How are people paying for cars?

hurikane

The thoughts of getting into big debt for a car does not appeal to me at all.

Myself and herself both work and have decent salaries, spend 15% of take home on the mortgage and I have a company car. We need to get a new car for herself. Ideally would like to spend €15k max, would like to buy outright rather than financing, paying interest and loan repayments.

How are people financing cars? Bank loans, PCP, HP?

What percentage of take home pay are people spending on cars per month?

Am I just a miserable fcuk and should I live a little and spend €2k a month on car finance?

Ded_Zebra

No option for 0% for those who don't have a finance package.

The purchase cost of my car was about 65% of my monthly paycheque.

If you're careful and more importantly know what to look for you can get a perfect car very cheap. This option I understand doesn't suit everyone.

Grueller

Whatever suits yourself op. They are a depreciating asset so you probably have the correct attitude.
To answer your question, there is no option for me as we spend 0% in this house. Both vehicles owned outright and no plans to change until reliability or lack thereof forces us to.

Samuel T. Cogley

This thread makes no sense to me. 15% of income on mortgage you should be able to buy cash. Who pays €2K a month for a car?

hurikane

Samuel T. Cogley wrote: »

This thread makes no sense to me. 15% of income on mortgage you should be able to buy cash. Who pays €2K a month for a car?

Just finishing building a house. 3 years combined take home salary gone in to the house. In hindsight, probably too much.

hurikane

Ded_Zebra wrote: »

No option for 0% for those who don't have a finance package.

The purchase cost of my car was about 65% of my monthly paycheque.

If you're careful and more importantly know what to look for you can get a perfect car very cheap. This option I understand doesn't suit everyone.

I think you're right, probably should have a 0%. Can a mod add please?

tedpan

People are buying new cars on PCP. They pay a fraction of the monthly cost, generally 4-600 eur per month (30-50k car) with a small deposit and optional final payment where they usually trade up to the next model 3 years later.

_Kaiser_

Ded_Zebra wrote: »

No option for 0% for those who don't have a finance package.

The purchase cost of my car was about 65% of my monthly paycheque.

If you're careful and more importantly know what to look for you can get a perfect car very cheap. This option I understand doesn't suit everyone.

Grueller wrote: »

Whatever suits yourself op. They are a depreciating asset so you probably have the correct attitude.
To answer your question, there is no option for me as we spend 0% in this house. Both vehicles owned outright and no plans to change until reliability or lack thereof forces us to.

The problem though is that insurers refusing cover (or hiking it ridiculously) on "older" cars - especially over 10-12 years old - means that people are being forced to change even though their existing car may still be mechanically fine.

If you work in Dublin but rent, the chances are you already have or are on the verge of having to move further out which means more mileage, more wear and tear, higher servicing and fuel costs, and increasing the chance of a non-economical repair needed.

If both happen together, financing may be your only option if you don't have savings to fall back on.

Mooooo

hurikane wrote: »

The thoughts of getting into big debt for a car does not appeal to me at all.

Myself and herself both work and have decent salaries, spend 15% of take home on the mortgage and I have a company car. We need to get a new car for herself. Ideally would like to spend €15k max, would like to buy outright rather than financing, paying interest and loan repayments.

How are people financing cars? Bank loans, PCP, HP?

What percentage of take home pay are people spending on cars per month?

Am I just a miserable fcuk and should I live a little and spend €2k a month on car finance?

If you don't want debt fair enough but if you took a loan for that 15k instead of savings, you'll still have the savings for emergencies or whatever else. It depends on ones own situation really. Interest is just the cost of managing the cash flow really, the principal will be gone to the bank or dealer either way. The issue isn't really whether it's cash or borrowing it's that you can afford it either way and if you can it's a matter of choice plenty lads would spend more on drink or holidays all about ones own preference

jimmy180sx

tedpan wrote:

People are buying new cars on PCP. They pay a fraction of the monthly cost, generally 4-600 eur per month (30-50k car) with a small deposit and optional final payment where they usually trade up to the next model 3 years later.

