Car Finance

Blackrod · Post by **Blackrod** » Fri May 01, 2020 10:09 am

A guy in the news moaning that he is unable to get a payment holiday on a car financed Audi A6 that costs £635 per month. It’s hard to feel sympathetic towards him. His job was never guaranteed so why over commit on a car he can’t otherwise afford. I can imagine a lot of young drivers of brand new cars will also be struggling with their finance commitments. It may change how people buy in future and affect the industry.

tim_noone · Post by **tim_noone** » Fri May 01, 2020 10:16 am

Dont do finance.

Devils_Advocate · Post by **Devils_Advocate** » Fri May 01, 2020 10:24 am

Not just young drivers but lots of families who buy their cars on finance could be hit by this

https://www.bbc.co.uk/news/health-52462333

Funkydrummer · Post by **Funkydrummer** » Fri May 01, 2020 10:56 am

The things is, if people do default on payments and the car is repossessed, there is
going to be one hell of a stock of 2nd hand cars going nowhere as not enough people
will be able to afford to buy them.

Catch 22.

beddie · Post by **beddie** » Fri May 01, 2020 11:03 am

His finance company needs a bit of pressure from someone with a bit of clout. Hopefully that might make them have re think it.

mealdeal · Post by **mealdeal** » Fri May 01, 2020 11:10 am

If he's chucking away over £7500 a year on a car he can't afford after a month, I'm going to struggle to cry him a river.

Funkydrummer · Post by **Funkydrummer** » Fri May 01, 2020 11:17 am

mealdeal wrote: ↑
Fri May 01, 2020 11:10 am
If he's chucking away over £7500 a year on a car he can't afford after a month, I'm going to struggle to cry him a river.

That's how a lot of people seem to live at the moment I'm afraid. Credit is king and plentiful - live for today, sod tomorrow.

Well, I'm sorry but "tomorrow" Is here now for a lot of people and it will be very interesting to see how it's all handled.

TVC15 · Post by **TVC15** » Fri May 01, 2020 11:19 am

It’s an industry that needs far greater regulation.
I change my car every couple of years and get offered finance every single time - they offer you pretty significant discounts on the car if you take the finance (£1500 to £2000) and don’t offer you this if you want to pay cash. A couple of time’s I have taken it and then paid off the whole debt without any charges or interest in the cooling off period. Other than that I never take the finance.

I have never seen any affordability checks undertaken by the car dealers as part of the process. As per OP some the monthly payments can be bigger than peoples mortgage payments. If you take any other loan or mortgage from a bank affordability checks used to be done as part of the credit risk process - now they are a regulatory requirement and there are guidelines as to the extent of outgoings you need to include as part of this.
Not even sure the car dealers do a credit history check for CCJs, bankruptcy etc or if they do whether they’d take any notice of them.

Damo · Post by **Damo** » Fri May 01, 2020 12:49 pm

Car finance was mooted as the next, large financial meltdown in this country not so long ago.
Lots of people driving around in cars they cant really afford

fanzone · Post by **fanzone** » Fri May 01, 2020 1:00 pm

Imagine being able to afford a new car without needing to use the finance option

ksrclaret · Post by **ksrclaret** » Fri May 01, 2020 1:00 pm

I often wonder how people afford such expensive cars, but then I remember that finance is playing a huge part in that.

I’ve only ever bought my cars outright. It limits the choice and I’ll never ever own a flash motor, but there’s something to be said for me about actually owning the vehicle.

That said though, I think a solution will be found pretty quickly because as has already been noted there’ll very quickly be a pile up of idle cars nobody can afford.

Stanbill05 · Post by **Stanbill05** » Fri May 01, 2020 1:13 pm

Bonkers. Absolutely bonkers. Who are these people? Buy a crap car you can afford, throw it away when it gets expensive/dies. People buying status symbols are bonkers. Get a life instead and keep your money - even if you can "afford it". Top tip: If you need finance - you can't afford it!

