A timely read

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I have just been reading about car finance deals soaring to an all time record high, which ties in nicely with my previous post about consumerism. My thoughts on consuming less is very timely indeed. The problem I see with the car finance deal, is that you are essentially thinking it is the best deal out there, but how much does a 3 year warranty, 1 year insurance and no more than 10,000 miles per year really cost? Surely financing a car is more expensive than paying for a car outright with cash?

A second hand car is not the end of the world. It’s just not what the Jone’s are driving. Who cares? No body, but you. I have had a car on finance and it is fair to say; I won’t again. If I’d just been able to fast forwarded to where I am now. Know what I know now, I never would have done so.

Take your current car payments, mine some 4 and a bit years ago, were £264 per month. Now save that for 6-10months. That’s £1584–£2640 in cash that is saved. “What am I meant to drive in the mean time?” Buy something cheaper. “How, I have no money?” This is the vicious circle that (I know) “pushes” you into taking out finance. So “find” £500 to get yourself started. There are numerous vehicles out there for around £500 and if you rock up with £400 cash in your hands, you could probably walk away with the £500 car and £100 in change. A quick search online gave me 2,288 cars under £500 – they won’t all be perfect, but there’ll be one for you. One located:

£500 Volkswagen Golf 1.6 SE 5d 105 BHP TRADE CLEARANCE – GREAT VALUE

If you don’t ask, you don’t get.

Buy the car and drive it until it goes pop. Even use the £100 towards a good servicing, to lengthen its service to you. It’s a car! Not a person. It is meant to be used and used until it is no longer usuable. We, as consumers have a responsibility to slow down in our mindless consumption – the earth is only so big and can only disppose of so much. Where will the “unwanted” stuff eventually go?

That car, based on the £264 saved over two months, gives you £528. Now imagine that the car lasts you 12 months. That there would be £264 saved, over the coming 10months giving you potentially £2640. Even if you could save only half of that, it’s £1320. Although the bracket is slightly higher; there are 23,861 cars available at £1,500 or less! So in theory, in a year you could have purchased another new (second hand) car. Keep repeating this method (use the car until it goes pop) and before you know it – you would have a brand new car, but with no finance. Obviously the newer the car that you keep purchasing the longer it is likely to last. Don’t forget though, brand new cars go down in value before you have driven off.

This is similar to what Dave Ramsey talks about over and over again. Get rid of your car payment. Live on less than you earn. It works. It is as simple as that.

 

The new registration plate: it’s not something to be jealous of

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Every March and September we play the number plate game. It helps with long journeys.

Rules are simple:
The first one to spot a new plate gets:
1 point for car
10 points for an emergency vehicle
5 points for a motorbike

Flip this game on its head though. Every new car – 0 to 4 years old – you see, don’t look at it with jealousy. Immediately think what are your repayments on that! The truth is probably a crazy amount. No it’s fine they are tiny – the lump sum at the end isn’t. Plus what’s tiny; £200 per month? That’s £2000 in 10 months. Just save your cash and get a cheap car. Cars are depreciating rapidly in value every month, week, day and minute you drive them.

Imagine no car payment. The only winners of car payments are the folk selling them. Go buy with cash and everyone’s a winner.

The likelihood is the person driving the car does not earn the £28,973 – UK average new car price 2012. The UK average wage (in 2014) was £27,271

How do they own it? How do they afford their mortgage/rent? Food? Fuel? Insurances? All their needed outgoings? Not to mention the tax and national insurance deductions? Plus the car cost?

Debt. Simple. Credit. Loans. How someone selling the car can’t see the maths not adding up I don’t know – wait a minute: commission.

If that new car breaks down – great it’s under warranty – but the amount of value lost since driving home that first day. That is a seriously expensive warranty. Think about it. Drive an old car and save your monthly repayment instead. Don’t be jealous of the a colleague driving that shiny new car. It’s not actually theirs – well the laws of averages means it’s unlikely.

It’s not something to be jealous of.