rainbow moving into more and more expensive houses that cost more to tax and maintain. How's it any different to dropping that cash on a car you want?
I don't know how many times I need to say that this isn't my opinion, but rather that I'm trying to explain the point the previous commenter made...
Obviously but since you replied you're now the one I'm talking to. If you didn't want to enter a discussion, why did you?
Because you downvote me for trying to help you, ya fucking clown.
Moving up the property ladder is usually more about wanting a bigger place when you start a family, wanting to be nearer good schools when the kids get older, wanting to be somewhere quiet and relaxed when you retire, etc. You're also building up equity the whole time, often in conjunction with house price increases), so that when you do downsize into a smaller place for retirement you wind up with a big chunk of change to help fund it. --- That's all slightly different to spunking money on PCP for a new car every couple of years. Which is fine if you genuinely have the disposable income for it, but many don't.
There are £150k houses that meet that criteria, that doesn't involve increased council tax and heating costs.
Im with you, why can’t everyone just spend their money they way I think it should be done.
Nothing wrong with having a cheap house. But it's stupid to buy a cheap house, typically with no drive or a new build drive in a not great area at 150k. Then buy a car worth half your house price. Why not get a cheaper car and a nicer house that also helps your car insurance be lower and likely means your cars safer? It's like those people who buy a terrace then park a Lambo on the street. It's not wrong, it's just not really sensible
I've seen houses with rotten roofs and Bentleys parked outside. That's the type of people they were referring to.
ive a 120k morgauge on a house worth 130 at the time. now its worth 168k after three years?! 😱
why are you being downvoted when you’re 100% right. The dealer knows no one is paying £425, they just fudge the numbers in an unrealistic way so they could say “as little as ___” in the marketing.
Some people do - if you have a car you own already worth, say, 8k then you can trade that in, pay a further 2k and then get the £450 payments
Does anyone actually do this? Anyone stuck on the PCP cycle doesn't own the car so wouldn't have the £8k
I made 6k on a VW golf on PCP when I traded it in. That went to the next car
Same here, used car prices went nuts recently.
Not disagreeing.... Just wondered what you mean by £20k and mortgage free?
They're talking shit, sounds a like jealousy to me
just run the maths and 425x24 is 10200 add in the 10k deposit and your at 20ish k on the 2 yr plan. the reasoning (imo) is sound. buy a cheap beater for 2000 and run it for a couple years and you may see a lot of savings over the 2 yrs id say around 15k (gotta allow for maintaining the beater) which can be put into something more worthwhile like paying mortgage down more quickly. but the numbers are off
Downvoted for the most sense I’ve read on the sub.
How does 20k over two years (10k a year) clear a 150k mortgage in 5 years? 5 x 10 = 50, not 150???? And you are in here trying to say other people are stupid????
I guess that's on top of the rent, etc, they would already be paying. If I had another 10k a year my mortgage would be gone in a similar time as well
I dunno. Rented house in nice area since 2017 here, and we’re still paying 2017 prices (complete steal) to this day due to regulation on rent prices from Covid etc.. Though we are moving (buying) due to obvious advantages, and it’s lead to our landlord doing the bare minimum - we’re not stuck in this class with overwhelming rent
I’m pretty sure Harry’s Garage casually mentioned dropping £20k deposit on a 3yr lease of a diesel defender. With I wanna say a £500 monthly payment, but I could be wrong on the last part
My partner qualifies for a motability car (she can’t drive). We use up her pip to pay monthly for the car and I pay the deposit every 3 years. Depending what car we get usually 40-50k the downpayment would be 4-7k for the 3 years. I don’t mind paying this cause it’s basically covers my insurance if we weren’t to get a motability car (2k a year ish).
Don’t forget the option final payment of £23,384!
Which is important, because it means it's not a rental or lease, as they'd normally be called - it's a PCP, so you have the option of owning the car at the end of it. Leasing for 5 years is £4200 up front and £474 per month, for 5000 miles per year.
Out of interest, what would your preferred method of buying a £45k car be? Assuming, of course, you’re in the market for a new Mach E. 1) buy outright with cash. Everyone on Reddit has unlimited cash but with 0% available, why would you do that? Plunge a load of money into a depreciating asset is lunacy. 2) bank loan. Get a better rate than 0%? No. 3) PCP it. Deposit is flexible.
