I read yesterday that 75% of cars in recent years were purchased using some form of credit !!!
MVP
|
"Rattle - I'm selling a 2001 Punto"
Sold - as seen?
;-)
Incidentally - our 2002 Punto doesn`t have a speck of rust - even stone chips on the bonnet don`t rust due to the galvanising.
Looks like a good deal - plenty of cheap parts and replacement panels /doors/bumpers and so on in breakers - in case of a knock or two.
|
|
|
|
The funny thing about buying on credit, is that the 'advantage' of instant gratification only works the first time.
If, instead of buying on credit, you saved up beforehand to buy, it would (for arguments' sake) take you 3 years: you save up the equivalent of monthly repayments in advance then pay cash - but without interest added of course (..in fact you earn interest).
When you buy on credit you get the new car buzz 3 years earlier, but effectively spend the next 3 years paying for that - just the same as saving up in advance & paying cash really - but with interest payment added of course.
So, you 'save' the waiting time of the initial purchase, but are then forever paying interest - instead of earning it with the 'saving up' method - all for the one & only 'advantage' of getting the 1st new car earlier (you can subsitute 2nd hand car of course in the above examples - same principle though)
It's a mug's game - but more than that, when the credit dries up - the whole economy collapses - mostly because people get locked into the cycle of credit/default & have no real cash money of their own.
|
woodbines, that's exactly what I did ~ saved up for my first new car.
It was a small and basic car with a puny 875 cc engine, bought when I was 27 in 1965. Since then all I've had to do is save up the cost to change for every subsequent car, earning interest on the money in the intervening years. I've always resisted the temptation of buying anything on credit (except for a mortgage) and hence couldn't afford my first new car until the relatively late age of 27. I started modestly and gradually worked my way up until I was happy with the level of car I've got now.
I'd still like to know how long it would take to save up the equivalent of the monthly repayments in order to pay cash compared with how long it would take to pay off a loan.
Edited by L'escargot on 28/01/2009 at 12:16
|
L'escargot: one example...
£10,000 spent on a car (ignore trade in)
To save £10k from scratch over 4 years requires saving approx. £200 a month with interest at 2%.
To have a loan for £10k over 4 years is £246 a month at 8.9% APR (a fair rate for today).
So, over 4 years the loan is costing someone an extra £2208!! Ouch!!
However, not having the loan would mean making do with old bangers (possibly) until you've saved the cash, and how much would be spent on buying and repairing old bangers over 4 years?
OTOH, if you have a good reliable car already, then it seems a very simple equation, save up - don't loan...
Edited by TheOilBurner on 28/01/2009 at 13:45
|
So over 4 years the loan is costing someone an extra £2208!! Ouch!!
Thanks, TheOilBurner, you've answered my question.
So ......... saving up £246 per month and then paying cash takes (approximately) only 39 months, compared to repayments taking 48 months.
|
That's about the size of it. Of course, if you shop around you can do better than 2% interest, which really starts to make loans look like the worst kind of folly for a depreciating asset like a car.
That said, I'm in the loan trap myself. I don't like it mind, and I'm hoping to be in a better position next time. Half the problem is setting a realistic budget and sticking to it, especially when loans are so easy to get and open up the market to much newer cars then you might otherwise afford.
|
|
|
|
And no I'm not rich just old fashioned ~ if I can't save up for it I don't buy it.
You and me both. And probably many more of our generation. House exepted (paid for).
Edited by Old Navy on 28/01/2009 at 12:06
|
Me too. Never had a car loan or any other kind of loan in my life except a mortgage. If I haven't got the money to pay for something I don't buy it. Might not always have been the cleverest policy but it sure as heck feels like it is now.
My dad gave me what turned out to be very good advice from the day I earned my first pay packet and I have stuck religiously to this rule ever since. He told me to put 10% of whatever I had earned straight into a "rainy day" fund no matter how little or much that represented. I still do it now. Over the years this built up to a sum which represented a year's net income. I now never let the fund fall below an equivalent modern sum. Anything I have over and above that is fun money. Resultantly if I have no income for 12 months I can survive and in the meanwhile I can spend my fun fund without guilt.
Works for me.
|
He told me to put 10% of whatever I had earned straight into a "rainy day" fund no matter how little or much that represented.
