I was discussing cars with someone not long ago and they were really matter-of-fact about switching to a new car just because the dealership offered it to them. It came across very much as that’s just how it works and everyone does that.
£300 per month to basically not have to worry about any unexpected bills seems reasonable to me.
Plus you get the social value of having a "nice" car. The safety features are likely to be higher quality. And, as mentioned in the article, newer vehicles tend to be more efficient.
Basically, it is a fairly rational way to spend money.
what the people have done informally is something similar.
1. person "buys" a car and Hypothecates the same to a bank for paying the car dealer. usually 80-90-100% of the car value can be paid by bank meaning 0-10-20% of the car value can be given as deposit.
2. now that the new "owner" has taken the car, they start making monthly EMI payments to bank.
3. 1 year or 2 years from purchase, the owner wants to "sell" the car so what they do is, find a buyer willing to accept the outstanding loan amount.
4. the first "owner" has paid 2 things. 1 deposit and say 12 months of EMI.
5. first "owner" tells the buyer that "here, take hold of these future EMI entries and give me a portion of the amount i have paid till now as in #4"
6. the first "owner" takes cheques each dated monthly in future with the amount from the buyer which the first "owner" will deposit every month and if there is any failure, claim default in payment of cheque.
7. car remains in title of the first owner and Hypothecated by bank until last EMI is paid at which point the first owner "transfers" the car to new owner
I did this and now I'm stuck with manual Kia... But I don't really drive enough to care, so I'm fine...
Everyone I know driving 100k+ 10y+ cars from reliable manufacturers have no issues beyond regular maintenance.
My father's Benz certainly spends more time in the shop though.
Of course we realise we're paying for depreciation but I consider a car to be a fixed expense and honestly if you take a look at the numbers above it's not that bad and we drive a new, safe, no issues (free servicing) car every 3-4 years.
Driving a new car every few years is incredibly decadent.
If you bought a car, paid it off in 5 years and drove it for another 10, you’d be saving thousands every year. Repeat that cycle every 15 years and invest the savings, and you’re talking about hundreds of thousands of dollars in trade-off costs over the course of a lifetime. That might be a reasonable trade-off for folks who are in great shape financially (I’ll certainly be doing it once retirement is funded!), but it’s pure foolishness for the average household.
What about maintenance? There's a lot of moving parts (often the labor to get to the part costs more than the part itself) and a stroke of bad luck can quickly balloon into 4-digit sums.
Paying a flat monthly fee for transport sounds like an attractive option to not have to worry about any of that.
If one lacks the rainy-day savings to afford a hypothetical thousand-dollar repair bill, one certainly cannot afford to throw away thousands of dollars every year “to not have to worry” about one’s precarious finances.
There are plenty of people who live near paycheck-to-paycheck who also need a car to get to work, where a stroke of bad luck like engine + transmission damage would not only be a significant financial hit but the downtime of the car being unavailable might compound the problem as they can't get to work.
While it's not a great financial situation and ideally nobody should be in it, in reality these people don't have a choice and budgeting away a fixed percentage of their salary on a vehicle that guarantees them to be able to get to work (to pocket the remaining percentage of salary) is a better option than not paying a monthly fee but gambling on the fact that a significant breakdown might completely wipe them out financially and jeopardize the transportation they use to get to work.
It's a bit like insurance - technically it should always be cheaper to self-insure, but insurance exists because for many people perpetually paying the premium is still better than a single event wiping them out completely.
This makes sense so long as it isn't used as an argument for leasing a new car on an ongoing basis. If one actually finds themselves in this situation, the responsible approach would be to find the cheapest possible lease and to save aggressively until they can take the more economical approach.
Leasing is like credit card debt. It makes sense in some rare cases, but in most cases it is wasteful and the average consumer should avoid it.