Christ alive, people can be fucking stupid sometime. Especially when it comes to the golden symbol of power, the car you drive.
Oi! You! Me? Yeah you. Sit down. And listen to me while I preach. Ummm, ok
So you need a new car do you?
Why do you need a brand new car? Because my family needs protecting. Selfish. Because I’m a car person. You’re not though, are you? Because I drive to work 5 days a week and deserve to do this in comfort. Bugger off. I need the 300 brake horse power. When was the last time you went to a track day? It does 0-60 in 7 seconds. Bravo, how often do you do that during your rush hour commute? I didn’t get a degree so I could cycle or get the bus like a pauper. You got a degree to buy a car?
Brand new cars, especially the so-called desirable ones, are ludicrously expensive.
They have these things called PCP contracts and they are ace
The thing is Finance Zombie, you pillock, you can get a brand new car on a PCP contract for a fraction of the price as a down payment. Then pay a reasonable monthly payment. And to top this superb deal off, at the end off it I can trade the car in for a brand new one. Providing I haven’t gone over the annual mileage, or crashed it…And start the whole thing over. I get a new car every few years while you drive round in your 15 year old Seat Ibiza with a wing mirror hanging off and crusty monkey poo on the roof from Longleat. Whose the winner there.
You make a superbly misguided point there, my friend. I suspect that you are a Level 0 finance zombie.
The thing is, it is easy to get blown away by the hype of it all. A brand spanking new car every few years and a constant monthly payment. That’s it. But how much is this really going to cost you?
I’ve just had a payrise and I could get a BMW 3 Series, just like that. I can afford the monthly payments.
Ok, let’s have a look at that as an example.
Going to finance4cars.co.uk, you can bring up a quote like this in a few swift mouse clicks;
This would get you a brand spanking new;
|Make : BMW|
|Model : 3 SERIES GRAN TURISMO HATCHBACK|
|Derivative : 320i M Sport 5dr [Professional Media]|
Or, if you like pictures;
I like BMW 3 Series, they have big wheels. A real car guy, huh?
Let’s assume you have only have two choices.
One. Take the car on a PCP contract and renew it every 4 years, for the next 32 years, that’s 8 brand new cars. Then buy the last car. I like the sound of that. A new car every few years, people would think I am real successful then.
Or two. Buy a car new second hand car for the deposit price every 4 years and save the rest. So you are still getting a ‘new’ car every four years. Hmmmm, I’m not so sure that Barry down the street would be impressed….
With the deposit at £3,305 it could be something like…
With £305 to cover you for MOT’s and services for the next 4 years, your laughing. Besides, it says that it is whiplash optimised.
Yeah the BMW is quicker, and has bigger wheels and alloys and blah shitting blah.
At the end of the first scenario you’d end up with no cash savings and a car worth £11k if the final payment is to be believed.
At the end of the second…. well let’s start at the beginning with some assumptions;
-You use the initial deposit to buy a second hand car. And every 4 years you’d replace your car with another 2nd hand car for the same amount. To be prudent we’ll even assume you’ve run the other one into the ground.
– You invest all of the £381.65 monthly payment into a stocks and shares ISA
– You earn a real 5% return on this (after inflation)
– We’ll assume that the monthly repayment remains the same each time the contract is rolled on every 4 years, i.e. there is no inflation (seems fair as we are taking the investment return after inflation)
– We also invest the final payment, £11,273, right at the end of 32 years.
– I won’t take into account difference in fuel efficiency, MOT’s etc between the two cars.
So….. at the end of 32 years you would have a staggering £310k!
That seems like a lot of money for a few cars…
See, I even made a graph;
|Compounded monthly car rental payments over 32 years|
You can see the drop every 4 years for the purchase of another car and the jump at the end of the final payment you would pay on a PCP contract.
This is really another lesson in the power of investing constantly over time and the incredible power that is compounding. As Chuck Norris once famously said – “They only thing that Chuck Norris is scared of is the power of compounding. It will literally compound your face off.”.
It is a sad fact that a lot of people will judge you by the car you drive, they will make assumptions about how successful you are in your career, how much money you are earning etc. And once you are in the loop of caring what people on ShiteBook think about you, as a result of what car you drive, you are in a dangerous loop. If you downgrade from your Beamer to 10 year old ‘banger’, people will assume that this is through money troubles (rather than recently becoming a PF badass and looking to retire early). The trick to it all is to truly not care what people on the periphery of your life think.
No one is saying that taking out a car on finance is morally wrong, stupid maybe. Or even that having a nice car is somehow a bad thing. But at least make these decisions on your own terms, and not because Barry down the road is judging your car.
If you can commit that much a month, to what at the end of the day is just a car, then you could alternatively save that amount. It’s just a mindset. Can you really afford to miss out on the £310k boost to your retirement? Would you hand over £310k right now to drive a new BMW every 4 years for the next 32 years. I’m guessing not.
If so, great. Hoon it about in that BMW, son. But at least make this decision with the knowledge of the other uses that cash could have. It could be working real hard for you!
And the example above assumes we are driving a car in the meantime, you could save a wedge more by cutting out cars altogether!
Good god, you really did preach. Alright then, what car would you choose, almighty Z.
Thought you would never ask. I would get this one;
Because it is an amazing colour, they are amazingly ugly cars, seem to last forever and are huge enough to act as a van if needed. And the advert says that it drives spot on.
Or better yet, sack off the car and get a scooter or cycle. It’s cheaper and if you are commuting, much quicker.
Spend less, save more & Escape the Horde