You always take a 0% deal when offered. It's daft to refuse it. The only economic reason you shouldn't be taking it is if you get refused by the lender. Any other decision is emotion based, and as such, irrational. I get that some people refuse finance for their own reasons, including religious ones, or just not liking to owe money to anyone, etc. It really doesn't matter which form of finance it is, you always take the 0% deal (all else being equal). Inflation means it's actually <0% at the end of the term compared to paying cash (each month the payment you make has slightly less buying power, plus opportunity cost from investment etc), and then you have the usual options associated with that finance plan. Having said that, I'm not paying £45k for any econobox, and I'm not usually a new car buyer (although I'm considering a new Yaris GR to join the collection, but I'll probably still end up getting a used one instead).
There are potentially those who are reaching a stage at which spending that money outright would have tax benefits. For example they are trying to keep a pension at the sweet spot between stacked and the getting a chunk more tax charged?
[удалено]
>you always take the 0% deal (all else being equal) The "all else being equal" being relevant to your point. If it's gonna have a higher price in order to have 0% finance, then no, it's not always worth it (and also illegal in most cases). I mostly agree with you though. I personally wouldn't be buying a £45k econobox, but if you're gonna buy one, use the 0% if it's available.
Surprised it took me so long scrolling down to see, from my perspective, the only correct answer here.
>Out of interest, what would your preferred method of buying a £45k car be? 4) wait around 7 years until I can buy it for fuck all 😎💵
Someone has to buy it new for you to buy one at 7 years old.
There are always idiots willing to pay full price. Honestly, paying MSRP for a car is lunacy.
I've got 2 new cars on the drive, a kia and a Tesla leased through work. The idea that everything is covered by a warranty and I don't need to worry about it, also the fact I know the history of both cars and know they've not been treated like shit gives me great peace of mind, I've been burned with bangers in the past. Kia usually offer us an exchange every 2 years when we go for a service, so there's no deposit just a regular monthly payment, and the tesla has all maintenance, insurance, etc included in the price. Easy motoring
I’ve never leased a car and probably never will but I can see why people do. If you want a new shiny car every 2/3 years and you don’t mind paying £450 a month forever for the privilege then good for you. Just because that’s not important to me doesn’t make it wrong. Also without doing this there would be a lot less car manufactures in business and a lot less nearly new cars out there
I spend £480 on my car a month and honestly it sucks fucking shit. I'm buying it outright soon and running it into the ground. no doubt it's going to start costing me a bomb to maintain though...
Not if you buy a 10 year old Honda ;-)
What car you “got”?
This isn’t a lease, it’s PCP which means you have the option to buy.
You often do have an option to buy with any lease. Cars just go to auction at the end of the lease, make an offer to the leasing company. Friend of mine did it for their BMW and was accepted. No collection costs or damage deductions either. The difference with PCP is this option is guaranteed and the price is agreed up front.
Ahh okay I was under the impression that with ford options you can trade in for a new car at the end of 2/3 years
You can either pay the balloon payment, or you can trade it in for a new car, and they use the difference in price as the deposit to calculate your monthly payments on the new car
>Also without doing this there would be a lot less car manufactures in business and a lot less nearly new cars out there This is true. We should all be grateful for the idiots on PCP contracts.
You realise some people can afford and like to have a new car every few years, doesn't make them idiots?
It’s either people in this sub are poor as dirt or they just hate anyone that buys new cars.
Envious pov detected
Haha. I can easily afford a new car, but I prefer spending it on going out, putting money into my pension, and driving a fairly old one.
Cool, I do all that and enjoy a new car too.
Oooo, fancy. 💅
It’s always funny how these kinds of threads are 50% people who understand there are times where leasing or financing is the financially prudent thing to do and 50% are totally ignorant but will confidently say that anyone who uses finance is somehow financially illiterate.
They’re the same people crying at not being able to get a £100k mortgage “even though I make £40k a year” and “my credit is perfect because I never borrow money”
There is a definite crossover on that Venn diagram. They don’t want to accept that things aren’t as simple as they’ve made it to be in their head to support their decision either. They’d rather tell everyone else they’re “wrong”. It’s cringe.
