How do people afford their cars?

Dot writes: a few years ago Dublin was awash with brand-new cars. People would borrow a bit extra on top of their hideously enormous but low-interest mortgages and splash it on an SUV. We did not do this. We were very lucky in that we were given hand-me-down cars by my parents in 2007 and 2009, meaning that all we had to pay was the import duty (and the road tax, insurance etc, but that applies to any car). We had savings but we saved them for when we could get a mortgage too; and of course last year we finally got said mortgage, and a much smaller one than it might have been if we’d bought during the boom.

Now, alas, the second of these ex-parental cars is facing imminent doom. We took it in for a service, and it came back with a list of woes as long as my arm. Some of the report was a bit unfair. The comment said ‘could not engage reverse’, but they’d backed the car into the parking space after looking at it so this was clearly not strictly true. However, it is possible that the gearbox needs replacing (estimated cost €3.3k). Or it could be the clutch, though I’m afraid I think it’s the gearbox. Apparently it’s an eight-hour job just to strip it down and find out. Even in Ireland, where cars are expensive, we could buy another car, though not an especially nice one, for that sort of money.

I have a very strong prejudice in favour of paying cash for things. Unfortunately we have been busy frittering ours away on doing up the house, so it looks like we need to think about taking out a loan. I’ve spent a bit of time today looking up car finance on the web and being astonished by the enormous amounts that people must be paying every month for their cars. To get a loan that is marketed specifically for buying a car, AIB specify that you have to borrow at least €10000. According to their online calculator, with the default loan-term of 24 months, for that you would pay €459.70 per month. And that’s the minimum amount. When you think how everyone’s pay has gone down, taxes up, mortgage payments up, fuel bills up, child benefit down, it really is amazing how many people must still be taking on that kind of expense, and indeed considerably more expense in the case of the many who still have cars only two or three years old. I guess they must be very good at controlling their grocery bills. Or maybe they never go out, just sit by the front window and gaze contentedly at their beautiful cars.

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5 thoughts on “How do people afford their cars?

    1. kenanddot

      Thanks for the tip. I’ve been looking at carzone.ie, but of course one doesn’t know which dealers listed there are ok and which aren’t.

  1. I told my father (a banker) that our next car would be a used car, and he started to object, and then said “come to think of it, if you consider the depreciation of a new car as an expenditure, you probably pay more on depreciation of a new car than you do on repairs of a properly maintained used car…” and it’s totally a true. A car that was new off the lot 6 months ago has already lost nearly half of its resale value. That’s a whopping loss on investment.

    Our current only car is a parental donation, my 2004 Echo. But when we eventually get a second car we’re planning on spending a couple of thousand dollars on a reliable oldie that will hopefully run for a long time with the occasional new gearbox etc.

    1. kenanddot

      I agree – I can’t entirely see the point of a brand new car. However, when we have got everything a bit more under control I like the idea of buying cars that are one or two years old instead of six. But we have chosen a new (six-year-old) car and I hope we will be very happy with it.

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