I applied the same principle to my mortgage repayments. I chose my first property (a modest maisonette) on the basis that the mortgage repayments were an affordable 15% of my gross salary. Whenever my salary went up I increased my mortgage repayments proportionally.
|
|
When I was saving up for my first new car I arranged to live within cycling distance of my job. And when I changed jobs I made sure my new job was within cycling distance of my abode. I cut my coat according to my cloth.
|
Glad to know I'm not completely on my own.
I waited until the ripe old age of 35 before buying my first new car for cash, and paid no more than £350 for the cars that I had owned before that.
Values have changed considerably - that's for certain.
Clk Sec
|
|
|
yes L'escargot - once you've got through the 'difficult' first 3-4 years (of not having the sparkly new car & driving a modest 2ndhand job instead..) you're effectively just paying the same, i.e. saving-up in advance as someone who is always on credit - but you're always earning interest while they're always paying interest!
It seems almost 'dishonest' ! ;)
After a bike loan 30-odd years ago, I realised how daft it was getting a loan, when with a little forebearance & thrift I could pay cash & realise the benefit of the accruing interest for myself. Now, like youself, I save up in the intervening period & have the cash to spend on the new (or 2nd hand!) car when I want it.
Paying cash also seems makes you (in my case anyway..) a bit more, well, 'hard' about the decision & whole buying process. If you're not bowing & scraping to get a loan, the psychological 'boot' seems to be on the other foot when choosing/negotiating with a car dealer - if they don't come up with the deal, you can just go to one who can.
|
i'm not a big fan of credit, but have used it in the past.
the comments above about saving up for a car and not buying one on credit are missing some element of the point
if you need reliability (e.g. for a job), security (e.g. carrying around a baby/child), particular vehilce (e.g. van for work) then you might have to decide that buying one early on credit is a sensible option
for example, some 20 years ago, my only car was becoming well expensive to maintain. My house at the time was in negative equity and i'd become single again, having to pay off an ex to keep the mortgage endowments as mine. My day to day cashflow was dreadful, i'd used up the savings to pay the ex and having looked at the previous 18 months of bills on my old car i worked out that buying a much newer car on 'tick' would be financially sensible.
cheaper fuel costs (change from early 20's to mid to late 30's mpg for a 12,000 miles p.a. user), no irregular maintenance costs (9 month old car) etc only cost me an extra £50 per month out of my pocket, which at the time was well worth it...particularly as I had friends/family 230 miles away and a reliable car meant the difference between visiting and not bothering.
I'd agree that huge great credit payments for something just because you want to look good or fancy the newer model isn't at all sensible.
|
"couldn't afford my first new car until the relatively late age of 27."
"I waited until the ripe old age of 35 before buying my first new car for cash"
Blimey, I must be a late starter - my first new car was when I was 55. And that was only because I took advantage of interest free credit offer from Citroen. Figured it would be good to have a newish car when I retired. As it was, they had another interest free offer 3 years later and with what I sold my "old car" (3 years old - still the newest car I had ever owned!) for and the new price I just continued the payments. 2 years later I had paid it off. I guess interest free means you can save for a car and have it early without losing too much - well, except for interest on the saving bit. That "loss of interest " was probably covered by the 10% better fuel economy of the new car (maybe?)
|
According to Ford's Sales Director, Ford is seeing far greater showroom traffic this January than it did last January.
Apparently many elderly people with cash see no point in leaving it in a bank at a tiny interest rate (and running some risk if losing it altogether). So instead they are spending it one one last decent car.
HJ
|
And at the other end of the sales spectrum from Ford, I was chatting to a small independent dealer in second hand cars the other day and asked him how things were going expecting him to say "ticking over" and he said that he had picked up some fantastic bargains at auction and had sold ten cars last Saturday alone - was doing better trade than last year. I guess it's a case of "right car, right price and it sells".
Phil
|
According to Ford's Sales Director, Ford is seeing far greater showroom traffic ... >>
Must make sure Mandy/Gordy/Darling and the Baroness Green-Shoots-of-Recovery know about this. So that they can scrub off Ford's name off the list of manufacturers going to them with their begging bowls.