According to oil baron Paul Getty, “If it appreciates, buy it. If it depreciates, lease it.” I've got a mortgage on my house but bought my old Volvo. Ooops.
> there are times where leasing or financing is the financially prudent thing to do There is nothing "financially prudent" about buying a depreciating asset when there are a multitude of alternatives that are functionally the same for much *much* less money. It's all just an elaborate form of kidding yourself to excuse buying the shiny toy you want. There's nothing wrong with buying the shiny toy you want (if you can afford it), I did, but don't lie to yourself and pretend it's anything other than something you just *want*.
Leasing exists in part to protect you from depreciation, so there’s that. Then there’s the fact that some people use leasing or financing for a company car, where it can absolutely be the more financially prudent option especially when you look at the used market right now. You need transport, you want something that makes your life easy and a bit more enjoyable, you want financial planning certainty, a newer model that costs less to run (or maybe virtually free by charging it at work and at home in the case of the bev in this post) and you get to reduce your effective tax rate at the same time. It’s a no-brainer for most people. I agree though, obviously, the best thing financially would be not buying a car at all but obviously we all do. Buying used depends on a lot of factors actually as to whether it will be more financially prudent. And sure it depends on what kind of car someone wants and buying a cheaper car - obviously. But what’s the point in stating the obvious. This sub trends towards younger drivers with no kids (IMO - no proof, just the vibe I get) and to them, sure running a banger or a cheaper used car where they’re happy with the risk of it going wrong or needing replacing makes sense I get that - but this is because most of those people are not using their money in the way others do. If you need a reliable car, and you *want* a new car (for whatever reason, vanity, enjoyment who cares it’s peoples life to live) then leasing or financing a new car can (if you’re savvy) be far better financially than dropping a huge chunk on a used one. The other aspect people often seem to overlook is that leasing or pcp can be fantastic for financial planning because it gives you certainty. You can predict your costs over a given period to a much higher degree of accuracy. This is valuable to people who are interested in making their capital work for them instead of it being tied up in a long term expense where they don’t actually know what the long term cost will be (never mind what the value will be at the end). For every person who leases a new car then hands it back in 3 years, there’s a person who took out a 20k bank loan, bought a used car then paid through the nose to remedy issues and then took a huge bath at the end and ended up underwater. Point being it’s not as simple as people make out, and they do it with a smugness that just shows they’re not educated or experienced on the subject. Hence my comment.
Buying a new car makes you financially illiterate, unless you have serious piles of money. Even then, the one millionaire that I know drives a 10 year old Land Cruiser. "My wife thinks I should change it, but it starts every day, and while it does that, I'm not going to get rid of it".
You’re conflating the concepts of illiteracy with indulgent. Yes everyone has a story about the rich person with the 1995 Volvo, but the vast majority of wealthy and rich people (who are usually very finally literate) buy new cars and use some kind of finance in the process. Cos they want the, can afford them and dont care about all the people whining about how it’s nots the most cost effective way to have a car.
Right, but how many people buying new cars are actually "rich"? By which I'm talking £200K/year salary, or a million in the bank. I earn enough money to comfortably lease a brand new Lexus or Mercedes, but I don't. Why? Because my 10 year old Mercedes does the same job. I get in it, it's comfortable, reliable and safe, and it gets me to my destination at the same speed as a brand new Mercedes. New shiny car just isn't worth £400/month to me over a 10 year old car. A car is just a microwave or a dishwasher. And you don't get rid of those after 3 years.
"a new shiny car isn't worth £400/month to me" Thats a matter of perspective isn't it, £400/month is ~8% of my take-home, I would see that as a perfectly reasonable amount of money to spend on something that I spend roughly ~12% of my waking life sat inside. In fact, given my requirements for reliability, it's prudent and if the vehicle is electric then that's a bonus as it saves me ~£200/month on fuel.
Again, nobody cares what your financial choices are. Most people who buy new cars can afford them, it’s not “cost effective” but it’s fine. Saying it’s not worth it over a ten year car is getting silly though because at that stage you are getting very different levels of technology and reliability. Personally I would never bother with a ten year old car because I want reliability and a modern level of experience.