TVC15 · Post by **TVC15** » Fri May 01, 2020 1:27 pm

Like probably many of us on here my first car cost a grand. A second hand mini - and working in Manchester I had to commute every day....when it eventually broke down it was a dark winter evening in ****-ing down rain on the M66 near the Bury junction....they had to shut down a whole lane and it caused a big traffic jam. Twas a lovely evening !

Everything has changed though in the last 10 or 15 years. Now many 18 year olds first car is a brand new one. They don’t need any deposit to find and you can get a 12 grand brand new car like a Corsa or Fiesta for £150 per month. It’s not your car and never will be but these kids are paying £50 a month for their phones.
The insurance is a grand a year on the car often paid for by the Bank of Mum and Dad.
Would I rather my daughter break down on the motorway in a clapped out mini ? Probably not.
Things have just changed - these kids have jobs. Many of them think there is no point saving up for a house as they can never afford that so spend a good amount on cars and phones.
Doesn’t change the fact that what car dealers is doing is essentially wrong. Offering you the car cheaper if you take finance because we know the dealer and salesperson receive a financial incentive for that and not checking they can afford to repay it is wrong on both levels. I ain’t got a clue why the FCA have never regulated it properly. These “business managers” from the dealership who come over for a chat when you are buying a car and try and sell you finance plus all those ridiculous add on products are no more qualified in financial products than your f’in window cleaner.

Billy Balfour · Post by **Billy Balfour** » Fri May 01, 2020 1:29 pm

Funkydrummer wrote: ↑
Fri May 01, 2020 11:17 am
That's how a lot of people seem to live at the moment I'm afraid. Credit is king and plentiful - live for today, sod tomorrow.

It's like the financial crisis of 2007–08 never happened. A couple of years later it was 'fill yer boots' time again for the banks and lenders. Govts and banks relaxed rules that were brought in to stop a subprime mortgage crisis, or similar, from happening again.

£38bn to finance cars? I know families who have a couple of cars on personal contract purchase (PCP) that are probably worth more than the property they live in. I also bet the cars cost more per-month than their mortgage. Oh look at me in my new top of the range car that's worth more than my house. Just look how shiny new it is. I might not have a pot to **** in, but this doesn't matter because it makes me look more affluent and important. Also, it's so much better than my neighbour's car.

claret2018 · Post by **claret2018** » Fri May 01, 2020 1:33 pm

“If you need finance you can’t afford it” is a very outdated perspective nowadays. Yes, lots of people spend far more than they can sensibly afford on flash cars, but there are some real bargains to be had on lease deals if you look hard enough, and don’t do a huge amount of miles.

I had a Mazda 6 a few years back which cost me £169 per month (no deposit) and was a great car. If you have a lump sum, there are far better ways of using it than buying a car outright.

As it stands I’d never buy a car again.

Billy Balfour · Post by **Billy Balfour** » Fri May 01, 2020 1:38 pm

People have been saying for ages that this model isn't sustainable in the long run and all it needed was a bit of a downturn for the balloon to go pop. And now we have the double-whammy of a global recession or worse. Tougher rules will be brought in after this.

TVC15 · Post by **TVC15** » Fri May 01, 2020 1:44 pm

I see what you did there Billy !!
(Balloon finance)

Zlatan · Post by **Zlatan** » Fri May 01, 2020 1:57 pm

fanzone wrote: ↑
Fri May 01, 2020 1:00 pm
Imagine being able to afford a new car without needing to use the finance option

It’s great, I recommend it

Papabendi · Post by **Papabendi** » Fri May 01, 2020 2:36 pm

I suppose having a mortgage means you can’t afford a house. Strange one.

Devils_Advocate · Post by **Devils_Advocate** » Fri May 01, 2020 3:05 pm

Or having a credit agreement for a season ticket

dsr · Post by **dsr** » Fri May 01, 2020 3:17 pm

Papabendi wrote: ↑
Fri May 01, 2020 2:36 pm
I suppose having a mortgage means you can’t afford a house. Strange one.

No, that's a bogus argument. Your house doesn't lose value as a rule so if it goes wrong, you can sell the house and repay the balance of the loan with a bit to spare.

Billy Balfour · Post by **Billy Balfour** » Fri May 01, 2020 3:22 pm

Papabendi wrote: ↑
Fri May 01, 2020 2:36 pm
I suppose having a mortgage means you can’t afford a house. Strange one.

