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dodsi
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dodsi
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 Posted: 22:57 - 21 Mar 2017  Post subject: |
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| stevo as b4 wrote: | Two final questions from me as this topic isn't really about me or my thing.
1, Put simply for someone like me to understand, what are the primary and most common reasons for people to want to always drive new cars and or say have a new one every 2years or so?
2, Regarding the buy own car and run for 10years thing. Firstly that average depreciation of 2k a year don't sit right with me as most of a vehicles depreciation happens in year 1, 3 and 5maybe. A 2year old isn't often worth massively less than a 1year old, and likewise the 3and 5yr milestones tend to wipe much more value off a vehicle than the usually negligible depreciation from years 5-10? So yeah an average 2k over 10years is one thing, but if the first few years result in say 5x the depreciation that years 6-10 experience, it's not that relevant to work it out as long-term cost.
And secondly, do people that buy a brand new vehicle and keep it for 10years, actually expect it to achieve some resale value worth having after that period? I know it's probably out of date thinking with cars now, but there used to be the old theory that if you buy and run a vehicle for 10years, its done it's thing, earned it's keep, and owes you nothing at all. If someone gives you a few quid for it after all that it's a bonus? I realise the above with today's cars could easily be rescaled to 15years or more in some cases, as cars today are built to last longer than they were in the 70's/80's, which is where the above mentality probably came from. |
Why do people want new cars? Many reasons.
Common ones include - the prestige of having a new car (imo a load of bollocks). Never worrying about failure (wrongly in many cases), warranty, having little mechanical understanding and a fear that an older car will always break down. Or purely that the cost is so insignificant to them that they may as well.
My perspective is, the costs in my case are less than running a approved used second hand car and it's a bonus nice thing to have - never had a new car myself before and poor upbringing 'boy done good' story so there is a weird feeling of achievement attached to being able to comfortably afford it. If the costs didn't stack up I wouldn't have it. Plus my wife is middle class so it's fitting of her regency. 
Point 2 - depreciation curve - you are correct it's different at different times in a cars lifecycle but ultimately we are comparing cost over time - if the figure given was 23k down to 3k over 10 years - the average is the best thing to use in the comparison. In reality over say year 1 lease cost vs purchase outright cost the lease may be massively cheaper. But it's irrelevant - work out your costs over a fixed time... the depreciation of a vehicle may work in your favour and it could depreciate less. Also it could depreciate more. The advantage to a lease would be knowing your costs in advance and certainly a maintained deal means no surprise bills.
Also with new cars there is a lot more to go wrong than on older cars. My 17 year old BMW 325i was in its day more expensive than the Skoda but has a fraction of the complications the Skoda has electromechanically or in terms of computers/radars/sensors/driving aids etc. This makes me less keen to own one for any long period of time - someone else can take care of those bills.
There is some emotional attachment to cars and people like to think of them as old faithful friends but to me it's a tool (providing we are talking about 'meh euroboxes' and not fun cars / exotica) |
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M.C
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| Posted: 02:13 - 22 Mar 2017 Post subject: |
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Sun Wukong
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| Posted: 04:34 - 22 Mar 2017 Post subject: |
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| M.C wrote: |
Lol, 4 pages of being proved wrong and it's still everyone else who's thick  |
Followed by...
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Buying a house has historically been a bit of a lottery, sure everyone's rises and falls, but you don't want to be the one in negative equity. I know someone who bought a flat in 2007 and ended up selling it for half that.
You could say the same thing's happening with classic cars, and the market has fallen apart in the past. |
Sooooo... actually more risky than expected.
Here is the Khan Academy video, which stands on its own pretty well. 10 minutes of your life.
Learn yourself some stuffs
The next video is about factoring in the cost of property appreciation/depreciation.
I firmly believe the housing market will drop savagely in the next couple of years, and you will be left holding a negative equity death box soon... but meh, one doesn't say this in polite company.
A good friend of mine has mortgaged to the hilt to buy a particularly wonky house in a meh area. Can't see that ending well, although obviously I hope he does well out of it.
Negative equity is not terrible if you are willing to wait it out, but that period stuck in one location is not ideal.
I would gladly buy a house and stick tenants in it while continuing to live in employer provided accommodation.