Recently quoted pcp on a new car 50k margin..12k deposit and 400e a month for 36months..it's madness

_Kaiser_

Mooooo wrote: »

If you don't want debt fair enough but if you took a loan for that 15k instead of savings, you'll still have the savings for emergencies or whatever else. It depends on ones own situation really. Interest is just the cost of managing the cash flow really, the principal will be gone to the bank or dealer either way. The issue isn't really whether it's cash or borrowing it's that you can afford it either way and if you can it's a matter of choice plenty lads would spend more on drink or holidays all about ones own preference

Indeed.. there's nothing wrong with debt so long as it's manageable and sustainable over the period of the loan.

I know we treat mortgages as the holy grail of achievement in this country but really there's very little difference. You don't own that property until the final payment either and very few can buy somewhere outright these days.

pauliebdub

I bought my current car back in 2007 from savings. 10k and never felt like upgrading. I can't understand why people waste so much money on cars.

looksee

I can see how you would need finance on the first car/s, but if you are doing even modest saving it should be possible to borrow from yourself to purchase a less expensive car, then have a direct debit paying directly into a separate bank account for the same amount that you would have been paying on a loan. Continue to pay it in for the same period - or longer - as the loan and you will end up with the amount plus (loan) interest in your account. When you need another car repeat the process. Provided you buy cars within your income level (and 'forget' about the money in the account) you will be able to upgrade, and, in the long run, still have your savings.

ironclaw

Not a popular view but PCP only makes sense if you are going to stay in the cycle and keep upgrading. Otherwise, your dropping the deposit (The equivalent cash price of many a car 4 to 5 years older) and then a monthly repayment with interest on a depreciating asset. To me thats insanity, you may as well burn your cash. Its not like a mortgage, your car is never going to gain value unless you are PCP'ing a Dino or La Ferrari. Leasing, to me, make sense if you are extremely wealth and the payments are fractions of your income.

You say you recently built a house, I'd be avoiding completely avoidable finance personally. You can pick up a smashing car for cash in the 10 to 15k range, and if you are willing to go below 2008, you'll do very well for half that. The Irish market is completely skewed, a post 2008 car is only more valuable due to the tax scheme. You'd drive a very nice older car for many years on the same money that a PCP scheme for 3 to 5 years will cost you.

Jack the Stripper

pauliebdub wrote: »

I bought my current car back in 2007 from savings. 10k and never felt like upgrading. I can't understand why people waste so much money on cars.

People like new nice things.

grogi

ironclaw wrote: »

Not a popular view but PCP only makes sense if you are going to stay in the cycle and keep upgrading. Otherwise, your dropping the deposit (The equivalent cash price of many a car 4 to 5 years older) and then a monthly repayment with interest on a depreciating asset. To me thats insanity, you may as well burn your cash. Its not like a mortgage, your car is never going to gain value unless you are PCP'ing a Dino or La Ferrari. Leasing, to me, make sense if you are extremely wealth and the payments are fractions of your income.

Well - a new car will depreciate the same, regardless of the way to decide to finance it, be it PCP, HP, leasing or cash. It ALWAYS is burning money...

elperello

grogi wrote: »

Well - a new car will depreciate the same, regardless of the way to decide to finance it, be it PCP, HP, leasing or cash. It ALWAYS is burning money...

Correct but paying any way other than cash you are also paying for firelighters.

oknepop

pauliebdub wrote: »

I bought my current car back in 2007 from savings. 10k and never felt like upgrading. I can't understand why people waste so much money on cars.

This right here. The only thing cars do, at least in financial terms, is depreciate.

I'm into cars, so I'm all for spending money on something you like, etc. At the same time, I've been told by people who upgrade their car every year to something brand new or a year or two old that the reason they do it is they don't have to worry about it breaking down, getting it NCTd and so on, and I just don't think that's a good argument! Sure fair enough it's nice and new and has a warranty, but at the same time, the amount that car is going to depreciate by in the first year is probably far more than youd spend on servicing and maintenance in the first year, if not the first three or even moreI don't understand the obsession over getting into debt.