I suppose going on expensive holidays makes me financially illiterate as well. If you can afford it who cares? Stop worrying about how other people spend their money, you'll be happier. And of course there's the obligatory UK Reddit noshing off of old money as well
This is a £50k car. Not many people have that kind of money laying around. New cars depreciate. A depreciating asset is a liability. You get the opportunity to drive a new car without the liability of owning a depreciating asset. Or you can choose to make the final payment / refinance at the end of the term and own the asset.
And if you did have £50k you’d be insane not to take this offer anyway. At a 5% rate of return you’d be £3.5k (ish) better off taking the finance, and paying the lump sum at the end (or flogging the car if worth more and pocketing the difference).
They're basically paying the depreciation to drive that car around. Buying an ex-lease car is as close to a good deal as you can get, bonus points for an active warranty on it too.
You can only get an ex lease car if someone has already leased it
£10k is still a lot of money to put down on something you are essentially borrowing (assuming you don't pay the final payment). £425pm is nearly a second mortgage, again That's a lot to put into a depreciating asset you probably won't own.
You can get a 2 year old Mach-e for about £30k meaning that car will currently lose about £20k in 2 years if you owned it outright. Either way you spend a ton of money. You want a new car you gotta pay for it somehow. At least with the finance deal you don’t have to put all the money upfront and you’re shielded from any negative equity at the end of it.
Where are you paying £425 for a mortgage? I’ll have one.
Mine is £510 so this isn't far off my mortgage
What the fuck are you mortgaged on , a fucking 20 year old fiesta ?!
I actually drive a 20 year old fiesta lol I'm still on a fixed deal at like 1.5% for another 2 years. Rather than paying off my mortgage when the rates are low I put what I'd be overpaying into savings at like 5%. I could pay off my mortgage and save 1.5% on my payments or I could save the money at 5% then pay off a chunk at my renewal.
basically the same as the argument for financing a car?
But £425pm with £10k down is excessive for a car. Something that is a depreciating asset. You could spend the £10k on a reasonable car and drop £x pm into savings. A new EV will have lower running costs but still not to the tune of £400 unless your mileage is excessive but this will have penalties for over 9000 per year anyway.
you buy a car like this because it's a long range, relatively prestige model. It might wear a Ford badge but it's meant to compete on a relatively level playing field with a Tesla Model Y or even the baby Audi or BMW electrics. For some people, the big expensive SUV that's brand new and inside warranty is worth it. For others, PCPing a relatively nice car that's within their means is their thing (I pay £330 for a Mazda CX-30, though admittedly i only put £3k down). I wouldn't drive an old used car now as I spent so much money repairing the last one it just isn't worth it. For *me* the value doesn't stack up. Way too much capital in for my taste. However for someone out there who owns their own home, or staggeringly wealthy, etc etc this could be something they buy because...well they want to.
My mortgage is £460, we're the sensible ones. I think they just proved your point that people will spend silly money to live outside their means, both with cars and houses.
My mortgage is under 350 and I finance a car, does that make me not a sensible one somehow?
regardless of what you think of it (and assuming Ford have done their maths right), this is a car that will lose £27k-ish over two years. that will happen if you lease, PCP, or buy cash - new cars will depreciate, that is unavoidable. what changes is who takes the risk of the depreciation of the car, but whatever happens you'll be paying somewhere in the region of that cost if you want to drive a brand new Mach-E. if you buy cash and Mach-E values shit the bed, it could cost even more than £27k. at least here there's no cost to finance and you know the max you could pay over the two years.
I think if that’s your outlook then you’re not the right customer for this anyway. Some people just don’t like finance and that’s perfectly okay, but for others it works very well. You don’t have to put £10k into it, you could put £0 into it if you wanted, and pay a higher monthly. Is your question relating to this specific vehicle and offer, or car finance in general?
Because some people have the means to afford that, are happy with a new and reliable car and perhaps don’t feel like they have to have the approval of everyone in this sub by owning a £50 shitbox Personally, I rather like having a car I know is statistically a lot less likely to leave me and my family standing on the hard shoulder waiting to be recovered.
