LLs Frugal February 2017

Thrifty tips, ideas, news & experiences on anything around the home to shopping to re-cycling etc.
User avatar
lancashire lass
Legendary Laner
Posts: 5770
Joined: 28 Jun 2007, 15:17

Re: LLs Frugal February 2017

Post by lancashire lass »

Mo wrote: 04 Nov 2020, 14:46 and have heard that there can be problems with that kind of car deal, if they cause people to buy a better car and then at the end find it isn't worth as much as the outstanding loan
The new car industry is all about VERY crafty and clever salesmanship designed to get you to buy the more expensive car than the one you had budgeted for. Even if you walk in determined with a "I'd like a new car that I can afford", you are unconsciously being persuaded to get the next model up by enticing you with a special deal which is unavailable on the one that you actually want which makes you re-evaluate the value. When it comes to selling the car later on, it is implied that you will get a better price for the more expensive model because of the additional features. Add on a complex purchasing system (the invoice taking into account the special deal and of course, your deposit plus part exchange on your old car (usually much lower value than if sold independently but that depends on your confidence in dealing with strangers coming to your house), tax, colour choice, accessories, availability, service contracts, proof of identity/driver's licence, choosing your number plate and payment choice and so on), it's easy to be swept into buying a brand new car that you hadn't originally planned on with the friendly salesman guiding you through it. And all the while, you are sitting in the car showroom amongst all the shiny new cars and comfortable surroundings made to make it feel like YOU had made the right decision.

The car finance deal has its plus as well as negative side. When taking out a bank loan, you are committed to buying the car outright - so if the car cost £16 000, you have to take a loan out for the whole amount so monthly payments will be based on that, whereas the car finance breaks it down into affordable packages. First a deposit (always worth saving up for that first), then the remaining amount is divided up between a payment scheme for 3-4 years (obviously it is more expensive with added interest when taking longer to pay) and then a final sum (the remaining amount you still owe) at the end. That final sum has been worked out as the value of the car at the end of the loan scheme that the car dealer is willing to offer you - car dealers in general always undervalue a car regardless of whether you are the owner or as part of the finance deal than if you were a car owner selling independently.

The monthly payments during the 3-4 year scheme are more affordable than the bank loan payments because you are only paying back part of the cost of the car. The option of paying back the final sum or handing the car back is the one where it gets tricky. As the car itself has been valued at the final sum which you still owe, that means when you hand it back to the dealer you get nothing back (in other words, you can't use it as part exchange for a new car as you don't own it and still have to enter into a new loan for the next car) Worse, if the car is damaged, the value of the car is less than what you still owe so you might find yourself having to pay the difference. And while you are in the financial deal, you are committed to taking the car to the dealership for servicing and paying for authentic parts (that is, if you bought a Ford car, then the parts must be Ford not from Halfords)

The other downside which starts to become obvious when taking the option to buy a new car every 3 years, is that you are constantly paying a loan with all the restrictions ... in other words, it is a form of car rental and you are never really the owner of the car. The upside of buying a new car is that a lot of the problems you get with older / second hand cars (damage / wear and tear / MOT) are much less and some things are covered by warranty. I had a car that had a chronic problem of breaking down (I think it was a design flaw because they never resolved it) which thankfully was covered by warranty that would have cost me £1000s in labour alone. Suffice to say that when the 3 year loan was up, I didn't keep that car and got a new one - the one I eventually bought and kept for 14 years (for the most part it was very reliable and caused no problem until near the end) In this instance, the option of only paying part of the original cost and handing it back for a better model worked in my favour.

The other upside is driving out of the showroom in a brand new car - there's nothing quite like it with its newness smell and everything is shiny. I can remember sitting in the car and it really felt like I'd bought a BMW or a Jag (it was only a Citroen Saxa) Not to mention not having to worry if the previous owner had taken care of the vehicle - anyone who buys a new car or it needs a new engine knows you have to drive it in carefully for the first few weeks.
Mo wrote: 04 Nov 2020, 14:46 Are you claiming your tax allowance for working from home.You may have been saving money up to now, but heating costs will go up now the weather has turned. That's another tip (irrelevant to me) from Money Box. You get the £6 a week allowance even if you only work from home 1 day (MB said just 1 day in the year), no need to prove extra costs.
)t' During the first lockdown, my employer raised the tax allowance idea for working at home as well as claiming back anything you need to do your job. As you say, heating costs will be an issue and has been weighing on me recently. Also, I'm wondering about the internet - my original package was unlimited anyway so that hasn't been a problem but it is an old system and I'm constantly getting "security" messages popping up on the works computer implying that system is no longer supported (I'm also expecting it to break down any day which could be a problem as all my home working is done networking!)

One bit of good news - as I pay Workplace Parking (Nottingham city council charge employers for every parking space to fund the trams which is passed on to the employees in most cases), this was first stopped in March and only restarted back in August / September at half the charge. With the second lockdown, it has been stopped again but as universities are still open, parking is free until the end of 2020. I pay just over £40 a month for parking (it is taken out of my salary and is also taxed which I still find incredulous having to pay tax on a tax!)

Post Reply