Edited by jbif on 28/01/2009 at 20:01
|
Apparently many elderly people with cash see no point in leaving it in a bank at a tiny interest rate (and running some risk if losing it altogether). So instead they are spending it one one last decent car.>>
I alluded to this possible phenomenon a couple of weeks ago on an earlier CC thread:
""During the coming months, the 'fixed-rate' savings accounts of many older folks will be maturing - and what do they do with the money? Would they put it back into a bank that could go bankrupt at any time, stash it under the mattress for a slimeball to come and nick ..... or, go out and buy a new Jazz?""
...... but tawse pointed out that I was wrong.
|
Less gloom here than in Channel 4 News.
HJ
|
|
That's what my dad(73) and my twin aunts(80) did this last year Dad bought an Octavia and Aunts a Yaris. Both diesel(not required IMHO) and both paid cash and stupidly full list price!!
Edited by smokie on 29/01/2009 at 09:26
|
Yes : retired friends boiught a new Fiesta. \Last week.
BUT it was the old model 25% off. They did not like the new one.
Maybe that accounts for some of the sales increase?
Edited by madf on 29/01/2009 at 09:17
|
According to Ford's Sales Director Ford is seeing far greater showroom traffic .......... decent car.
When I read things like that I'm pleased I'm a fan of Ford cars!
|
Local estate agent is saying that enquiries received during this month are far higher than those received in January last year. He didn't mention sales, however.
Nice to hear a few optimistic words amidst all the gloom. Is that a green shoot I spot in the distance?
Clk Sec
|
Green shoots?
Ther are always market fluctuations.
House prices I suspect have another 25% to fall (down 16% in 2008) - .
Come back and ask in 2010?
|
Increased taxation or loss of public sector jobs will hamper any recovery. Recent job losses and loss of tax revenue (stamp duties, VAT and income) still need time to feed into the system.
There will be green shoots and the ecomony will recover, it's a question of when. Personally, I think it will be at least 12 months before we see any green shoots.
|
Far, far too early to be talking about recovery in my view. Sure, some sectors will do better (relatively) & some new businesses/niches will arise, but overall the current 'numbers' have barely had time to make an impact yet.
We're still in the 'phoney war' really - the effects of even the autumn contraction have barely affected the GDP yet. House price falls & repossessions have at least 3 years to go before bottoming out - more likely 5-7 years. I see 10-12 years before even nominal asset 2007 values are reached - barring hyperinflation through currency slump that is.
I think we're in a phase shift transition - never will we have the buying power of 2007 again - we simply won't be rich enough. I'm already cutting my cloth, as it were, and re-calibrating my (personal) future expectations.
The big lie currently is that this is just another recession (although deeper & sharper..) - I don't think it is, it's much more fundamental.
(it's being so cheerful that keeps me going!)
|
Really don't understand all this.
I accept that I earn good money but my services are in demand still. Many business people I talk to on a regular basis are still really very busy. For others some parts are up and some down. Some people are having a rough time.
In the town where I live house selling prices have dropped by about 10% and houses are still selling.
I've always believed in credit and always borrowed as long as my personal cash flow is about zero.
I've taken out substantial amounts of credit in the last few months, some to re-finance and some to store away, with no issues at all.
So in these straightened times I've never had so much free cash to do what I want with. My mortgage has dropped to a third of what it was, thats a lot of £100's a month.
I cannot possible believe that I am the only person in the world in such circumstances.
|
|
No, you aren't. But there are many who aren't as lucky. Joining for a moment with the visionaries, I can see a very distinct two tier society evolving, along with it higher crime and (eventually) civil unrest. I'm not really a gloomy sort, but not everyone will be as lucky as you are hxj. I hope it continues for you.
|
I think part of the problem is the massive amount of personal debt that we have. Whilst people like you and me (I presume) can take out 0% credit cards and pay them off when the 0% ends, there have been a lot of people out there who have taken out 5 credit cards, minimum payments on all of them, plus a couple of loans - and then have hit the buffers and can't get anymore credit to fund their overstretched lifestyle.
The banks are still lending. You just need a good credit record now, whilst before they would have thrown money at you. Those with defaults and CCJs on their credit records are the ones who are probably feeling the pain most right about now.
|
....those with defaults and CCJs on their credit records are the ones who are probably feeling the pain most right about now...
One of the injustices of the system is that those who can least afford it are forced to pay the most.
Similarly, the cheapest and best food is generally at supermarkets.
Can't afford a car? Pay cornershop prices, then.
Pay-as-you-go electric meters used to charge more, although that may have changed.