You can by something really nice, say a 2010 accord for around 10k, and not have to worry about it breaking down too much and depreciation will still be reasonable.

That's just me of course, different strokes etc.

Mooooo

elperello wrote: »

Correct but paying any way other than cash you are also paying for firelighters.

Realistically most people do not have the cash amount for a car unless sub 5k, and if so I'd consider it foolish to spend majority of any savings on a car, would get a loan instead. Someone has enough put away that am the car will be not empty the savings fair enough I guess.

mickdw

oknepop wrote: »

This right here. The only thing cars do, at least in financial terms, is depreciate.

I'm into cars, so I'm all for spending money on something you like, etc. At the same time, I've been told by people who upgrade their car every year to something brand new or a year or two old that the reason they do it is they don't have to worry about it breaking down, getting it NCTd and so on, and I just don't think that's a good argument! Sure fair enough it's nice and new and has a warranty, but at the same time, the amount that car is going to depreciate by in the first year is probably far more than youd spend on servicing and maintenance in the first year, if not the first three or even moreI don't understand the obsession over getting into debt.

You can by something really nice, say a 2010 accord for around 10k, and not have to worry about it breaking down too much and depreciation will still be reasonable.

That's just me of course, different strokes etc.

There is an Argentina for a reasonable priced new car every 3 years.
5k per year will probably keep you in new passats every 3 years.
When you consider that you will have a new car under warranty for the entire time as well as having a nice car that will need nothing only a basic service and tyres and it starts to make sense.
Sure the 10k car will work out cheaper but if you can afford 5k per year and it doesn't impact on your life, it makes sense.
It also means you are not open to unexpected large bills that a used car can generate. Some people are happy to continually pay a known amount and have the new car.

Jack the Stripper

If people stop buying new cars where will the ones that don't want to buy new get their cars.

mikeecho

Jack the Stripper wrote: »

If people stop buying new cars where will the ones that don't want to buy new get their cars.

UK

grogi

Jack the Stripper wrote: »

If people stop buying new cars where will the ones that don't want to buy new get their cars.

If the market dries out, the used prices will inflate and we will see return to buying new (as we see at the moment - PCP is not the only thing to blame).

Atlantic Dawn

At one stage I spent 50% of my gross annual salary to purchase a car, a little later in life and I try to keep my total purchase price of a car to a months gross salary, best decision I ever made, have never once been let down by the purchases.

biko

Added option for people with no finance.

elperello

elperello wrote: »

Correct but paying any way other than cash you are also paying for firelighters.

Well not if it's 0% PCP finance.

But aside from that it's also it's actually looked on as poor financial management to lump all your cash into buying a car and it wouldn't even be possible for the vast majority if buying a new car. It's much more sensible to keep the bulk of your saving in the bank (less a deposit) and use finance to pay off your car. Even the very wealthy finance their purchases as why would they want to tie up a load of cash.

Not everyone is happy with a 5 or 10k second hand car that might be possible to buy with cash (but as above anything above about 5k should be financed imo). They want a new car, under warranty, speced as they want, not used by someone else with interior and exterior imperfections, no worries about realibility etc etc.

ironclaw wrote: »

Not a popular view but PCP only makes sense if you are going to stay in the cycle and keep upgrading. Otherwise, your dropping the deposit (The equivalent cash price of many a car 4 to 5 years older) and then a monthly repayment with interest on a depreciating asset. To me thats insanity, you may as well burn your cash. Its not like a mortgage, your car is never going to gain value unless you are PCP'ing a Dino or La Ferrari. Leasing, to me, make sense if you are extremely wealth and the payments are fractions of your income.

You say you recently built a house, I'd be avoiding completely avoidable finance personally. You can pick up a smashing car for cash in the 10 to 15k range, and if you are willing to go below 2008, you'll do very well for half that. The Irish market is completely skewed, a post 2008 car is only more valuable due to the tax scheme. You'd drive a very nice older car for many years on the same money that a PCP scheme for 3 to 5 years will cost you.

