Car financing is going to cause the next financial crash

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Nuffles
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#41
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#41
(Original post by Treeroy)
Because car financing is generally only ~3 years worth of money, even on expensive cars it's not going to amount to more than £10K or so. which in the grand scheme of things is not a massive amount of money. Unlike the housing crisis where houses that are worth 100s of thousands went kaput.

so the financers are in a very secure position.
From the article I linked in my previous post -

"Overall, the situation has been more than 10 years in the making, though the explosion in loans dates back to 2013 and the first signs of recovery from the 2008 crash. UK households borrowing last year to buy cars was up 12% on the year before. This year, the total borrowed is expected to exceed £40bn. Cash purchases are almost unknown, and a record 2.7m new cars were sold in Britain last year – the fifth year in a row of increasing sales. Of those, 1.3 million were diesels. The British are now buying more cars per head than any other large country in Europe."

£40 billion is hardly petty cash. If the auto industry falls on its ass then that's a fairly hefty chunk of our economy.
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Dysf(x)al
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#42
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#42
(Original post by IWMTom)
What's the problem if they can afford it? This type of financing is nothing new, don't overdramatise things.
Because a lot of them can't afford it. Some probably can if they make sacrifices, but for someone on a budget it's far smarter to buy used. They may be able to afford the initial payments, but only barely. One unexpected expense and the whole thing could collapse.

I'm skeptical of the "next financial crisis" claim, but I think it can be quite a big problem.
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IWMTom
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#43
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#43
(Original post by TheMindGarage)
Because a lot of them can't afford it. Some probably can if they make sacrifices, but for someone on a budget it's far smarter to buy used. They may be able to afford the initial payments, but only barely. One unexpected expense and the whole thing could collapse.

I'm skeptical of the "next financial crisis" claim, but I think it can be quite a big problem.
Credit and affordability checks aren't exactly easy to pass - if someone's managed to get finance, especially with a main dealer, they've proven they are capable of making repayments.

It's not a problem though - the finance companies account for nonpayment; they can just take the car back.
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Emma:-)
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#44
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(Original post by WoodyMKC)
The ignorance is making me laugh :lol: How do you think brand new cars even make it onto the market? Nobody buys a brand new car first-hand, it's a bad investment because it depreciates by a huge chunk as soon as you drive it. Someone leases the car, their contract is up, they hand it back in devalued and then someone buys it a few years old, for a significantly reduced price compared to when it was new.

If you buy a car, you're not just paying the cost of the car. You're also paying repairs and maintenance when things inevitably go wrong with it, and it all adds up. If you buy it brand new, while there is a reduced risk of faults, you've paid full whack and lost out.

If you get a good lease contract, with all insurance, maintenance, servicing and repairs included, you potentially save money all the while driving around in a brand new car, compared to buying used. For example, a while ago, I bought a 2000 reg Peugeot 206. I paid 700 for it. Another 1000 for insurance. Then if I had it in and out of the garage fixing the faults rather than driving it until it was no longer drivable... that would have been a few thousand pounds in total for the year that I owned it. If you're buying a newer car, you have to also think about depreciation i.e. not getting back what you paid for it.
Now I'm leasing a brand new Fiesta Titanium. I pay 200 a month, which includes EVERYTHING - insurance, servicing, repairs, breakdown, the lot - apart from petrol. Just over 2 grand a year, it's brand new so worry free, I'm not invested in the car if it gets written off and overall it likely works out cheaper than running an old grunter and certainly works out cheaper than buying a newer used car cause you're gonna lose a few grand in depreciation by the time you've owned it a few years and that's not even including the repairs and maintenance costs.I also get to hand it back in after my 3 year contract and get yet another brand new car.

So, really, it's not a poor financial option at all. There's a reason it's becoming more and more popular. It's pretty much a flat rate every month - if you don't make much money, the last thing you want is something to go wrong with it and you have to fork out a huge lump sum that you haven't got. If you've got a lease with maintenance package, you're safe in the knowledge that you won't have to come up with that lump sum - everything's covered in the monthly price. So you're saving yourself a lot of stress as well.

So yeah, as I said, ignorance. Not only cost effective as IWMTom said, but also reliability and peace of mind which makes it even more worth the money. I consider myself pretty clued up on financial matters and I make a good chunk of my money from knowing how finances and markets work, and I'm never going to actually buy a car again if I can help it. Leasing is the future and it not only isn't going to leave people broke, but it's good for the economy because more money is going straight to the dealership and is taxed.

EDIT: Noticed the title and thread content has been changed from "leasing" to "financing". My work here is done
Your ignorance is making me laugh.
I think you will find that a lot of people buy cars brand new.
I havent myself (i brought a car that was a year old). But you will find that a lot of people actually do.
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Mr Smurf
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#45
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Shhhh. We need this to keep happening so the UK used car market remains cheap due to the huge oversupply. :ninja:
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Unistudent77
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#46
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Woody has been posting a lot of sense here...

Firstly, Car deals do not account for much of a person's monthly expenditure. Mortgage/rent are often £500 plus with car loans typically £180-300 from customers I sell Income Protection to.

I forget his name but as an American Oil Billionaire said:

'If it appreciates, buy it. If it depreciates, lease it'.

I used to not like the idea of leasing but i've come round full circle.

I can get a bmw 5 series that's 3 year old 20,000 miles for £250 a month, £1500 deposit (that's before i've started negotiating and i'm certainly not taking the first price they give me as Woody has said) and that's with me allowed to do 15k miles a year.

2 year contract so i'd have paid 7.5k over the policy term.
To buy the car it would be 18/19k and 2 years later they're currently priced at (notice, not what the buyer necessarily pays) 8,500 ish.

So that's at least a 9/10k depreciation if I did 30,000 miles.

So i'm saving 2/3k, I don't have the hastle of trying to sell an asset that is worth ever less everyday I drive it and I can get a newer version in 2 years.

As long as you have a steady income then you're good to go. If self-employed then better to go for the loan and cash but you'll lose more money that way.

It's a no brainer.

(Also, never ever ever buy new unless your dad owns a car dealership or you're mega rich)
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sachinisgod
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#47
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#47



http://www.dailymail.co.uk/debate/ar...r-finance.html
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mr778
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#48
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#48
With the great economic reset and the their predictions for 2030 didn't the world economic forum say in the past "you'll own nothing and you'll still be happy"
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IWMTom
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#49
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(Original post by mr778)
With the great economic reset and the their predictions for 2030 didn't the world economic forum say in the past "you'll own nothing and you'll still be happy"
Talking of the past... THIS THREAD IS THREE YEARS OLD.
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Haraldje
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#50
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(Original post by IWMTom)
Talking of the past... THIS THREAD IS THREE YEARS OLD.
History repeats itself. Take some posts from some years ago and they will be totally up-to-date in the near future :cool:
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6lack
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#51
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I have to disagree slightly... they may not be able to afford it by buying it outright but they can afford to pay it monthly. This financing strategy is not new and doesn’t apply to just cars... most people don’t buy houses outright.
Last edited by 6lack; 1 week ago
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