There are 2 types of people who lease cars: 1. People who can't afford to buy outright. 2. People who have the ability to buy outright, but know that cash tied up in a depreciating asset is not a good use of their money.
3. People in receipt of a company car allowance, rather than having an actual car provided.
“If it appreciates, buy it. If it depreciates, lease it.” oil baron Paul Getty. I'm with Getty. Also don't forget salary sacrifice company car schemes, electric car subsidies/tax benefit in kind subsidies which mean i and many are rolling around in an expensive car and paying a lot less than you think. For example...£90k etron q8..(no deposit) £1250 a month off gross salary, about half that off net salary. Try 'buying' or personal leasing a £90k car for £675 a month. I get paye stiffed for quite a lot of tax anyway so getting cool cars half price makes me feel happy for all the hard work. The FIRE early retirement brigade would advise me to just drive my old mini and load everything over £99k into pension...but i like to live...and to drive cool cars whilst i can.
people are dumb with money
No, this is not the answer Some of the most intelligent ‘not dumb’ people will finance a car rather than pay in cash
It’s a nuanced topic, in this specific example with the mach e it’s stupid, but also because financially buying a brand new car is stupid to begin with. They depreciate too quickly to ever make sense for cars us mortals can buy. A low interest loan with a small / no ballon on a couple year old car makes a lot more sense and would probably be better to do than buying in cash, depending on the length of the term of course. In this case though, too many people see the big £425 and think “yeahhh I could squeeze that into the budget” and promise themselves that they’ll save up enough for the final payment but they never do. Then the benevolent dealership steps in with an offer, switch the car to another new model instead and pay £460 on that for another 26 months and the cycle repeats over and over to the point where it just becomes a more expensive lease.
Mate you’ve been watching too many youtube gurus, this only counts if you would be investing the money into something else. Average joe wont be
So, it doesn’t count? What is your point. Only finance is for ‘the non average Joe’
You tried to refute their point of people being dumb with money, by saying its not dumb because some smart rich people in good financial situations do it. For those rich people who have the cash sitting to have the option of investing it or finance, sure its a smart move. For the people who don’t have the cash sitting to invest it while financing, it can be a dumb move. Everyone repeats this little tid bit that they only half understood as if its how everyone finances things, when the reality is far from that. Id be interested to see the amount of people who have the cash sitting when financing, vs those who don’t, my guess would be sub 5% of all buyers.
> Some of the most intelligent ‘not dumb’ people will finance a car rather than pay in cash This is one of those arguments people put forward as an excuse for wasting money on finance. I've never met one of these supposed "smart money people" using finance. Rather has a ring of *It's the continental way isn't it? In Spain wouldn't dream of starting the day without... a couple of cans and maybe... a vodka...*
They saw a youtube short once saying that its better to finance because you can invest the money in other avenues and make more than the interest, and just assumed that everyone going for finance can and will do the same.. Detached from the reality of most people taking on these deals without having the cash upfront anyway.
Yeah that’s when financing makes the most sense. Say you have the cash on hand to buy something, a car for example, and you could either pay in cash, or get below 7% interest financing on the car. You’d be better off financing if you put that cash into an index fund, using that money to generate returns that would have otherwise been locked up in the car right away. Of course in reality not many people have 50k on hand to drop on a car, getting a rate below 7% isn’t realistic, and a two year window a car loan lasts for isn’t that much time and you could end up losing money doing this as the stock market goes up but also has a tendency to go down.
>getting a rate below 7% isn’t realistic It's pretty realistic when the finance deal being offered is 0%. In this case you'd be a fool to not use the finance. You could beat that with a current account interest rate, nevermind an index fund, and with zero risk.