If buying new PCP is the cheapest way to finance a car even if you don't intend rolling over, you can get it as low as 0%. As above though the fear of finance is all a bit silly, even for a second hand car tying a load of cash up in a car is not a sensible way of doing it.

mloc123

0% PCP makes sense to me... Take a 30k car for example.

Say you have 30k sitting in an account and could buy outright... Instead you pay 3k deposit and monthlies. The remaining 27k can sit in a savings account or be invested and 'earn' money over the following 36 months. At the end you pay of the lump sum from this.

The issue with people financing cars is when really they cannot afford them to begin with.

Have no car finance .... if I was going down that road 8/9% of take home would be the maximum I'd allocate. That would have me driving a good car on PCP but I'm not really interested.

Paying off my residential mortgage early, pension & investments are my financial priorities after living very comfortably for the month.


Think I might get a 2 year old civic in 2019 perhaps but that'll be ,€20K ish so modest enough a purchase.

mloc123

mloc123 wrote: »

....
The issue with people financing cars is when really they cannot afford them to begin with.

Affordability is very subjective... we all know people with nice cars, no/minimal savings, no assets... an ish income who reckon they can afford their car.

dev100

There's a number of your circumstances Your income, expenses, your mileage per year, insurance and savings, budget and then servicing and how long you will keep a car


For me up to 20K and that's my limit, get as a reliable of a car as best I can . I do nearly all the servicing myself. My logic is to buy a fresh a car as best I can . I try to keep a car for 10.years if bought for 20K it's costing me 2K a year .

I'm not in a position to spend any more than that as it just means unjust working to pay for a car ....

I know a few people who buy a car on Pcp and their logic is they've a new car every 3 years and n at 0 for maintenance costs and somewhat sense that a new car won't let them down .

boardsuser1

Applying for finance on a Ford Galaxy tomorrow, with my own trade in i'm expecting i'll need to finance about 15k of it.

Here's hoping i get it, the PCP option for the same car is a bit too much for us.

mloc123

Augeo wrote: »

Affordability is very subjective... we all know people with nice cars, no/minimal savings, no assets... an ish income who reckon they can afford their car.

And if they can easily make the payments for the car each month... I guess they can.

mloc123

mloc123 wrote: »

And if they can easily make the payments for the car each month... I guess they can.

Again subjective.... an ish income.... no assets, minimal savings... nice car.... car on finance. Essentially living paycheck to paycheck.

I owe I owe it's off to work I go.

76544567

Everyone i speak to the finance dept about a new car i add up the monthly payments and the other payments on the PCP. It never works out well and i walk.
I just don't understand pcp at all.

76544567

76544567 wrote: »

Everyone i speak to the finance dept about a new car i add up the monthly payments and the other payments on the PCP. It never works out well and i walk.
I just don't understand pcp at all.

Deposit, monthly payments and what's owed after the term (GFMV).

Simple really.

Augeo

Augeo wrote: »

Again subjective.... an ish income.... no assets, minimal savings... nice car.... car on finance. Essentially living paycheck to paycheck.

I owe I owe it's off to work I go.

If you are making your repayments then you can afford it, the rest is irrelavent really to the point of whether or not you can afford the car.

Yara Wooden Uncle

Yara Wooden Uncle wrote: »

If you are making your repayments then you can afford it, the rest is irrelavent really to the point of whether or not you can afford the car.

Smell of pre 2007 is strong.
Along with people not understanding what subjective means.

NIMAN

Usually with different forms of debt.

I would say PCP is a godsend at present for car buyers.

mloc123

Augeo wrote: »

Again subjective.... an ish income.... no assets, minimal savings... nice car.... car on finance. Essentially living paycheck to paycheck.

I owe I owe it's off to work I go.

Hmmm. I would say the majority of people live paycheck to paycheck... Mortgage/rent, food, clothing etc.. etc... If people didn't need to work to live I suspect a lot of people would not work.