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"Hard times lead to hard people. Hard people lead to good times. Good times lead to weak people. Weak people lead to hard times." Smegballs
"Oh and STE balloons would be one of the nicer things we would receive at the office, the amount of dog turd in jiffy bags is not funny." Jsmith86 |
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dodsi
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M.C
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| Posted: 16:37 - 22 Mar 2017 Post subject: |
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Anywhere not totally horrid  It only seems to be crummy seaside towns where I could afford to live, and then you've got to factor in either working locally for less money, or commuting back into London (cost and time etc.) |
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Sun Wukong
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| Posted: 05:52 - 23 Mar 2017 Post subject: |
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| dodsi wrote: |
Put simply for me - other flats near me rent for £3.60 - £4.80 for something similar to mine. My mortgage is a few pennies short of £4 based on the 4.something percent Apr i currently have. per month plus my service charges are a further £4 per year or so.
Current market value is £920 I paid £768 for it 1 and a half years ago. And spent a further £56 on renovations so far with a further predicted £20 to spend on a new bathroom. This may increase the value by at least a further £20
I can remortgage come September and bring my mortgage down to £3.20 per month. This is due to my loan to value changing with the increase in property price. This means I have an outgoing less than rental values in my area. The property market would have to massively shrink for the rental costs to reduce to this. Then in a further 23 years that cost goes down to just the service charge.
My equity only Rises as I pay down the mortgage debt so in real terms interest/'safe' investment would not make any good money on the £40 I put down on the flat 1.5 years ago. Even at 5% return that's £2 per year or £3 in total for length of my mortgage so far.
The numbers are all indicative but the % all work in my example. |
Aargh, the numbers make my brain hurt more in 1/100th form than original.
76,800 + 10,000 renovations (ish) with 4,000 deposit, mortgage payment of 400 at 4% apr / 25 years.
120,000 total to the bank over term. (Although you said you are remortgaging, due to improvement in house value)
4000 * 25 = 100,000 service charges
(All nominal rates)
Value in buoyed market is 95,000 ish, a net improvement of around 10,000
Rent: 400 * 12 * 25 = 120,000 (nominal)
With such a small initial deposit (5% of an assumed 80,000 mortgage) there is not much opportunity cost on that money there, you’re right. But that 4000 GBP at 5% for 25 years compounds nicely. 13,550 GBP over 25 years.
But you can take that off the rent cost, so that would be 106,500 net for renting.
Much like leasing, no worries about boilers, flooding, pillaging by the huns… etc.
But you’re still paying 40,000 rent on the current house over the 25 years while using the banks money.
And the rates of 4000/year are roughly the same as the yearly rent of 4800 (12 * 400)
If the house value continues to rise, as the last generation saw, then happy days. My parents bought my childhood home for 40k, sold it for 120k in 2001… it went for 300k+ last year.
But it doesn’t seem like something that can continue, especially without such cheap lending from the banks, which I think will slow down in future once central banks are restricted ( )
Don’t get me wrong, I’d love to own a house. It is definitely on my to do list, but I think I will try to buy in a low economy country and buy outright. This is my current plan. Failing that, a set up similar to yourself certainly doesn’t seem a bad way to do it.
Recently I have been focusing on work with accommodation supplied.
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"Hard times lead to hard people. Hard people lead to good times. Good times lead to weak people. Weak people lead to hard times." Smegballs
"Oh and STE balloons would be one of the nicer things we would receive at the office, the amount of dog turd in jiffy bags is not funny." Jsmith86 |
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dodsi
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| Posted: 08:53 - 23 Mar 2017 Post subject: |
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| Sun Wukong wrote: | | dodsi wrote: |
Put simply for me - other flats near me rent for £3.60 - £4.80 for something similar to mine. My mortgage is a few pennies short of £4 based on the 4.something percent Apr i currently have. per month plus my service charges are a further £4 per year or so.
Current market value is £920 I paid £768 for it 1 and a half years ago. And spent a further £56 on renovations so far with a further predicted £20 to spend on a new bathroom. This may increase the value by at least a further £20
I can remortgage come September and bring my mortgage down to £3.20 per month. This is due to my loan to value changing with the increase in property price. This means I have an outgoing less than rental values in my area. The property market would have to massively shrink for the rental costs to reduce to this. Then in a further 23 years that cost goes down to just the service charge.
My equity only Rises as I pay down the mortgage debt so in real terms interest/'safe' investment would not make any good money on the £40 I put down on the flat 1.5 years ago. Even at 5% return that's £2 per year or £3 in total for length of my mortgage so far.
The numbers are all indicative but the % all work in my example. |
Aargh, the numbers make my brain hurt more in 1/100th form than original.
76,800 + 10,000 renovations (ish) with 4,000 deposit, mortgage payment of 400 at 4% apr / 25 years.
120,000 total to the bank over term. (Although you said you are remortgaging, due to improvement in house value)
4000 * 25 = 100,000 service charges
(All nominal rates)
Value in buoyed market is 95,000 ish, a net improvement of around 10,000
Rent: 400 * 12 * 25 = 120,000 (nominal)
With such a small initial deposit (5% of an assumed 80,000 mortgage) there is not much opportunity cost on that money there, you’re right. But that 4000 GBP at 5% for 25 years compounds nicely. 13,550 GBP over 25 years.