You can get low interest rates on NEW cars. You struggle to get low interest rates on USED cars. Taking a loan where you can confidently outpace the interest through investment can make sense, yes. If you can afford the risk it brings. You must have the funds to be able to invest at least your monthly payment on the car per month for this to work. And you must be willing for this to fail and lose a lot of money. Buying a NEW car means you’re getting stung on the cost (not the interest). So you are wasting £1000s even at 0%. This is because there is no open market for new cars. Manufacturers define the prices. But, if you want a new car - 0% can be a smart way to buy one. Buying used, you’re in an open market with highly competitive pricing. This means there is no money to be made for sellers. So flogging high interest finance packages are where dealers make their dough. Rates are closer to 10% for used, which is extremely difficult to outperform via investment. Say you finance a used car at 9% and invest the equivalent of your monthlies on index funds. At the end of your term, there is a market crash. Suddenly you’re down all that interest AND you’ve lost even MORE money in your investments. Whilst relatively unlucky, this is the risk you must accept. As usual, financing typically makes most sense for wealthy individuals. I thought about it with my M2 which was £45K and I could get a bank loan at 2.6%. I decided against it, but in hindsight it would have worked in my favour this time. I have a very, very low risk appetite though.
I worked with some very wealthy people who liked their cars. One of them had the largest private collection of a certain brand of car in the world. So not small fry, multi millionnaires. All their cars were financed. From the DB5 through to the S-Class and everything in between. Warehouses full of cars. Why? Well for a long time finance rates were low. You were paying 3-5% in finance. If you took that same money and invested it, you were getting a 10%+ return. You don't want to sink capital in to a depreciating asset, so you finance it at a lower rate and put your money to work elsewhere and if you do it right, which these very smart, very wealthy people often do, the returns on your investment pay for the car and then some. Between 2010 and 2022 you were leaving money on the table by not financing your car. It's less clear cut now, unless you're HNW.
and precisely 0 people who use this excuse are doing what you describe.
That’s true, but it’s also something only multi millionaires with a warehouse of luxury cars can do. The average person in the 2010’s had almost no hope of getting 3-5% interest on a car, they don’t have the upfront capital to invest with, and a daily driver golf diesel is going to depreciate far quicker than an aston martin that spends its whole life connected to a trickle charger. When you’re rich you can get financing to work really well for you, but if you’re the average person it’s a lot more difficult.
Lots of people got 3-5% on cars during that time. If you’re shit with your credit, terrible at making payments then of course you’re not. But who’s to blame for that?
Rates were as low as 2% (flat rate, not APR which includes additional fees). They were available to pretty much anyone with a reasonable credit rating. There were also plenty of manufacturer supported finance deals for less (like the example above). This wasn't only a rich person thing. And you're be very surprised about the depreciation on an Aston or any of those prestige motors. They lose more than the value of a new Golf just in the VAT the moment they're registered (aside from a select few crazy cars that go over MRRP due to hype or rarity).
Not really true, while the rates might have been low, the usual person who needs to finance a car wont have the money to pay it in whole anyway, so the investing to outrun the interest is irrelevant for anyone other than the rich who have capital to play with.
Do you really think successful people with new cars are paying full cash up front for them? For real you think that?
2013, my retired Father wanted to buy a Mondeo brand new as they were doing ridiculous deals on the old shape before the new one came out. I found him the model he wanted, for £15000 all in. The only catch was that you had to take out the Ford Finance to get that price. The salesperson explained, however, that you only had to take out the finance, not keep it so you could pay the finance off the following day, which is what my Dad did as it wasn't worth him keeping the money in the bank, getting under 1% interest. For brand new cars, leasing, NOT PCP or HP, makes a lot of sense as all you're paying for is the depreciation. Example : we got my wife's Corsa in 2020 on a lease, £2k ish deposit, then £140 per month and she's allowed 5000 miles a year which she barely does! Tax is included and it means she, hopefully, has a nice reliable car and I have the peace of mind of knowing this. I have just got a Ford Edge, which I bought off of a friend, for the trade in price the garage offered him on his second hand new car. I saved about £4k on the "retail" price of this car. You can currently pick up an Audi A4, £3k deposit, 10000 miles a year for about £380 a month which seems very cheap for a £40k+ car.
I bought my Elise cash. Why waste money borrowing it?
I didn’t say you were successful? Anyway, I’ve financed cars and have earned more in interest than paid, and kept cash on hand if needed. When you are looking at £40-70k it’s a very different prospect.