Cash machines that charge a transaction fee are routinely installed in the smaller shopping parades on estates, thereby catching the elderly and others without access to their own transport.
|
cheapest and best food is generally at supermarkets
Not quite right - veg and meat is better at local shops and you generally get more bang for your buck.
|
Very off topic, but, according to Jamie Oliver, cheap cuts of Pork are not even sold in the UK. They are exported because British supermarkets have determined that the customers don't want them.
HJ
|
Same with mutton HJ,
Sheep are still grown in the UK and older ones are exported. Perfectly good in a slow cooker but supermarkets don't think that there is a demand!
Total waste!
|
SQTotal waste!
I like my lamb tender and slightly underdone, not some scraggy fatty meat boiled to death for hours.
How is exporting food for money a waste?
Edited by Dynamic Dave on 30/01/2009 at 13:39
|
Very off topic
I wonder who will mark HJ's card for being off topic ?! Personally I think its all relevant, expensive priorities elsewhere affects motoring, it may stop you doing the odd fe pleasure miles or stop you buying a new vehicle altogether - in here I think its all motoring related.
£3.00 for two A cup chicken breasts at the local food cavern or 3.50 for two DDs at the local butcher ! (and they actually taste of chicken as a bonus)
|
I've never consciously thought about chicken breasts and cup size before.
In fact, now I wish I hadn't!
|
I know. He was on about ducks the other day too. Maybe he's getting a thing about feathers.......
;-)
|
>>>veg and meat is better at local shops >>
It is very rare that I go to the supermrket now. I support my local shops by buying food on a daily basis from greengrocer and butcher. Admittedly, it is but a short 7 minute walk from home at the weekend, or on way home from station ater work.
The bonus is that my car can stay in the garage, not suffer car park "dings" and is probably better for the environment (in it's own very small way)
|
I forgot to include this in the above post:
:-)
Clk Sec
|
Apparently many elderly people with cash see no point in leaving it in a bank at a tiny interest rate (
Just yesterday I visited Ford dealership for getting my car's MOT. Ford was doing it for just £27.
I was wondering why all customers there [barring me :)] were old gentelmen!!
|
Just yesterday I visited Ford dealership for getting my car's MOT. Ford was doing it for just £27. I was wondering why all customers there [barring me :)] were old gentelmen!!
You probably went during normal working hours, and you were the only employed person who was swinging the lead instead of being at work!
;-)
|
Two stage society?
We're already there. visit any "sink" estate.
Edited by madf on 29/01/2009 at 14:18
|
We've always been there. It's just the position of the boundary between tiers which fluctuates. Hundreds of years ago it was extremely high (feudalism). Today, it is comparatively low.
Can't remember there ever having been a Communist Utopia in Britian.
|
Nor a Fascist.. mind you - there must be a few potential Adolf Hitlers in the `respectable` Shires and Market Towns - voting ultra right..
|
Now, back to motoring, the laws of supply and demand are seeing car auction prices rising. Click on the news item on the right.
HJ
|
|
A friend told me today (over lunch) that he had been offered £3,000 as a trade in on his four year old top of the range SAAB that was listed at £20,000 when new, He also said it is probably good for another ten years so it will be kept. No wonder new cars are not selling.
|
From today's auction report:-
SAAB 9-3 2.0T Aero 4-dr, 04 reg, 99k miles £3,550s
SAABs don't make a lot because of the fear they are going to need some very expensive work.
HJ
|
|
But do Saabs cost more than average to maintain HJ ? I thought quite a lot of their underpinnings were GM ?
|
I understand SAABs have some built in weaknesses on engines and suspensions which appear around 100k miles and are NOT cheap to sort out.
GM engineering is carp compared to Ford.
|
GM engineering is carp compared to Ford.
The more that Backroomers big up Ford the happier I get. I'll probably have to keep my 2003 Focus until it's 10 years old.
Edited by L'escargot on 31/01/2009 at 07:40
|
SAAB dealers charge more to maintain them. But the biggest cost is repairs. Component prices are expensive. And the main current shared engines are the rather dodgy 1.9 Alfa Romeo diesels and the petrol V6. SAAB 4 cylinder engines are their own chain cammers the origins of which go back to the Triumph Dolomite Sprint and, er, TR7.
HJ
Edited by Honestjohn on 31/01/2009 at 08:36
|
|
|
|
|
|
