4 ms·
In the UK, new cars typically get a 3- or 4-year finance deal, with an additional lump sum payable at the end if you want to keep the car. This arrangement is c
by gmac 7y ago
In the UK, new cars typically get a 3- or 4-year finance deal, with an additional lump sum payable at the end if you want to keep the car. This arrangement is clearly designed to encourage you to get a new car every 3 or 4 years.
I bought a car that I expect to keep at least 5 years (and paid a bit extra for the peace of mind of a 5-year warranty).
To finance this, I specifically sought out a 7-year bank loan. The value of the car at 5 years should exceed the balance of the loan at 5 years, at which point I will probably sell the car, pay off the loan (with some left over), and repeat the process. This works out as a kind of hire-purchase plus minor incidental savings scheme.
I'm an economist. The car was good value and I got a good loan rate. But according to the WSJ (and several comments in this thread) this means I can't afford my car. WTF?
- guidoism 7y agoI think by definition if you have to take a loan out to buy your car then you can't afford it. The only reason I would ever take a loan out on a car would be if it were at 0% interest and even then it would be such a small amount of gain as to not be worth the mental effort.
- tomrod 7y agoWe bought a van a few years back, and the total interest paid came out to $700 total. That was worth the credit build to us. And in our minds that was what we purchased: low interest for an asset we needed and one we earned many multiples in interest because we held a large portion of the principal.
- 0xffff2 7y ago0% is the wrong number. You should take the loan if the rate is less than your expected rate of return on parking the cash in an investment vehicle that matches your expected rate of return. That is certainly higher than 0%.
- theandrewbailey 7y ago> The value of the car at 5 years should exceed the balance of the loan at 5 years, at which point I will probably sell the car, pay off the loan (with some left over), and repeat the process. Why not pay off the loan and keep the car as long as you can?
- arpa 7y agoThere is no warranty and a car is always a money sink. New cars are also seldom built to last.