Buying a car on finance? How much debt would you get into for a nice car?

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.

buying a car on financeI 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?

18 thoughts on “Buying a car on finance? How much debt would you get into for a nice car?

  1. Like anything, overall cost has to be figured in. Cars to me are to get from A to B. Maintenance on older cars can run up costs. It is dumb going in debt for status though.

  2. Jon and I have owned only one new car in the 14 years we have been together. We buy second hand and Jon is luckily very good at doing them up; I think the most we have paid for a SH one is £3000. Our current cars, we have two cost us very little. Mine is a Dihatsu Sirion for which we paid £450. It was owned by a registered disabled man and had been very well looked after indeed. We paid the tax outright, the insurance is less than £15 a month, it takes £35 to fill it and does 50 miles to the gallon. I love it as it is really nippy and I have my independence and can get the boys where they need to be instead of relying on Jon. Jon has a Renault Scenic for which we paid £300. The people who sold it us had been told by the Renalut garage that the issues it had would cost over £800. Jon took a look at it and it cost him a few hours labour and probably about £50, maybe less, to put those problems right and it sailed through its MOT! New is not always best and that is for sure.

  3. Luckily both hubby and myself have no interest in new cars. Always bought used cars. The only car we ever had on finance taught us a hard lesson – it was a used people carrier and the hassle/charges we incurred just gives me the shudders even now many years later. Our current one is 18 years old this year with no rust and is reliable (it’s German made).

  4. Couldn’t agree more. Like you, a car is a means of getting from A to B (hopefully in safety and reasonable comfort). I worked at a posh garage for 12 years as sales administrator. The cars themselves didn’t interest me greatly – what fascinated me were some of the people in the trade. In earlier generations they would have been horse dealers!

  5. None. I like a nice second hand car but would not go into debt for it. I’ve had enough of old bangers. I want something half decent which hopefully will not break down, and within my budget after saving up for it.

  6. After frequently spending a lot trying to repair an older car I bought I traded it in for a kia picanto that was only 2 yrs old. 8 years later I have only had the brakes and clutch done and at 10 yrs old now it has just passed an Mot with nothing even advised. Sometimes it pays to spend a bit more (cost 5k) at the start rather than costly repairs all the time.

  7. I am constantly battling my husband over cars! 🙁
    Every few years he starts getting a bee in his bonnet about needing to replace our vehicle, and I usually see absolutely no need to whatsoever!
    His current reasoning is because when we have all the kids in it (5) the 2 who have to more or less sit in the boot are very squashed, which is true, but the number of times we have all 5 in the car with us now is becoming less and less as they go off to university!
    Being the smallest, I’ve even taken to volunteering to sit in the very back if we have a car full!! But once he’s set his mind to replacing it ……..! Sigh 🙁

  8. Our car is 17 years old this spring and it’s still going strong (says she, fingers crossed!) We bought it when it was just one year old with a genuine 900 miles on the clock. The elderly gentleman who had owned it changed his car every year – it was his treat, he said (some treat!) – and only used it about once a week to go to the shops. It was a high-end model, a 6 cylinder model and so it makes nothing of our Devon hills, and is still in very good condition. It has all the luxuries that such cars have, heated seats, cruise control, CD player. Sadly, trade in value would be just about worthless (not that we wish to trade it in!) But we don’t mind. We have our own number plate so it doesn’t shout “old car!” and we think it looks very smart, all black leather interior and white body (even though I recently read white cars are ‘naff’ … well, not to me, I love it and would have white again. Contrary to popular opinion, it doesn’t show the dirt as much as a dark car.) I would never buy brand new, as soon as you drive a car out of the showroom it has lost zillions of pounds. No matter how much money you have, that’s not a wise thing to do, surely?
    Margaret P

  9. When I owned cars, all were second hand and driven for years.The last, a Toyota, was eight years old when purchased in 1998, driven for ten years. Now use public transport and wheelchair taxis.

  10. I am currently ‘car-less’ due to my last car finally giving up the ghost after years of city driving. It took a bit of time but i am getting used to not being able to just pop-out to the local supermarket/ shopping mall. I’m sure that i’ve saved a fortune in not doing these trips! I am lucky because although the fares are costly, there is a city bus service – not always running on time, but always running. The downside of course is having to lug heavy groceries home on the bus, but I do seem to manage somehow. One of my goals for end of this year is to use accumulated frugal-savings to purchase a (very) cheap car – seems a long way off at the moment though!

  11. Everyone has to do what works for them. After years of tracking vehicle expenses, paying cash for cars and buying cars that were too expensive, I realized that, after factoring in additional expenses for insurance/tires/repairs,etc, I just may as well start leasing new cars. I have bought several cars new off the dealer’s lot over the years, and they lasted me only about 8 years on average, even the expensive car that was regularly maintained. Figuring out what I paid for the cars plus insurance/tires/repairs told me that leasing (in my case) would be cheaper. I live in California and do a TON of driving so I need a reliable car to get me around. I lease a new car for three years at a time and never have to worry about repairs, tires or any other repair. I turn the car in and get a new one. It means that I pay approx.$200 a month to drive a new car but I have done my math and this is actually far cheaper and more enjoyable for me to lease. I would absolutely NEVER go into debt for a car again in this lifetime.

  12. I’m an expat, living in the US, and I’ve been enjoying your blog for a while. I know that the cost of living is lower in the US, but I wanted to mention that, although we’re very frugal, buying a new family car is the better option for us. We get a deep discount through work, and we paid for our latest car within a few months with money from investments. And no swapping for the latest model in a couple of years – we’ll drive it until it dies, like the last one!

  13. My 2004 zafira is still going strong. Fingers crossed! My husband works from home most days and I walk to work so I’m beginning to think if it does go to Vauxhall heaven we may be able to get by with one car instead of two. It’s ferrying my two sons about that matters most to me. I would always buy second hand, with boys and a dog a posh expensive car would be wasted on me!

      • Yes they are good family cars but now my boys are older I don’t need 7seats etc. Just a smaller run around that’s cheaper to tax is the way to go, you definitely dd the right thing downsizing

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