But you can take that off the rent cost, so that would be 106,500 net for renting.
Much like leasing, no worries about boilers, flooding, pillaging by the huns… etc.
But you’re still paying 40,000 rent on the current house over the 25 years while using the banks money.
And the rates of 4000/year are roughly the same as the yearly rent of 4800 (12 * 400)
If the house value continues to rise, as the last generation saw, then happy days. My parents bought my childhood home for 40k, sold it for 120k in 2001… it went for 300k+ last year.
But it doesn’t seem like something that can continue, especially without such cheap lending from the banks, which I think will slow down in future once central banks are restricted ()
Don’t get me wrong, I’d love to own a house. It is definitely on my to do list, but I think I will try to buy in a low economy country and buy outright. This is my current plan. Failing that, a set up similar to yourself certainly doesn’t seem a bad way to do it.
Recently I have been focusing on work with accommodation supplied. |
Close but no cigar, the numbers are not in 1/100th
My mortgage is just short of 1k month. 
The renovations included a brand new gas heating system (whole install as it was electric heating before) which means it was done properly using copper piping and a brand new valiant boiler with 5 year warranty. Mound resistant paint, new plastering, new doors, new carpets and floorings and electrical fittings.
So in terms of maintenance there is little to do moving forward, building maintenance is taken care of in my service charge as is building insurance.
Not taking into account any appreciation in property value from today - come September my mortgage becomes less than a rental and in 23 years I stop paying it all together but still have the asset at let's say the same value as today.
Plus then there is security- my home is not 'mine' on the whim of anybody else - I get to have control of what happens to the property and stay here until whenever I want providing I pay my mortgage.
The reason this is different to leasing a car is the asset is generally an appreciating asset/hold the same value.
If I paid £7k to lease a car worth just shy of 24k for 2 years and it was worth £24k at the end with a predicted spend of £60 road tax (VED) (£30 per year) a minor service and possibly a couple of consumables then it would be a terrible decision. But the fact is the car is not worth 24k at the end of the term. |
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Sun Wukong
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| Posted: 10:32 - 23 Mar 2017 Post subject: |
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Assuming the figures were in proportion, it shouldn't matter I suppose.
What kind of monster gives figures divided like that...
Weirdo.
Anyway, I appreciate you get a generally appreciating asset at the end of it.
I don't think I'd be comfortable renting long term either, but far less uncomfortable than being forced to by a house in Scunthorpe or something due to difficulties of getting on the market.
And yes, different to the car example, but still interesting nonetheless.
____________________
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"Hard times lead to hard people. Hard people lead to good times. Good times lead to weak people. Weak people lead to hard times." Smegballs
"Oh and STE balloons would be one of the nicer things we would receive at the office, the amount of dog turd in jiffy bags is not funny." Jsmith86
Last edited by Sun Wukong on 13:21 - 23 Mar 2017; edited 1 time in total |
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dodsi
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| Posted: 13:10 - 23 Mar 2017 Post subject: |
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| Sun Wukong wrote: | Assuming the figures were in proportion, it shouldn't matter I suppose.
What kind of monster gives figures 250 times smaller...
Weirdo.
Anyway, I appreciate you get a generally appreciating asset at the end of it.
I don't think I'd be comfortable renting long term either, but far less uncomfortable than being forced to by a house in Scunthorpe or something due to difficulties of getting on the market.
And yes, different to the car example, but still interesting nonetheless. |
The kind of monster that was giving an indicative example and wanted to see if you would A: work out the actual costs and B: whether or not you would translate them back to real world numbers on a public forum given the 'lengths' I went to disguise them.
The idea of the cost of opportunity is a really interesting one, and given the right scenario would probably be a great thing. I.e. if I 'have' lets say 300K but I could invest that 300K and make money from it so that I never actually paid out of my 'own pocket' for rent on a property. But given my scenario of my own cost of opportunity then the numbers wouldn't stack up. If they did I would probably rent a house too and take advantage of the finances.
There is an argument that if you ordered the latest rare and beautiful super cars that appreciate as soon as you have them due to availability you could effectively drive a car for free. But that involves having a lot of money tied up in cars to enable this more so than the average man would have available. |
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Sun Wukong
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| Posted: 13:23 - 23 Mar 2017 Post subject: |
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Old Thread Alert!
The last post was made 7 years, 28 days ago. Instead of replying here, would creating a new thread be more useful? |
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