Chris Harris on... car finance

[Skd884]

Chris Harris on... car finance

A new car is most people’s second largest purchase. But, asks Chris, is it really worth it?

www.topgear.com

 

[Headhurts]

My previous Mercedes was a lease but my current car an E350 S212 I paid cash for but it was a retirement gift I treated myself to.

Most of my cars have been paid for with cash or a small personal loan and I have had 1 on lease and 1 on PCP.

I have been tempted to change recently as until end of month you can get a brand new E220 SE saloon for under £30,000 but in retirement you have to think harder as the ability to replace savings is limited.

Robin

 

[MCFastybloke]

Not just car finance, the have it nows are upto the back wheels in debt all over, cards,loans,furniture the full mashings.

 

[Bobby Dazzler]

Chris Harris on... car finance

A new car is most people’s second largest purchase. But, asks Chris, is it really worth it?

www.topgear.com

View attachment 98497

Interesting. Chris mentions having to pay more at the end of a lease. That can’t be lease, or PCP, but I’m far from an expert.

 

[Deleted member 126251]

My previous Mercedes was a lease but my current car an E350 S212 I paid cash for but it was a retirement gift I treated myself to.

Most of my cars have been paid for with cash or a small personal loan and I have had 1 on lease and 1 on PCP.

I have been tempted to change recently as until end of month you can get a brand new E220 SE saloon for under £30,000 but in retirement you have to think harder as the ability to replace savings is limited.

Robin

Buying on finance might be a strategy - especially now with low interest rates and where your money may be tied up in something giving decent returns or not easy to liquidate.

However since I was about 30, the only debt we (46 years together) have ever had, has been our mortgages.

I've never purchased anything I could not afford to pay for in cash, we went without instead.

I've not had a good look at the market but expect that there may be some good (car) deals around & have been tempted but, I want to wait and see how electric cars develop. Our next "family' car could well be electric if I can get a decent mileage range for holidays (we prefer road trips) and in the interim , the SL (my retirement present to me ) will have to do.....

 

[nyssa7]

Interesting. Chris mentions having to pay more at the end of a lease. That can’t be lease, or PCP, but I’m far from an expert.

I’m guessing this is where you take out a PCP at say 5k miles/year but actually do a shed load more this invoking the per mile clause. Or let the car get into a bad state so the repairs have to be added in

theres a time and a place for a PCP, I bought a CLA45 Shooting Brake 4 years ago, p/exing my 3.25 year old Evoque - residual on that was great so even though I’d done 47k (and bought on 4 year/40k PCP) I had plenty of decent deposit on the AMG
not driven so much this time round, have 10k/year allowance but only reached 30k last week so won’t be handing it back per se

PCP actually ran out at beginning of June, but with dealers having been shut for 3 months, couldn’t have bought a replacement even if I wanted to. Mercedes have extended for 3 months at lower monthly cost, guess I need to figure what to do by September. But the “hand it back” price is fixed so long as it meets the reasonable condition for age and below the agreed mileage

 

[Darrell]

The only debt I’ve ever had have been for the 3 properties that I’ve bought and because I rented the first 2 out I never even lived in them. Both mortgages are now paid off without me personally making a single months payment.
Everything else has been paid for by cash. I haven’t even got a credit card.

I know nothing about leasing or PCPs but a few of my friends use them and haven’t got any issues but strangely my wealthiest friend who works in finance buys his cars in cash.

 

[Eddy77]

Interesting. Chris mentions having to pay more at the end of a lease. That can’t be lease, or PCP, but I’m far from an expert.

I read the article. Harris is using the word lease when he means PCP. A true lease is simply a long term rental. You hand the car back at the end and walk away. Like a rented house. Any damage is charged to you as agreed at the start. Super simple. Under a true lease you have no option to buy the car at the end even if you wanted to. You hand it back. Just like a rented house.

PCP is similar but you have the option at the end to buy the car for a final balloon. Or you can hand it back and pay nothing more (unless there is some damage to the car).

People often confuse the two products. They are different!

People also talk about the ticking time bomb with reference to the amount payable at the contract end. I see no time bomb. With a lease there is no option to buy so no risk. On PCP there’s no risk as you are quoted the final payment on day one and you go into the deal knowing what you pay each month and what your OPTIONAL purchase price is at the end.

The ticking time bomb is people over borrowing, losing their jobs, and being unable to service the debt. But that’s a different consideration to the resale value of cars.

The time bomb is actually ticking for the car leasing companies who could end up getting a load of cars back where the residual value is too low and they lose money on the deal. But that’s their risk not yours (as the customer).

 

[Deleted member 126251]

The only debt I’ve ever had have been for the 3 properties that I’ve bought and because I rented the first 2 out I never even lived in them. Both mortgages are now paid off without me personally making a single months payment.
Everything else has been paid for by cash. I haven’t even got a credit card.

I know nothing about leasing or PCPs but a few of my friends use them and haven’t got any issues but strangely my wealthiest friend who works in finance buys his cars in cash.
[/QUOTE]

We had a similar approach, my job (project management ) meant that realistically, I'd be changing companies quite frequently. About 35 years, ago we decided to invest mainly in bricks & mortar (instead of a pension fund) and so far (touch wood), it has worked very well for us. We've had a total failure - lost half the money we invested in Turkey but the rest have been brilliant. However, we did not have flash cars, clothes or holidays and ploughed it all into our retirement which, is very comfy.

 

[SlimJim]

I think the ticking time bomb referred to is the unaffordability if people lose their employment status and can no longer maintain monthly payments.