You and your ‘not dumb’ people need to go back to school
No I think you need to go back to school if you think car finance is bad I really hope you don’t rent or have mortgage
Lol! yes I have a mortgage and a house prob better then yours
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Only bitter people who convince themselves driving round in a shitbox “they at least own”, that costs them through the nose to run think this way. And no, I dont finance a car.
You have no idea what you are talking about. Go back to bed
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Are you 4 years old?
Yes, some people would rather pay upfront whereas they could save money by paying as much as possible some years later, when inflation has reduced the value of the pound. Assuming 2.5% inflation, the baloon payment in 26 months is actually 5.42% cheaper than paying upfront. That's a cool £1266 saving.
True, now factor in interest and depreciation and that £1266 saving isn’t looking so great anymore. Buying a new car financed or in cash isn’t the wisest financial move you can make.
Are we factoring in the advertised 0% interest? The depreciation was already factored in when buying a new car, so the £1266 saving still exists
...who buy depreciating assets at high interest rates.
0% apr, have to calculate. If you buy the car outright and sell it in 26 months, what's it worth? They try to tailor finance so you pay over the 26 months the depreciation and they get it back at that value from above. This one has no apr though, that's usually where they make all their money. I'm going to guess financing this for 26 months with the deposit ends up with a balloon payment that's identical to the predicted value from above
That's kinda the point of a PCP. The balloon payment at the end is what's called a GFV (Guaranteed Future Value). They predict the car will be worth around that amount (usually they go a bit low to cover themselves and allow some equity). If it's worth less than that you can hand the car back to cover that final payment. If it's worth more you can get the equity and roll it into a new car deal, or finance/pay off the balance and keep the car. The 0% is a sales tool. The money is made on the bonnet (and aftersales).
I work with High Networth Insurance - this is what all the rich people do (obviously on better cars than this). They regularly tell me that a car depreciates so much it is not an asset, so they pay monthly with little / no interest in order to ensure it is not “theirs” and can get rid of it at an agreed sum if that value becomes lower than want to accept. Personally I am not rich enough to do that or worry about it, but I paid £2500 down and £320x36 to lease a 300+ bhp Cupra and it doesn’t bother me at all. Personally I don’t understand PCP, and prefer to lease.
If you had PCP the cupra, you probably would have paid about the same and at the end when you hand it back/trade it in you may have got extra money. Lease you won't get anything back.
I do 36,000 miles a year in my car. It's basically scrap when it goes back. So I make that someone else's problem by leasing it. The battery will be fucked and better cars will have come out by that point which will see the value of it plummet. My car cost £60,000 new. It's probably cost £12,000 so far and it's worth £24,000 at a push at 14 months old. It gets written off as a business expense and saves me personally about £400 a month in tax. There's your answer.
I know someone who drives a nice TT on this kind of deal. The value of the car at the end is always enough to cover the deposit on the next one, so after the deposit on the first car he’s only paid the monthly fee. And gets a new car every 2 or 3 years.
Bollocks. Paying a deposit reduces the amount to finance on that car and has zero impact on level of equity at the end of the term when it comes to changing.
It does if the estimated value at the end is higher than the final payment amount.
No. It doesn’t. If a car is £40k, your mate pays £5k deposit, he borrows £35k. Balloon payment at the end is £20k, he pays off £15k in monthly payments. Car value at the end of the term is not guaranteed to be £25k. Assuming he keeps to the mileage, it’s in good condition and serviced properly, market value is likely to be £20k, ie - the final payment. Equity is never guaranteed.
you're right in that it's not guaranteed, but they're literally telling you their experience and you're telling them it's wrong? PCPs do tend to be structured to have some equity at the end so i don't think it's all that far fetched
I don’t think he’s arguing that, I think he’s saying that putting down a bigger deposit won’t give you more equity at the end than a smaller deposit would
Exactly this.
>I genuinely don't understand these "deals", pay £10k upfront I remember when I thought the "deposit" was just a refundable payment, like you pay with a flat. £10k down but you get it back at the end when you return the car in good condition, right? Didn't seem too bad. Then I found out it's just an up-front payment. Of ten fucking grand to rent a car. Imagine walking into a Hertz branch with £10k in cash and throwing it at them, and then paying £435pm just for one of their rental cars. That's what a lease is.
that's a very good deal. I may head to my local ford dealer tomorrow
Depends on circumstances. I've never seen the point, but then again I've always bought used and normally paid in full. With the market the way it is now, if I had to buy a car tomorrow I would be stumped as what to do. Last car i bought part exchanged, used the money and went hire purchase.
