Leasing V Outright purchase

[Peter DLM]

Because the vast majority of folk in them couldn't afford them if it wasn't for finance. I know I couldn't have bought the first Mercedes I owned without.

This one I bought cash.

People would, if it were not for easy finance, have to do the unthinkable and actually save up for their car. They'd have to save what they'd otherwise pay out in a loan, not a PCP payment as that wouldn't get them the car they are in.

And this is why the motor industry relies on car credit. Nearly all car manufacturers are actually Finance companies with a side line in motoring. No credit, no car companies.

 

[nick mercedes]

In the credit free world, there are only Nanos. Do you think there'd be the likes of SLs and M5s if car credit didn't exist? Manufacturers wouldn't have a business case selling a relative handful of cars every year.

How so?

There are plenty of cars that are £10k or less brand new, a figure that is not that hard to save up for.

Back in the day, only the wealthy drove around in SLs and yes they paid cash for them.

 

[nick mercedes]

And this is why the motor industry relies on car credit.

A crutch that needs to be taken away, too much access to cheap credit to buy imported goods is why our nation is in the mess that it is.

 

[Peter DLM]

Seems there are some with a neurosis on this topic. For the last 10 years I've been buying used cars for cash, but before that I was leasing. My car buying method is whatever suits my requirements at the time, it's a stupid thing to discriminate against a proven product just because one has a irrational fear/ignorance/whatever of something that the majority of people use. My next car is likely to be a lease.

Maybe brainwashing by peers? But I think that most commentators haven't allowed themselves to properly investigate the subject that they are deriding and therefore don't know all the facts. People don't know what they don't know, if you know what I mean Not all leasing is good, it doesn't suit every purchase, but then no method of buying is perfect for everyone on the planet, this is why there are choices, sometimes it's the smarter choice.

 

[Peter DLM]

How so?

There are plenty of cars that are £10k or less brand new, a figure that is not that hard to save up for.

Back in the day, only the wealthy drove around in SLs and yes they paid cash for them.

Yes, there are many new cars for less than 10k, and this will be the extent of the market in your credit free world. Did you not cotton on to the fact that I was using the Nano as an example of this?

Are you comparing the motoring industry now to that of 30 years ago I guess this explains your thoughts on the matter. Here's a wake up call for you, things change. That business model can't exist in this day and age. In your car credit free world, do you honestly think that manufacturers would be able to build posh cars for the elite few that didn't cost millions of pounds each?

 

[Shude]

...it is a depreciating asset so is not a place to stick your capital.

I'd argue the opposite - that it seems unwise to borrow money against a depreciating asset! That way you lose out twice!

 

[hawk20]

How so?

There are plenty of cars that are £10k or less brand new, a figure that is not that hard to save up for.

Back in the day, only the wealthy drove around in SLs and yes they paid cash for them.

In most parts of Britain you couldn't get to work to earn a living to do the saving without a car. And old bangers are not reliable except if you are lucky and then not for many miles.

Guy near me was made redundant not long back and nearest comparable job he could find was in Bracknell. So needs car to commute. Another needs to get to a job in Wimborne about 25 miles away. Needs a reasonably good car to do that.

Why don't you suggest that nobody should have a house unless they save up to buy it for cash first?

 

[nick mercedes]

InGuy near me was made redundant not long back and nearest comparable job he could find was in Bracknell. So needs car to commute. Another needs to get to a job in Wimborne about 25 miles away. Needs a reasonably good car to do that.

*Any* car can manage 50 miles a day.

Only the deluded would assume that such a task could only be undertaken in a brand new one.

 

[hawk20]

*Any* car can manage 50 miles a day.

Only the deluded would assume that such a task could only be undertaken in a brand new one.

Only the deluded would want to do it in a £500 old banger. Old cars are cheap becuase they are at the end of their economic life. OK if you know enough to do your own repairs but for regular commuting, modern levels of safety, and a reasonable chance of being there on time a fairly modern car is a sensible buy. It doesn't have to be 'essential'; it merely needs to make sense to the buyer. And if they can afford the payments and enjoy the product they have bought, good on them say I.

 

[nick mercedes]

Only the deluded would want to do it in a £500 old banger. Old cars are cheap becuase they are at the end of their economic life.