I do get your point... I think. Home and savings should be priority over a new car... And sacraficing the former for the latter isn't great financial sense.

mloc123

Car owners in general fall into two categories IMO people who like cars and people who need a car.

My father in law views a car as a financial decision. Metallic paint being a pointless extra as that 500e will not be recouped in 8 years when he sells.

I see a car as something I enjoy and don't care if the extras specced up are 'wasted' money... As I will enjoy them for the period I own the car.

The logical thing would be to buy the cheapest, most reliable car you can... But if we all did that.. where is the fun?

antodeco

I saved up for a while and had 25k to buy a new car for myself. Thought I'd be crazy buying a new car, at that price. Bought 2 second hand ones, for myself and the missus instead. We both get 2 year old cars,for the same price I would've bought a new one for.

Fol20

mloc123 wrote: »

0% PCP makes sense to me... Take a 30k car for example.

Say you have 30k sitting in an account and could buy outright... Instead you pay 3k deposit and monthlies. The remaining 27k can sit in a savings account or be invested and 'earn' money over the following 36 months. At the end you pay of the lump sum from this.

The issue with people financing cars is when really they cannot afford them to begin with.

I have to say i disagree with this sentiment. If you have the money you should always pay cash. With 27k in the bank. You might if your lucky earn 300 in interest over 3 years or if you "earn" money over 3 years for the average joe. I very much doubt it will be more than the interest you pay.

Don't get me wrong. I like pcp plans and will more than likely go for one in the next 2 years. But it's more to do with my own funds rather that specifically choosing to go for it. People today have massive debt. I could never understand why people prefer getting a nice car every 3 years vs saving for a house.

grogi

Fol20 wrote: »

I have to say i disagree with this sentiment. If you have the money you should always pay cash. With 27k in the bank. You might if your lucky earn 300 in interest over 3 years or if you "earn" money over 3 years for the average joe. I very much doubt it will be more than the interest you pay.

It is indefinitely easier to spent cash that to get it. If it costs you nothing, it is better to keep the cash.

_Kaiser_

_Kaiser_ wrote: »

............

If you work in Dublin but rent, the chances are you already have or are on the verge of having to move further out which means more mileage.............

For everyone who moves out further surely someone moves in?

Fol20

Fol20 wrote: »

I have to say i disagree with this sentiment. If you have the money you should always pay cash. With 27k in the bank. You might if your lucky earn 300 in interest over 3 years or if you "earn" money over 3 years for the average joe. I very much doubt it will be more than the interest you pay.

Don't get me wrong. I like pcp plans and will more than likely go for one in the next 2 years. But it's more to do with my own funds rather that specifically choosing to go for it. People today have massive debt. I could never understand why people prefer getting a nice car every 3 years vs saving for a house.

And what if you need cash 6 months after spending it all on the car? Madness spending a load of savings when for a small interest rate or possibly 0% you can finance a car.

Saving money is also harder than paying finance as the saving is optional so saying you can resave the money is not so simple.

mloc123

Fol20 wrote: »

I have to say i disagree with this sentiment. If you have the money you should always pay cash. With 27k in the bank. You might if your lucky earn 300 in interest over 3 years or if you "earn" money over 3 years for the average joe. I very much doubt it will be more than the interest you pay.

Don't get me wrong. I like pcp plans and will more than likely go for one in the next 2 years. But it's more to do with my own funds rather that specifically choosing to go for it. People today have massive debt. I could never understand why people prefer getting a nice car every 3 years vs saving for a house.

The interest paid on a 0% PCP deal is.... Zero. If you finance 17k of that 27k... You repay 17k.

Manic Moran

It's all variable. I spend a little under 10% of my take-home on my new car payment. Then again, I also spend somewhere over 50% of my take-home on the mortgage (Welcome to San Francisco). In ordinary terms, 10-15% does not seem particularly unreasonable, depending on the value you place upon having a good, modern car.