 

[Darrell]

I think the ticking time bomb referred to is the unaffordability if people lose their employment status and can no longer maintain monthly payments.

Surely the ticking time bomb is around us permanently then.

 

[Darrell]

I read the article. Harris is using the word lease when he means PCP. A true lease is simply a long term rental. You hand the car back at the end and walk away. Like a rented house. Any damage is charged to you as agreed at the start. Super simple. Under a true lease you have no option to buy the car at the end even if you wanted to. You hand it back. Just like a rented house.

PCP is similar but you have the option at the end to buy the car for a final balloon. Or you can hand it back and pay nothing more (unless there is some damage to the car).

People often confuse the two products. They are different!

People also talk about the ticking time bomb with reference to the amount payable at the contract end. I see no time bomb. With a lease there is no option to buy so no risk. On PCP there’s no risk as you are quoted the final payment on day one and you go into the deal knowing what you pay each month and what your OPTIONAL purchase price is at the end.

The ticking time bomb is people over borrowing, losing their jobs, and being unable to service the debt. But that’s a different consideration to the resale value of cars.

The time bomb is actually ticking for the car leasing companies who could end up getting a load of cars back where the residual value is too low and they lose money on the deal. But that’s their risk not yours (as the customer).

Good explanation. Thanks.

 

[Swotty]

I know someone who professes to buy a new Range Rover every 4 years but the cars are actually rented on pcp.

Dunno if he actually believes he owns the car or if it's just bragging.

 

[Deleted member 126251]

I think the ticking time bomb referred to is the unaffordability if people lose their employment status and can no longer maintain monthly payments.

Exactly - people live for today instead of planning for the future!

 

[Eddy77]

Exactly - people live for today instead of planning for the future!

Undoubtedly. However, there is nothing wrong with debt if it is manageable and sensible / to scale with earnings and job security. Unfortunately that’s not always the case. Too many people driving around in brand new cars who should be in something more modest!

 

[John]

Although the government don't reward people who plan for their future.

You have to use your savings for care whereas those who pist their money up the wall constantly are bailed out.

 

[Will]

I think this is basically just a continuation from another recent thread we had on here? In summary some people are happy to drive £500 cars, and spend money/time on fixing them regularly. Others are happy paying £500/month for a car they’ll never own, also knowing they’ll never have to touch it, knowing that amount of money keeps them mobile 24/7 when they need it with no surprises. Fixed cost motoring to fit your budget. Someone my wife knows leases a VW Up for £100/month, no idea on the term but it’s not all expensive metal on drip. As is mentioned in the article, very few people buy new/newish cars for cash, ie out of savings, regardless of price these days. Some people just want a hassle free new car that fits their budget and leases can work well in those circumstances.

But circumstances are different. The comparisons CH makes to times gone by are interesting but there’s so many other factors to consider it’s almost not relevant either.

Incomes have changed, interest rates are lower than they have ever been, many cars are relatively speaking cheaper than they used to be, and they are generally more reliable. But the way things are going they become obsolete before they are likely to wear out. This is the new way of many things in life.

The most pointless thing to do is to try and guess someone’s finances. The person who leases that new £100k RR may have invested £100k into his/her business instead, or used it for a buy to let property generating them income on an appreciating asset or something. Just as plenty of old money people are happy to run around in older cars there’s plenty of wealthy people who may drive newish car they don’t own.

The person who leases a new one every 4 years surely has more spare cash to play with than someone who buys a 4 year old one outright? Possibly not, but you can bet paying off the first four years worth of depreciation (bulk of the lease cost) of a brand new RR isn’t going to be cheap to do continually...!

If someone loses their job and can’t afford their car repayments I would say that’s probably less of a problem than those who’ve perhaps overstretched on their mortgage and risk losing their home. A car by comparison is relatively easy to replace.

So long as what people are doing with their money/income is legal I don’t really see the big issue with it, what does it matter if the neighbours have a new car or someone who you know drives a car above (or even below) what you think their means are? They probably don’t eat at the same restaurants as you or go on holiday to the same sort of places or whatever. Be a boring world if we were all the same

 

[Deleted member 126251]

Although the government don't reward people who plan for their future.

You have to use your savings for care whereas those who pist their money up the wall constantly are bailed out.

Yep....High earners pay a lot more £££ to the tax collector than low earners, we get a lot less back for our money paid in to taxes (vs the knuckle draggers) and yet the people (knuckle draggers) who benefit from the taxes we paid are angry at us.....go figure.

 

[pmcgsmurf]

.......
The most pointless thing to do is to try and guess someone’s finances.......

So long as what people are doing with their money/income is legal I don’t really see the big issue with it, what does it matter if the neighbours have a new car or someone who you know drives a car above (or even below) what you think their means are? They probably don’t eat at the same restaurants as you or go on holiday to the same sort of places or whatever. Be a boring world if we were all the same

These are very valid points.
Lots of people have very different circumstances so if it works for them then good luck to them.

I see folks around here with massive nearly new Range Rovers, if that's what they like for the shop and school run that is up to them. They must think I'm bonkers but I'm not bothered then again they probably don't take that much notice of the old fart in the corner house.

 

[fabes]

It's and opportunity for some though.

A said above, it's the PCP / car companies who are going to be getting a lot of cars back that they weren't expecting.
Market values will be depressed as used buyers pick up the 2, 3 or 4 year olds - distinct possibility
To replace our ageing, paid for, Nissan Qashqai +2, I will be watching and waiting.....