Old cars are cheap in the UK because new cars are so cheap.

Plenty of people on this forum choose to go to work in older cars, are they all idiots?

 

[hawk20]

I'd argue the opposite - that it seems unwise to borrow money against a depreciating asset! That way you lose out twice!

But that is a very silly argument because you might just as well say that it makes no sense to buy a depreciating asset for cash either.

The point is that cars depreciate. If you want one -tough- you have to live with that.

If you want one, or need one for work etc etc, then the only question is whether for you it makes sense to buy for cash (if you are lucky enough to have the necessary amount) or to borrow and have the car now or to save and have the car in some years time.

If the interest rate is sensibly low it may well be a sensible choice for some to borrow and have the car now.

For some the choice will be an old car for cash or a newer car with some borrowing. If you would rather spent £x a month on the payments for a car, than on more booze, or more birds, or dearer holidays, then for you that is a sensible choice.

 

[hawk20]

Old cars are cheap in the UK because new cars are so cheap.

Plenty of people on this forum choose to go to work in older cars, are they all idiots?

Not many choose to commute long distances or rack up serious mileages in £500 bangers. True you can buy an old car and be lucky or you might need a new auto box and greastly regret you did not buy newer.

Many whose livelihood depends on getting to work by car choose to have a car in warranty so they are lent a replacement if things go wrong. And they don't want the hassle of an old car.

Newer cars have many benefits like better economy and safety. And if you happen to want these benefits and are happy to pay the cost of having them, why on earth not?

If we all did what some of you are suggesting there wouldn't be any older cars for you to buy.

 

[nick mercedes]

Not many choose to commute long distances or rack up serious mileages in £500 bangers. True you can buy an old car and be lucky or you might need a new auto box and greastly regret you did not buy newer.

So anyone who manages to get to work each day in a £500 car is doing the impossible?

Better everyone jumps on the hirecar/debt bandwagon and gets themselves into debt to do what the vast majority of older car drivers seem to have no problem doing?

 

[Shude]

...old bangers are not reliable except if you are lucky and then not for many miles.

My "old banger" got me to my first job every day for a year before I part-ex'd it, I drove thousands of miles in that thing! Only broke down once in the time I owned it and that was due to a handbrake fault introduced by the workshop that "fixed it" a few days earlier (and set fire to it in the process!). Understand not all £200 bangers are equal.

Guy near me was made redundant not long back and nearest comparable job he could find was in Bracknell. So needs car to commute. Another needs to get to a job in Wimborne about 25 miles away. Needs a reasonably good car to do that.

At least if you've been made redundant and own your car outright you might not be worrying about where the next loan payment will come from and you could trade-down to recover any equity. Not quite so easy if you've signed up to a 3-year lease. Not sure where the various penalties or clauses will leave you if you stop paying.

...have the car now or to save and have the car in some years time.

Pretty much sums it up. I had no car until I got a job, and then I had a banger until I had earned enough to buy something better. IMHO being able to afford everything right now diminishes the appreciation for it. These days everyone wants everything right now, no-one wants to wait.

 

[hawk20]

So anyone who manages to get to work each day in a £500 car is doing the impossible?

Better everyone jumps on the hirecar/debt bandwagon and gets themselves into debt to do what the vast majority of older car drivers seem to have no problem doing?

You keep trying to twist my words. I did not say getting to work in a £500 car is impossible. I said not many "choose" to do that. When I had to I ran many cheap old cars. But it is irrelevant. I am merely arguing that many prefer to pay something extra per month on top of what they can afford for cash, in order to have a more modern car. And why shouldn't they make that choice if they wish. Nearly all on this forum will have borrowed to buy a house and there is no good reason not to do so -within your means- for a car.

 

[nick mercedes]

You keep trying to twist my words.

"Guy near me was made redundant not long back and nearest comparable job he could find was in Bracknell. So needs car to commute. Another needs to get to a job in Wimborne about 25 miles away. Needs a reasonably good car to do that."

Perhaps I misread the above, but is not the jist of it that a 50 mile per day journey is beyond the capabilities of anything other than a new (lease?) car?

Given the state of the UK economy would you not agree that rather than people desperatly hunting for some percieved need to go out and rent a new imported car, it would be better if they instead saved their money?

