Does nobody buy a car outright? Am I missing something?

[TNGL]

I've been driving an old Vauxhall Corsa for around a year having only passed my test last July whilst in uni, so I do not know much about the car market as a whole and how most people go about getting a reasonable car.

Recently I've been looking to buy something a bit better and I'm set to buy a used Audi A4 at the end of this month for around £6k. However, having spoken to a fair few people, I was quite surprised to see how often people buy cars on finance. Is this the norm? Is it better than buying a used/slightly older car outright?

Would I be silly to buy this 2010 A4 up front instead of getting a 2017 A4 on finance from Audi and then trading it in for something else in 3 years?

All in all, is getting a car on finance usually a good deal? Or is this simply the result of car finance being too readily available atm? I read an interesting article about this not too long ago, https://www.ft.com/content/8b6607de-6304-11e7-91a7-502f7ee26895 for those interested.

 

[Gun9]

Why is your link click bait ?

 

[TNGL]

Why is your link click bait ?

Read it for free here if you're not subscribed to the FT.

Now, do you have anything relevant to say about the topic in hand or is that all you're able to contribute?

 

[Rotty]

I always take a bank loan out and use that to top up the value of my part ex, suppose I could run a cheaper car for a few years but tbh interest rates are that low it's not worth it to me

 

[adolf hamster]

it's been getting more prevalent in recent years, there seems to be some myth that cars over 3 years old immediately transform into rusty obsolete death traps at the coming of their first mot, plus i guess people are so used to things like phone contracts it makes more sense to them to do the same with a car.

personally i'm planning to avoid ever financing a car if it can be at all avoided, at least with second hand cars there's less depreciation and most importantly you aren't owing anyone money.

if it were me i'd take the '10 a4 over the '17 if it meant avoiding finance, so i don't think it's a silly move at all, it'll be yours, you can own it for as long as you want, modify it if you want, do whatever milage you want etc etc.

of course that said, i can see how its started from the dealers perspective- new cars are expensive, and leasing in particular is a great way to get a car depreciated for free so you can then sell it to a wider market once it's value has dropped a bit, and making some money while you're doing that isn't a bad move either.

 

[sports_brah]

I don't get it personally. The idea of putting yourself in a debt for a car is a bit weird for me. Then again I'm off the opinion that cars have been pretty good for a long time now, they're not the rust buckets they used to be.

 

[TNGL]

With regards to interest rates, I can definitely see why people might go for 0% finance. Though, I have to say, I'm with @sports_brah in saying I wouldn't be too comfortable putting myself in debt for a car. From my understanding @adolf hamster, it definitely is in the dealership's favour and I guess that explains why whenever a new model of a car is advertised these days, they usually present the cost of it in £/month.

 

[sports_brah]

With regards to interest rates, I can definitely see why people might go for 0% finance. Though, I have to say, I'm with @sports_brah in saying I wouldn't be too comfortable putting myself in debt for a car. From my understanding @adolf hamster, it definitely is in the dealership's favour and I guess that explains why whenever a new model of a car is advertised these days, they usually present the cost of it in £/month.

I could understand some logic behind it for high end cars where the cost of finance is preferable to losing the opportunity cost of the capital.

Dealers probably love it because they likely make moneys on the comms from the finance company who they contract. And it allows every Tom, Dick & Harry to purchase cars they probably shouldn't.........it's only XXX£ a month!

 

[acemastr]

We finance because we want a nice, shiny new car that we don't have to worry about.

 

[Entai]

I have only ever paid cash for all my cars, never financed part or whole on any I have had.

Just put in order for 2018 Mustang, when they ask for a deposit. it will be cash, when I pay for the car later, it will be cash.

Always found there is more power to haggle a discount, if you hand them a nice crisp pile of folding.

 

[andybird123]

Not everyone has £30k+ in cash, but they do have £2-3-400 a month that they can set aside for a payment. This thread is like asking "why do people get mortgages, why dont they just live in a cardboard box if they dont have £200k+ in cash just laying around". The basis of why people get loans to pay for things hey want is pretty simple.

 

[Rilot]

Always found there is more power to haggle a discount, if you hand them a nice crisp pile of folding.

This hasn't been the case for quite some time. Dealers make money from the finance agreements and so will be more willing to haggle on the price of the car. Some manufacturers even have a specific amount of money they will give you for the deposit if you take the finance.

I pay cash too as I don't like debt but I'm well aware that I won't have much wiggle room on the price of the car because of it.

 

[Freefaller]

A few hundred quid a month is not a lot and easily affordable and can be easily budgeted for. Even if you're able to save a grand or two a month that will still take a few years to buy anything more than a few grand.

I've personally done both. And it's quite nice to get something with low monthly payments that you can just forget about. For students and low earners then buying a cheaper car outright does make sense I guess.

 

[Lustral]

I brought my car outright but i did the finance to negotiate an extra £2500 off , then 3 days after receiving the new car , i called up the finance and exercised my rights to 'withdraw' from the finance and they gave me a figure of settlement and i did a BACS over for the amount. The interest paid was like a tenner.

It might be worth doing if it was 0% , but it was like 5.9% at the time , and over the course of 3 years , it worked out like £3k worth of interest.

 

[Nasher]

I always buy outright, but I don't buy new cars. I think that if you NEED to take a loan/finance out for something like a car, you can't afford it. All this debt is going to hit people hard in future.

They say cash doesn't get you as good a price any more, but TBH I don't think that is true. Being able to throw money on the table there and then has a lot of bargaining power. But I do like that idea of starting the finance for any discount and then canceling it when you get home. Might have to try that sometime

 

[Freefaller]

I don't agree. Just because you can't buy it outright doesn't mean you cannot afford it.

Do you buy a house outright? Or do you mortgage? If you can afford the monthly payments, what's the difference?

 

[matthab]

My first car was £500 and bought out right. After that I have always had some form of finance on them, whether this is a small credit card debt to cover any over budget or a loan. My Cupra is on PCP as it was 0% and its my first new car.

I dont see the point buying outright a car which could be £20k+ and depreciate like a stone. AT least with a house it will hopefully go up in value.

 

[Slam62]

I always buy outright, but I don't buy new cars. I think that if you NEED to take a loan/finance out for something like a car, you can't afford it. All this debt is going to hit people hard in future.

They say cash doesn't get you as good a price any more, but TBH I don't think that is true. Being able to throw money on the table there and then has a lot of bargaining power. But I do like that idea of starting the finance for any discount and then canceling it when you get home. Might have to try that sometime

I agree with this, I just bought a brand new car for cash, had to shop around a fair bit to get a decent price.

 

[Glanza]

I've always bought a car outright with either my own funds or a bank loan if the rates are good.

I think finance is popular due to people seemingly obsessing about having a brand new (granted poverty spec) Audi or BMW on the drive and see the monthly payment of £150 - £200 as not much at all without checking how much they will actually pay back over the term of the lease.

 

[Firestar_3x]

Not everyone has £30k+ in cash, but they do have £2-3-400 a month that they can set aside for a payment. This thread is like asking "why do people get mortgages, why dont they just live in a cardboard box if they dont have £200k+ in cash just laying around". The basis of why people get loans to pay for things hey want is pretty simple.

A loan against an appreciating asset vs a depreciating one are two very different things.