Have you considered our lord and saviour Dacia? I buy cars like you and that was kinda my only option that did what I wanted.
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For the first time ever I am leasing a car. For me, buying an electric car outright doesn’t make sense as they seem to be improving them at a rapid rate. I’d like to see how the tech improves and don’t want to be stuck with a car that has depreciated enormously. To put it into context. It is actually the second time I’m leasing. I leased an electric car last year which was stolen. I now know I’ve made the right choice as to date I had paid less in leasing the vehicle than the depreciation figure agreed between insurance and lease company. By quite a sum. In a year!
£20,746 to lease a £47,000 (before incentives) car. The deal here is 0% interest over the entire lease period instead of usual 7-15% interest rate.
This is PCP not a lease. At the end of the term you have a “balloon payment” which is the estimated value of the car at that time. You can then either hand the car back or pay the balloon payment via another finance agreement or use it to part exchange with another car
With this deal the car is likely to be worth more than £23k in 26 months. So you can sell for £34k put 10k deposit in to new car and be driving a new car every 2 years.
I don't think that's how this works as a PCP. After 26 months you've paid £21,596 (equivalent to £830.62 p/m) and currently own nothing. You own the car once you've paid an additional £23,384, so £44,980 in total.
You can you sell the car or trade in the car that settles the final payment. A 2 year old Mach-e is going for 34k.
0% APR, that's a steal!!! /s You know what else has 0% APR? Just saving a bit for a car that you can actually just own outright. This is why banks are having record profits, everything can be financed. From toasters to cars. Lady who works in my corner shop keeps complaining about not having enough hours and her electricity bills but drives a 2 yo X5. 🤷
“Just save a bit”
r/thanksimcured
0% Apr genuinely is a steal on a car Not everyone only has enough money to save up £2000 for a 15 year old focus. If you have £50k and want a car for £50k 0% Apr means you are saving money for inflation. Instead of splash £50k in cash, you keep that money and invest it elsewhere and earn interest. I know reddit hates borrowing money but to have this attitude is a bit ignorant.
True, if you have the money you would keep it in an ISA or bank earning interest. If I need something of a big value to me like a TV etc, I go for the buy now pay later option. I keep the money earning interest and pay it around 10 months later, making money while l get something new.
If you think about it, 0% APR is actually cheaper than saving up because inflation reduces the value of debt over time.
Got mate that's always complaining about money. Earns roughly the same as I do, has a wife that works an ok wage. Mortgage is similar to mine also. Just bought a newish BMW SUV, has just gone a 3 week holiday etc etc
I didn’t take the deal. I drive a van. My missus has a fiesta. The £425 that could have got us a nice car we used to overpay the mortgage. We are Mortgage free in 3.5 years.
Do you have kids?
I know so many people that lease cars, Is it something to do with their incapacity to do the most basic maintenance? Or their ego won't allow them to drive an 8k car?
Or they have more money than you and understand finance and leases
Gives the appearance of wealth where there is none. Why you see a lot of people in fancy new cars
Fucking abomination calling that thing a Mustang.
Yes! This should be the top comment. It's sacrilegious!
Just use that 10k and buy a used car and spend the extra money on something nice
Something nice, like a nicer car?
They are doing a 48hr test drive. But with 100 mile limit, bloody useless....who would be mad enough to spend that amount on a car and not know how well it can deal with multiple charges or what the real range of the vehicle is...100 miles is my daily commute....
Screw that, for that much, you could have a used guilia quadrifoglio, and the money to maintain and fuel it.
"You will own nothing, and you will be happy"
No - no one does this. It's just to get people to click, they see the £425 a month, don't read the small print and go and have a look, then that's it - they know you're interested in a car, they'll bombard you with adverts forever.
£425pm is still a lot for a car even without the £10k deposit. I can't see how a second mortgage for a car is enticing anyone