 

[Red C220]

I'd argue the opposite - that it seems unwise to borrow money against a depreciating asset! That way you lose out twice!

The answer to that is it depends on what the capital is being used for instead.

Most people buy on finance because they don't have the capital to buy outright. This will account for upwards of 80% private new car sales. There is no argument for this other than you want the vehicle and are prepared to pay for it.

However, where Nick comes from is a business perspective.

Lets say you have £40,000 in cash - and you run a wholesale business.

You can buy a £40,000 Mercedes New, and afford it comfortably. You then don't have £40,000 with which to buy stock.

Or, your lease/HP/PCP your £40,000 Mercedes, (paying circa £5000 interest) then use the resultant cash to buy stock which over a 36 month period you recycle three times and make £120,000 or so profit with. Which then makes the £5000 interest look cheap.

Paul Getty is creditted with the phrase “If it appreciates, buy it. If it depreciates, lease it" for exactly the above - He had vast amount of cash we he could then invest and make for more money with than the lending cost him.

Alternatively, you buy something outright for say £10,000 and invest the remaining £30,000 with no interest payments whatsoever. You then treble your £30,000 over 36 months and make £90,000.

That's all fine until the capitalists that run the world make a right pigs ear of the whole thing and the cards all come tumbling down.

 

[Will]

As already mentioned, the reason used cars are so cheap these days is because it's easy to borrow money and buy new ones. People are easily tempted so end up in cars that they otherwise wouldn't be able to afford.

Without going to extremes (£500 bangers or Tata Nanos) you really can buy a perfectly good car for just a grand or two.

Years back (2004) I bought a 1993 'K' plate 190E 2.0 Auto for £1k for a friend of mine as his first car. He used it daily and drove it everywhere. It was maintained inexpensively and never broke down. After a while he started asking about a newer car and it was suggested that he could look for a newer one when it went wrong. It never did

Eventually he gave in and bought himself something newer (a facelift 208 CLK), but it was sold on to another friend of mine and then subsequently to a forum members brother for a similar amount to what it cost 5/6 years before. I understand that it's still giving good service.

I drive/have driven/will drive anything from brand new/nearly new and all the way to old bangers if I have to. You don't need to be spending tens of thousands on a car to use for commuting.

My 1999 E320 Avantgarde estate was well under £2k - 2 owners from new, 107k miles. Including an oil service, new water pump and coolant, a couple of bulbs and a wheel refurb I think I've spent around £300 in total on it since purchase. I'd drive that anywhere and I'm pretty sure it wouldn't break down on me. In fact a few of my friends have borrowed it for the last few weeks and complemented it. Safe too I would think and probably worth less than the deposit on some basic new car.

Doesn't anyone remember when only the rich could afford a Mercedes? They were built really well and cost lots and were still worth lots secondhand. Nowadays you can pick them up used for buttons

Don't get me wrong, I'm not against all forms of finance and recognise how/why people use it, but it's silly to suggest that everyone needs a new/nearly new car (or a Mercedes at that) just in order to commute and earn a living. It's perfectly safe and possible to drive a slightly older car if you wish.

 

[wemorgan]

Nearly all on this forum will have borrowed to buy a house and there is no good reason not to do so -within your means- for a car.

I'm not old enough to know the answer the this question - but was there a time when it was only a house that most people borrowed money for?

Nowadays the accepted norm is a lease deal on a car. Some borrow money for white goods too. Were times before leasing a mobile phone so bad?

Does this not all reflect the rising aspirations of people, with banks feeding those aspirations?

Remember that Grange Hill anti drug pop song......Just say no! (no to excessive consumerism)

 

[BTB 500]

Houses are a bit different - most people don't have the option of saving up and buying one for cash. Assuming you need somewhere to live, a mortgage is typically cheaper than renting.

For cars there have always been bank loans or hire purchase agreements. I would say though that there is more peer pressure nowadays to keep 'upgrading' (everything).

I had to do a 200 mile round trip to chair the AGM of a national organisation last month. I went in our 16 year old 145k mile car, and had no doubt that I would get there OK in it. Yet my brother in law's VW (less than 2 years old) is dead and needs a new engine ...