They don't really compare. The average mortgage deposit in the UK is around £33,000 on an asset that ordinarily doesn't depreciate.

aggi · Post by **aggi** » Fri May 01, 2020 3:28 pm

If it's the same article I read it was being funded (at least in part) through his work company car scheme. Obviously with being furloughed that scheme isn't currently in place for him but I imagine he may not have anticipated this all happening.

Burnley1989 · Post by **Burnley1989** » Fri May 01, 2020 3:34 pm

I finance my Mrs VW Polo, think I pay £205 a month.

She changes her car every few years and it works for me as I wouldn’t want to use any of my savings to buy a VW Polo, I’d rather save it for a rainy day. My own cars a company car, which again I imagine is financed

Darthlaw · Post by **Darthlaw** » Fri May 01, 2020 3:58 pm

Options)

1. Buy newer car on finance. Little to no initial outlay, monthly payments but protection if the car is a dud / circumstances change (hand it back to the finance company. Warranty if anything goes wrong.

2. Buy newer car outright. No monthly outlay but your money is depreciating probably by the same amount as a monthly payment. Warranty if anything goes wrong.

3. Buy an older car. Not much depreciation or monthly costs but more likely to go wrong. If it does you finish up paying to get it put right or throw the car (and your money) away.

One of these answers is correct. Answers on a postcard.

dsr · Post by **dsr** » Fri May 01, 2020 4:12 pm

I take it that answer (3), buy cars about 4-5 years old and run them until they are likely to break down, at a capital cost of about £750 per year on average, is the wrong answer?

Whitgord · Post by **Whitgord** » Fri May 01, 2020 4:30 pm

I think the bottom line is that there is no cheap way to run a car.

Burnley1989 · Post by **Burnley1989** » Fri May 01, 2020 4:34 pm

You do what’s right for you, everybody has different ideas.

I always know that should I lose my job I’ve enough money put away to pay my mortgage and car for a decent enough period of time before I find another job so there’s little risk in finance for me. Obviously when you’ve got 18 year old lads driving around in 30k+ Mercedes and BMWs it’s very risky and I’d imagine mum and dad finance them.

Darthlaw · Post by **Darthlaw** » Fri May 01, 2020 4:39 pm

dsr wrote: ↑
Fri May 01, 2020 4:12 pm
I take it that answer (3), buy cars about 4-5 years old and run them until they are likely to break down, at a capital cost of about £750 per year on average, is the wrong answer?

There isn't really a right answer. Is there a 4-5 year old car you can purchase for an initial £750?

Buddy of mine used to do the 4-5 year old thing with Volvo's, as he loved them. The amount of times he was pumping over £2000 per year to keep them running, though, which always seemed mental to me.

clarethomer · Post by **clarethomer** » Fri May 01, 2020 5:06 pm

I think the wider issue which has been touched on isnt the finance as such but the fact that most people stretch themselves to the point where it takes one thing to happen and the weak foundations of their financial lives show how easy things start to crumble around them.

You should look to have 6 months of expenses saved up. That is good financial planning.

The car finance industry is still too unregulated by the FCA - I have taken car finance out and they don't explain things fully, they pay lip service by talking about the FCA but its not really anywhere near the point where it should be. An assessment of affordability should be done - which I seem to recall was 2 questions

"can you afford this?" and
"are you aware of any changes to your circumstances which may impact your ability to afford this?"

They have also got creative with their finance deals. PCP is an example of this and was actually talked about quite recently on the moneybox podcast.

Before PCP, your £300 a month would have got you a £15k car over 5 years. Your debt is £15k plus interest and after 5 years, you have a car to do with as you like.

Post PCP, your £300 pays for £15k of depreciation on a car which allows you to get £30k+interest of debt. All of which is your responsibility to repay still if anything happens that doesn't allow you to complete the contract within the terms agreed.

Equally people assume that you can voluntarily terminate at the half way point. So for a standard car loan this will be really easy - it should be 50% into your loan agreement. On PCP, its based on the whole value of the credit agreement (not just the depreciation) so this typically won't occur until near the end of the term of your payments. So 3.5 years in on a 4 year term.

