I am always shocked when I notice how much new cars cost these days. The average cost of a new car in the UK is more than £28,000! Even a decent used car costs an average of around £8,500. I wonder how many people are buying a car on finance, paying even more in interest? The idea of being £28,000 in debt in order to drive absolutely terrifies me.
Buying a car on finance
I don’t know how anyone can actually afford a new car, but I suppose someone needs to or there would be no second hand ones for those of us who live on smaller budgets. However, I would be reluctant to purchase new even if I had £28k lying around because cars depreciate in value so quickly. According to the Money Advisory Service, the ‘drop in value varies between makes and models, but typically is between 15-35% in the first year and up to 50% or more over three years’. So you start to wave goodbye to a lot of money as you drive your shiny new car off the forecourt.
I bought my 5 year old Zafira for £3500 in 2008 and she finally died on me last June. I think this was pretty good going. However, I replaced her with an even cheaper car – Mr S picked up a little Toyota Yaris for £500 from a friend. An old but reliable car – not glamorous but she gets me to and from work and is cheaper to run than the Zafira!
A car as a status symbol?
I would struggle without a car but really don’t care a jot about having a vehicle as a status symbol. If I won the lottery tomorrow my natural frugal instincts would in all likelihood still insist I buy a decent second hand car rather than wasting money on a brand new one. I do love a classic or vintage car, though, and I could argue that would be an investment! A car of some kind is an essential for me but an old banger will do nicely until that lottery win arrives. I would rather put my money towards my mortgage or in savings! How about you?