Can you afford your car?

[goron59]

I've often thought that if you can't buy something with cash (house excepted) then you can't afford it, so always stayed well clear of HP, credit cards where you pay interest, PCP etc.

Now it seems that PCP is rather unregulated so a good chunk of people will be "buying" cars without being able to pay the bills, and so regulation may be introduced.

Makes sense.

https://www.autocar.co.uk/car-news/new-cars/bank-england-looks-regulate-pcp-car-finance-deals

---

"PCPs are popular because people can afford it more than hire purchase," it said. "For many years, under UK/EU law, every credit deal has had to have affordability checks; they're mandatory. Basic logic is if any lender wants to lend, it only makes commercial sense if the lender gets its money back."

If the measures are introduced, a similar set of means and affordability tests would be implemented and the range of cars available to those on lower incomes would therefore be more limited.

---

[VanB]

I wonder what % of forum members would not drive their cars if they hadn't been able to do a PCP type of deal to "purchase" it.

PCP offers a valid method of getting into a car (expensive or otherwise) so long as you can afford the payments so shouldn't impact anyone on here. However, I do think there is a section of the motoring public who don't understand what they are getting themselves into or that there will likely be little or no equity in the car at the end of the deal. People are also paying interest on the balloon throughout which is a relatively expensive way to borrow.

Edited for clarity.

VanB2017-05-02 15:36:43

[Guy]

I concur! (with the OP!)

However, PCPs do seem quite a good deal for those that can afford them (as long as the APR and GFV are OK), and especially so for those that don't need them (because they have cash). My father has spent his whole life avoiding the likes of HP, PCP etc, but has purchased his last couple of Skodas on PCP because the overall package was too good to ignore, with discounts, free servicing, free petrol etc. He also didn't have to worry about the plummeting value for his last diesel (he has now made the switch back to petrol!).

Ironically, those idiots who have taken out PCPs without being able to afford the repayments will probably be able to claim a mis-selling scandal and have their loans written off!

Guy2017-05-02 13:48:04

[Macananon]

Depends upon the car.

In the past, I have lost more money on a car by buying it, than I would have leasing or finacing some other way with a guaranteed outlay.

Also by not buyng the car outright, leaves you with additional capital to invest for a return

[happy days]

I bought three of our last Golfs on PCPs. The final payment was exactly what the car was worth and there was nothing left to use as a deposit to continue on. But at least the monthlies were low.

[JohnP]

3 years in any car is enough for me, and I certainly don't want to own it after that, nor do I want the aggro of selling it, so fixed monthly payments and being able to simply walk away at the end is a very attractive proposition.

I can then use my cash for reinvestment in my business, where I get a much better return..

[Deleted User 611]

Todays Times https://www.thetimes.co.uk/edition/news/fears-for-car-market-amid-loan-mis-selling-6dzrmkw68

Britain's £40 billion car finance market could be heading towards a mis-selling scandal because of concerns about the reliance on debt to buy vehicles.

Nearly 90 per cent of new cars are sold using finance deals, most of which mean the owner in effect leases a vehicle for three or four years rather than buys it outright.

These so-called personal contract plans (PCPs) allow people to secure cars for monthly payments, helping to cause a motoring boom. Experts fear, however, that many customers are being sold loans without having the terms properly explained to them.

Analysts suggest a financial downturn could result in thousands of drivers unable to keep up payments, leaving dealers with a glut of second-hand cars they would struggle to sell.

The Times can reveal that The Car Finance Company, a provider of finance to those with poor credit histories, appears to be in financial trouble. Six directors of the "sub-prime" lender have quit since the beginning of March and its accounts are listed by Companies House as overdue.

[goron59]

All good responses. So it remains to be seen if PCPs will continue to be a good vehicle (no pun intended) for 'owning' cars if the regulators take a look.

After the subprime event, huge swathes of the UK population couldn't afford a mortgage any more. Still can't.

[Kasfranks99]

I am a simple kind of guy. If I don't have the money I don't buy it.
Finance / PCP is great but it's all down to the individuals to be sensible and responsible.
We have seen this with mortgages a few years ago.
The worst thing is you are financing something that is going down in value.

Never try and keep up with the Jones's as you will probably find out that they actually own nothing and it's all on finance and credit cards.
But it looks like they are millionaires.....

Saying all this life is too short and you do have to enjoy yourself a little

Kasfranks992017-05-02 16:59:59

[Col Lamb]

A great question to ask.

Whilst it is not relevent to me as I have bought both of my Porsches with cash had I been 10 years younger and still in business for myself then the Macan would have been bought on such a scheme and offset against the business to minimise the cash given to those bloodsucking vampires that are the Government (strickly a non political comment as there is no difference between any of the parties as far as I am concerned).