The one thing that I hope comes out of this whole thing is people who are now up the brown creek with no wooden instrument start to understand that it doesn't matter how secure your position is one day, things unforeseen can happen so it pays to ensure you get your finances in order to weather any future storms that come along.

dsr · Post by **dsr** » Fri May 01, 2020 5:08 pm

Darthlaw wrote: ↑
Fri May 01, 2020 4:39 pm
There isn't really a right answer. Is there a 4-5 year old car you can purchase for an initial £750?

Buddy of mine used to do the 4-5 year old thing with Volvo's, as he loved them. The amount of times he was pumping over £2000 per year to keep them running, though, which always seemed mental to me.

That's where the average comes in.

What i did was save up until I could afford a car, which was when I was 24. Then paid £3,550 for it. Strangely enough, the second hand cost of decent cars hasn't gone up all that much. My current one is a Corsa, 5 years old when I bought it, £4,300 including part-ex for the 15 year old Astra.

All told I have had 5 cars at toal cost of £22k or thereabouts, in 30 years. I've never had a major breakdown or a bill of £1k. I have had to call the AA out about 3 times on the road and and about the same for homestart - though two of those were replacing flat tyres.

Claretnick · Post by **Claretnick** » Fri May 01, 2020 7:33 pm

Reading some of these replies and comments on other threads makes me think how lucky some of you folk are. Secure jobs for life for some of you, able to save for cheap cars and housing etc. Unfortunately life does not fall into convenient little boxes for some folk. When my 4 year old son died suddenly 30+ years ago every day since has been a battle just to start the day, and just sometimes plans go awry and you make a bad decision that has further consequences. If any good comes out of this current crisis is that the human race slows down and we all stop rushing around surrounding ourselves with material possessions that are really worthless and we appreciate the important things; family the planet and our own well being.

Papabendi · Post by **Papabendi** » Fri May 01, 2020 7:43 pm

dsr wrote: ↑
Fri May 01, 2020 3:17 pm
No, that's a bogus argument. Your house doesn't lose value as a rule so if it goes wrong, you can sell the house and repay the balance of the loan with a bit to spare.

Not bogus at all. You are skating over the detail. Plenty of homes at various points end up in negative equity or for various reasons are difficult to sell in a decent timeframe, so come with their own problems. Or they go wrong badly from a maintenance perspective and need capital to be habitable. A mortgage / home ownership in this sense is more analagous to outright ownership of a car.

Actually, the central posit was if you can't buy it outright then don't buy it. That is a totally outdated approach in a world where most things are moving to a rental / virtual model and not outright ownership. You simply have to get the finance to work for you personally.

I have no interest in sinking a load of money into owning a car outright.... But I own a great car that I love driving and can easily afford the upkeep for on a monthly basis. And I know if anything goes wrong it's not my problem but the car dealership's. No brainer. Oh and if I fancy a change in a few years that's OK too,

Blackrod · Post by **Blackrod** » Fri May 01, 2020 7:52 pm

I think the point was why pay £635 per month for a car that that you clearly can’t afford and can’t afford the payment after one month when your job isn’t there it as planned. Why not buy a cheaper car or with a cheaper finance payment. Finance isn’t a bad thing per se and works for some. If you can get a perfectly good car for an amount that works for you on finance then great.

GodIsADeeJay81 · Post by **GodIsADeeJay81** » Fri May 01, 2020 8:20 pm

Car finance deals was predicted by many to be the next big bubble to burst, long before this pandemic appeared.

Way to many people trying to keep up with the Joneses so to speak.
I know a woman who has a brand new car and does barely 400 miles a month, but she doesn't see a problem paying out thousands a year for it.

Dyched · Post by **Dyched** » Fri May 01, 2020 8:58 pm

Can’t remember who said it (Pretty sure it was Jay Z). If you can’t afford to buy it twice, you can’t afford it. Serves me well.