PCP, after looking it up, seems very similar to leasing. A very popular option here in the US. Everyone wins. The car manufacturers actually get their biggest profit margins on leasing. Most folks pay less for their cars. There's a burgeoning used-car market of in-warranty cars for those who want to buy depreciated. Particularly if you're buying an emerging technology like hydrogen or electric, where after the three-year lease, the car you would have for the same money has moved on substantially in capability.

With car loans on average going up to 5/6 years, the question becomes how much you want a car more than 6 years old. My 12-year-old Audi makes brilliant financial sense on paper: It got paid off seven years ago, it's just running costs. Of course, those running costs are starting to dramatically increase. The air-con is a $10k repair bill. I spent a week pulling it apart to repair a window cable. The airbag light just went off, indicating an electrical fault in the airbag system. And, of course, it doesn't have convenience things like radar, rear-view cameras, pre-collision braking, and other modern safety equipment. It is now, however, a reserve/weekend car, it just can't keep running like it used to.

Take the cost of a car over the length of a loan. Say, my Passat. $33k or so, over 5 years, some $500/mo. Add in interest charges and whatnot, plus maintenance costs. $35k. Looking at my local VW dealer's website, a lease for a similarly priced car is $3k down, $155/mo, limit of 10,000 miles/year.

With my Passat, after 6 years, I'll have a car, which is mine, I paid $35k for, I drove as much as I wanted, and is well out of warranty, and has all the safety features and gadgets of a 6-year-old car. But I can keep it as long as I want.

With the lease, it's two cars over two three-year leases $3k+(155x36)+($2k+(155x36))=$16,160 total. For this, I end up with a car which is never more than three years old, never out of warranty, has modern features, has all maintenance paid for, and likely never even needs to get as much as the brakes or tyres changed. The catch, I can't run it more than 10,000 miles a year, and at the end of it, I have nothing. I must spend money in order to have a car. Some folks drive that little. (Leases vary in mileage restrictions, the website was advertising (obviously) the cheaper, lower-mileage one). On the other hand, I have about $20k in my pocket I never spent 6 years previously. The simple description is that during a lease, you're paying for the depreciation of the car, not much else.

If you are looking for a weekend car for family outings, or if you have a short commute, leasing makes a whole hell of a lot of sense around here. I'm not saying it's a panacea, but after purchasing both new, recently used, and heavily used for my various vehicles, the more I look into it, the more I think I'll be leasing the next vehicle.

wonski

10k bill to fix an air-con???

I hope it was a typo

carzony

I'm young but have always gone the 'bangernomics' route when buying cars. I usually pick up a car for under say 1200 and get over a year out of them which is fine by me.

I'm currently driving a 2004 focus that I picked up for 400 euro. It's nct'd, tax and in great nick. I see lads in my job spending thousands on cars that they just don't have.

One guy recently spent 10 grand on a lexus. Crazy considering it's a just above minimum wage job :O

Manic Moran

wonski wrote: »

10k bill to fix an air-con???

I hope it was a typo

Nope.

Turns out the compressor is driven by a mechanical shaft, which diasppears into the engine block somewhere. When the compressor seized, the shaft stripped the gears in the engine. To repair it, the engine has to get pulled out.

If that's not bad enough, since the engine's a V8 stuffed into an A4 body, with no room at all, pulling out the engine is no simple thing in itself. Hence the cost.

Fortunately, it's a convertible, so on warm days, I just lower the roof.

bmwguy

My philosophy is to let them depreciate and then pick them up for cash at about 10% of purchase price as a 10 year old car. Bought one yesterday it's an 06 5 series for less than 10% of new price, it's pretty immaculate too.

Moved from an 04 e39 5 series which I bought for 2.5k back in 2013 which I might get a grand back for now.

Of course I have a higher motor tax bill and fuel bill than others buying new but I'm happy enough with that. Plus no main dealer warranty for peace of mind.

Others couldn't stomach a 1000 a year motor tax bill but I couldn't stomach owing a 5 figure bill to a financial institution on a rapidly depreciating asset.

I just get nice, well specced cars that were once very expensive. Others just want to get from A to B and don't want any hassle.

I wouldn't judge anyone on their choices. Either way, motoring is expensive.