The Off Topic Topic

[Josquius]

Yes. That's the key it seems to me. Too many people place some prestige value on having a fancy new car that they simply can't afford.
That's my attitude to things. If I can't afford something then I should save up. Debt is to be avoided.
Sure, I'm not paying extra on my mortgage now that interest rates on savings outweigh those on the mortgage. But unless you've got a fix carried over from an earlier time then usually borrowed money will cost you more than any interest you can gain.

I always thought you got car loans - but that might just be my family

Google suggests around 90% of new car purchases are financed in UK

Key word there- new.
Obviously some people buy new cars, but I don't think I know anybody who ever has. Its a poor financial move.

[garbon]

I always thought you got car loans - but that might just be my family

Google suggests around 90% of new car purchases are financed in UK

Key word there- new.
Obviously some people buy new cars, but I don't think I know anybody who ever has.

I'm not sure what to say to that.

[Sheilbh]

Yeah - I mean I would find it mad just having that money for a cash purchase

I build up my rainy day savings, but anything beyond that (lololol) and it's getting spent, mortgage overpayments or (less likely) going into my pension. Any big cash purchase I use credit (credit cards for small, loans for big). Because then it's just out of cash flow but I'm not wasting my savings on stuff that'll only lose value.

[Sheilbh]

Yeah I think I view it differently and less about interest. Paying down more on my mortgage is increasing my share of an asset that will (God willing) at least hold its value. So there's interest reduction but also I'll basically get (hopefully) as much back in value as I put in in pay-off. And, hopefully, the value will appreciate.

For other purchases - for me furniture, laptop, white goods etc. They will lose value the second I buy them. So it's not like for like from savings - I'll get less back for spending actual cash. But I want the benefit, so credit.

[Grey Fox]

Yes. That's the key it seems to me. Too many people place some prestige value on having a fancy new car that they simply can't afford.
That's my attitude to things. If I can't afford something then I should save up. Debt is to be avoided.
Sure, I'm not paying extra on my mortgage now that interest rates on savings outweigh those on the mortgage. But unless you've got a fix carried over from an earlier time then usually borrowed money will cost you more than any interest you can gain.

I always thought you got car loans - but that might just be my family

Google suggests around 90% of new car purchases are financed in UK

Key word there- new.
Obviously some people buy new cars, but I don't think I know anybody who ever has. Its a poor financial move.

Do we not count?

[Syt]

Unsure if we've had this before: LIFE Magazine 1949.



Full size for easier reading: https://i.imgur.com/100pu9X.jpeg

[Tamas]

Yeah - I mean I would find it mad just having that money for a cash purchase

I build up my rainy day savings, but anything beyond that (lololol) and it's getting spent, mortgage overpayments or (less likely) going into my pension. Any big cash purchase I use credit (credit cards for small, loans for big). Because then it's just out of cash flow but I'm not wasting my savings on stuff that'll only lose value.

That's a good attitude but if you buy a car on loan you are still wasting that money - only piecemeal. Unless as grumbler suggested the savings are earning more interest than the loan's but I'd be shocked if that happens for most people.

[Tamas]

For other purchases - for me furniture, laptop, white goods etc. They will lose value the second I buy them. So it's not like for like from savings - I'll get less back for spending actual cash. But I want the benefit, so credit.

Hold on, you pay interest on credit. So whatever is credit interest minus savings interest, you are adding as additional cost compared to a cash purchase.

For example our house needed a substantial spend on blinds - we could get 0% credit on it assuming we paid it back by month X. So even though we had the cash, we took the credit and paid back in a lump sum before month X, letting the money collect interest in the meantime. But if the credit had something like 4%+ interest on it, it would have been a bad move.

[Sheilbh]

Sure but even a loan is interest for a fixed period. You repay it over 5-8 years. It's a predictable monthly payment.

Going into a pension fund is going to accrue over its lifetime. Mortgage is like for like. You're exchanging savings for something that's value is fixed or growing and at least equivalent. While I feel like the cost of buying a sofa, say, isn't necessarily the interest so much as that it immediately loses, at best, half its value when it's unpacked (and for someone with okay credit I'd expect that loss is bigger than the cost of interest over, say, 2-8 years).

Edit: So I suppose in my head using cash = losing half of it. While interest over a few years is unlikely to be at more than 50% total on reasonable rates for someone who's got decent credit. If that makes sense?

[Tamas]

It doesn't. The sofa won't lose less of its value if you buy it on credit, except that for the same value, you will have paid more if you opted for credit.

If you don't feel safe losing the cash it takes to buy the sofa, the correct decision is to wait with buying it or buy a cheaper one, not to buy it on credit.

[Josquius]

I don't understand this.

I buy something on credit then rather than paying £500 now I pay £700 at £20 a month for the next whatever.
If on the other hand I put that spare £480 into the bank....I would usually end up with less than £700 at the end of the period.

[Richard Hakluyt]

Interesting what people find preferable. I like to pay for things in full and then forget about it. The object is to leave my income as free of rents, charges and subscriptions as possible. That way I know I have £x a month that could theoretically be spent on any silly thing that catches my fancy. And I like x to be a very high proportion of my income.

So we do buy brand new cars with a single payment, my wife drives them until the frequency of repairs becomes irritating then we sell and buy another new one.

Just skoda estates btw nothing fancy.

[DGuller]

Whether to pay cash for a vehicle depends on the other uses for the money.  If you are just taking money out of savings, or from an account that earns less in interest than the loan costs in interest, then pay cash.  Ig you are talking the money out of a 10%-interest-yielding money market account to avoid a 7%-interest load, say, then paying cash is not wise.  Some people might do it just to avoid being in debt, but it isn't wise.

It isn't necessarily unwise.  Many things can go wrong when you invest on a margin (in this case in effect loan the money at 7% against your car to invest at 10%).  It's very unlikely that you'd be able to get a risk-free return higher than the interest on the loan, as an individual;  when money markets return 10%, you sure as hell won't be taking out 7% loans unless they're heavily subsidized by some entity.  There can also be a duration mismatch, where you're trading a long-term debt commitment against an asset return can quickly change.

[garbon]

Interesting what people find preferable. I like to pay for things in full and then forget about it. The object is to leave my income as free of rents, charges and subscriptions as possible. That way I know I have £x a month that could theoretically be spent on any silly thing that catches my fancy. And I like x to be a very high proportion of my income.

So we do buy brand new cars with a single payment, my wife drives them until the frequency of repairs becomes irritating then we sell and buy another new one.

Just skoda estates btw nothing fancy.

Without shade, I feel like that's a privileged position that not many can take.  Like I know when I was growing up and my parents were spending lots of money on their kids, they never bought a new car outright, always financed. Then once we were all gone / their investments paid off then they only buy new cars with a full payment.

Similarly, when I bought my first (and only) car, I could not have afforded to buy it outright. Decades later with no kids, if I needed to buy a car, I'd likely buy outright.

[Josquius]

Swiss polis investigating a real life suicide booth:

https://www.theguardian.com/society/2024/sep/24/several-detained-in-switzerland-over-suicide-capsule-death-police-say