Jamesy · Post by **Jamesy** » Fri May 01, 2020 8:59 pm

Blackrod wrote: ↑
Fri May 01, 2020 10:09 am
A guy in the news moaning that he is unable to get a payment holiday on a car financed Audi A6 that costs £635 per month. It’s hard to feel sympathetic towards him. His job was never guaranteed so why over commit on a car he can’t otherwise afford. I can imagine a lot of young drivers of brand new cars will also be struggling with their finance commitments. It may change how people buy in future and affect the industry.

I feel sympathetic towards him. He financed a car on the basis of his salary. Just like people get mortgages on houses in relation to their salary. I used to live in Piccadilly Road in Burnley, however once my earnings increased I bought a larger property. What is wrong with that?

Billy Balfour · Post by **Billy Balfour** » Fri May 01, 2020 9:06 pm

A house is a necessity whether you are renting or buying. £635 per month, or £7620 per year, on car finance is an extravagance.

Blackrod · Post by **Blackrod** » Fri May 01, 2020 9:10 pm

Jamesy wrote: ↑
Fri May 01, 2020 8:59 pm
I feel sympathetic towards him. He financed a car on the basis of his salary. Just like people get mortgages on houses in relation to their salary. I used to live in Piccadilly Road in Burnley, however once my earnings increased I bought a larger property. What is wrong with that?

A job isn’t guaranteed. This guy is moaning after one month that he can’t afford to pay it. If you can’t pay your mortgage or for a car after one month of no salary you really shouldn’t have or you should downscale.

Jamesy · Post by **Jamesy** » Fri May 01, 2020 9:49 pm

Blackrod wrote: ↑
Fri May 01, 2020 9:10 pm
A job isn’t guaranteed. This guy is moaning after one month that he can’t afford to pay it. If you can’t pay your mortgage or for a car after one month of no salary you really shouldn’t have or you should downscale.

Yes but that is the problem. People today live for today without any thought for the future and finance companies encourage this behaviour. Therefore I can sympathise with this guy as he has just followed the new norm.

Devils_Advocate · Post by **Devils_Advocate** » Fri May 01, 2020 9:59 pm

Dyched wrote: ↑
Fri May 01, 2020 8:58 pm
Can’t remember who said it (Pretty sure it was Jay Z). If you can’t afford to buy it twice, you can’t afford it. Serves me well.

How was Amsterdam?

Papabendi · Post by **Papabendi** » Fri May 01, 2020 10:54 pm

going by some of the comments on here, there must be a lot of people buying all the albums and tv and movies available on spotify/netflix twice over each month while i rent them both cost effectively, because if by some arbitrary measure you can't afford them twice you can't afford them (someone said it once so it could/must be true).

dsr · Post by **dsr** » Fri May 01, 2020 11:12 pm

Papabendi wrote: ↑
Fri May 01, 2020 10:54 pm
going by some of the comments on here, there must be a lot of people buying all the albums and tv and movies available on spotify/netflix twice over each month while i rent them both cost effectively, because if by some arbitrary measure you can't afford them twice you can't afford them (someone said it once so it could/must be true).

I think you've misunderstood. The suggestin was that you should be able to afford twice the price, not that you should actually buy them twice. Not that this thread has any relevance to one-off rentals of videos.

Rileybobs · Post by **Rileybobs** » Fri May 01, 2020 11:36 pm

Some real jealous people on here who seem to drive sh!tty cars because they’re too stuck in their ways to finance them and would rather do the old school thing in owning the car outright.

I finance my car. I can comfortably afford it, but like with most things if I lost my job I would struggle to do so for any period of time. In the same way I can’t afford to pay the mortgage on my house without a job, or my mobile phone bill, or my season ticket.

If financing a car isn’t for you that’s fine, but don’t assume that anyone who drives a better car than yours is doing it to be ‘flash’. Maybe some people enjoy driving a nice car and would rather pay a little more money to do so rather than buying a £2k banger and running it into the ground every few years. Horses for courses.

ksrclaret · Post by **ksrclaret** » Fri May 01, 2020 11:51 pm

Rileybobs wrote: ↑
Fri May 01, 2020 11:36 pm
Some real jealous people on here who seem to drive sh!tty cars because they’re too stuck in their ways to finance them and would rather do the old school thing in owning the car outright.

I finance my car. I can comfortably afford it, but like with most things if I lost my job I would struggle to do so for any period of time. In the same way I can’t afford to pay the mortgage on my house without a job, or my mobile phone bill, or my season ticket.

If financing a car isn’t for you that’s fine, but don’t assume that anyone who drives a better car than yours is doing it to be ‘flash’. Maybe some people enjoy driving a nice car and would rather pay a little more money to do so rather than buying a £2k banger and running it into the ground every few years. Horses for courses.

Just because a car is a few years old and costs less than newer models, doesn't mean it's sh1tty.

Rileybobs · Post by **Rileybobs** » Fri May 01, 2020 11:57 pm

ksrclaret wrote: ↑
Fri May 01, 2020 11:51 pm
Just because a car is a few years old and costs less than newer models, doesn't mean it's sh1tty.

I didn’t say it was. Nothing at all wrong with buying used cars. I’d argue that car that costs a couple of thousand pounds and lasts a few years before packing in is sh!tty though.

ksrclaret · Post by **ksrclaret** » Sat May 02, 2020 12:16 am

Rileybobs wrote: ↑
Fri May 01, 2020 11:57 pm
I didn’t say it was. Nothing at all wrong with buying used cars. I’d argue that car that costs a couple of thousand pounds and lasts a few years before packing in is sh!tty though.

Some are, probably due to unscrupulous sales practices though because a lot those 1-2k cars have probably been written off at some point, patched up and sold on. Some of the older cars you can get around 2.5-4k can be quite good actually though if you do your due diligence.

To be honest though, a few comments on this thread have made me rethink my aversion to car finance. Funny really because it turned into a bashing, myself included.

dsr · Post by **dsr** » Sat May 02, 2020 1:13 am

Rileybobs wrote: ↑
Fri May 01, 2020 11:57 pm
I didn’t say it was. Nothing at all wrong with buying used cars. I’d argue that car that costs a couple of thousand pounds and lasts a few years before packing in is [deleted] though.

My last car cost £4,000 and ran for 10 years (80,000 miles) without breaking down. It was just as fast as a Lamborghini Diabolo (unless the Lambo driver went over the speed limit) and it always got me to where I wanted to go. It was comfortable and cheap to maintain.

I could have spent perhaps £2,000 a year on a series of new cars over that period but I didn't want to. What would I have got with a new car? Prettier bodywork. (Mine was a bit pink, the red having faded.) I'd have got a CD player instead of a cassette recorder. Which i hardly listened to. I'd have perhaps got a fixed satnav instead of one I had to take out of the glove box. I don't want any of those things, and I could have afforded them.

I have no objection to people choosing to spend money on pretty things if they have the money. But if they spend the money on pretty things when they haven't got the money and things go wrong, that's their choice and as long as they are happy to live with it, so be it. But spending money just for the sake of it, when it brings you nothing better than what you have, is IMO pointless.

Billy Balfour · Post by **Billy Balfour** » Sat May 02, 2020 11:03 am

There's those who buy nearly new cars from the likes of Motorpoint, et al. Then there's those who buy a much older car, but buy well and get years out of it. There's those who prefer PCP etc. Each to their own.

This thread is about a guy who's paying £635 per month for an Audi A6, but now can't pay due to circumstances beyond his control. Now he hasn't said anything about his payment protection insurance not paying out for a pandemic? So maybe he didn't take any out? Which is rather folly, given that he doesn't have any fallback, even after a couple weeks.

I would have taken out PPI if I was paying over seven and half grand per annum for a car and didn't have any savings to service the debt. Or maybe have gone for a car that cost half the price per month. But like I said, each to their own.

Papabendi · Post by **Papabendi** » Sat May 02, 2020 11:11 am

dsr wrote: ↑
Fri May 01, 2020 11:12 pm
I think you've misunderstood. The suggestin was that you should be able to afford twice the price, not that you should actually buy them twice. Not that this thread has any relevance to one-off rentals of videos.

Nope, no misunderstanding. Just following through the logic and showing the folly. You're welcome.