Sacrificing my pride and joy

[Stackkk]

Hi guys,


I am 22 years old I am currently employed full time. My goal is to get a mortgage ASAP. I purchased a golf gti a year ago and spent loads of money on it. I could never get that money back even if I sell the car. Now I pay £400 a month for it I could afford it but then I want to save up as much as possible. If I sell the car the money could go towards my deposit but I love the car also if I keep it I’ll carry on spending money on it. I’m confused I don’t know what to do. Have any of you guys been in a situation like this? If yes what did you do?

[doolally]

It seems to me that your goal is actually to have a nice car, and the goal to get a mortgage ASAP is of secondary importance.

Unless you have a load of money to cover both, you have to decide what is really most important to you. It sounds like you are lacking financial discipline. If you had a mortgage, would you have the discipline to handle all the implications of that? You are 22, you want everything, but at your age you have to make sacrifices unless you are earning a fortune. That's life.

Welcome to Lemon Fool, by the way
doolally

[Mike4]

It seems to me that your goal is actually to have a nice car, and the goal to get a mortgage ASAP is of secondary importance.

I think you are mis-reading the situation. Owning a Golf GTi is an old goal now achieved. The new goal is to get a house using a mortgage. (I'd suggest few people have 'getting a mortgage' as their primary goal, rather it is a tool to achieving the goal of home ownership.)

The trouble is, cars are something of an impediment to achieving true wealth. I remember a social meet-up of the TMF property board members many years ago and it was amusing to note that there were a number of property millionaires sitting around the pub table yet the sum total value of the cars we'd all turned up in was probably less than about £15k. The richest man I ever met (an Arab sheik) liked routinely to drive around Windsor in a rusty old Ford Sierra.

Yes it's nice to have a posh car but once you can afford one really easily, the desire to own one seems to evaporate for some, if not many.

[DrFfybes]

Hi guys,
. If I sell the car the money could go towards my deposit but I love the car also if I keep it I’ll carry on spending money on it. I’m confused I don’t know what to do. Have any of you guys been in a situation like this? If yes what did you do?

I did do similar, but with a couple of differences.

It was bikes, not cars, and I didn't get into debt over it. This was down to upbringing, "if you can't afford it, you can't have it", however it did mean I never had any spare cash until I was about 28 and the penny dropped. Even then it was coming into a lump sum that triggered me into buying somewhere, as I didn't want it to disappear with nothing to show.

You know what you need to do to save and get a mortgage, whether you are willling to do that is a different matter.

£400/month is nearly £7kpa of your salary before you pay tax and NI (I'll assume at 22 you are a basic rate taxpayer). If you've scratched the GTi itch you will need something to replace it with, but there are a lot of small fun cars out there that cost a lot less to buy and run.

And Mike4 is right, getting a nice car was always a target for me. Once I actually had one, eventually the novelty wore off and I started using it less and less, until I realised it was costing about a quid per mile and got rid.

I still keep looking at high end performance cars, but actually I know we'd get a lot more use out of a GT86.

Paul

[MrFoolish]

I would never borrow money for a depreciating asset like a car. It is likely to seriously compromise your finances in the long run. But it's your money, your choice.

[Loup321]

Hi guys,


I am 22 years old I am currently employed full time. My goal is to get a mortgage ASAP. I purchased a golf gti a year ago and spent loads of money on it. I could never get that money back even if I sell the car. Now I pay £400 a month for it I could afford it but then I want to save up as much as possible. If I sell the car the money could go towards my deposit but I love the car also if I keep it I’ll carry on spending money on it. I’m confused I don’t know what to do. Have any of you guys been in a situation like this? If yes what did you do?

I think others have assumed the £400 is debt repayment, but I have assumed it is petrol, insurance, and other running costs. If you clarified, perhaps advice would be more meaningful.

If you sold the car, would you also need to buy a car? What would the running costs on that be? If you could manage without a car, what would your other spending be (travelcard, taxis, or whatever)?

You've two things to consider - the capital and the running costs. Not knowing anything about cars, I expect from your post that the capital is a reasonable chunk. However, you seem to be assuming that the running costs of £400 would instantly be realized if you sold the car, and I don't think they would. If you would free up £300 a month, sell the car now. If you would only free up £50 a month, keep the car and sell when you are nearer your goal. Most of the depreciation has probably already happened (I know nothing about cars...), so you'd only lose a little bit more by selling a 2 year old car instead of a 1 year old car.

[Dod101]

Hi guys,


I am 22 years old I am currently employed full time. My goal is to get a mortgage ASAP. I purchased a golf gti a year ago and spent loads of money on it. I could never get that money back even if I sell the car. Now I pay £400 a month for it I could afford it but then I want to save up as much as possible. If I sell the car the money could go towards my deposit but I love the car also if I keep it I’ll carry on spending money on it. I’m confused I don’t know what to do. Have any of you guys been in a situation like this? If yes what did you do?

The most sensible thing to do is, if you have a well off grandparent, persuade them to help you out. If you came to me, I would say sell the Gti and buy a Ford Fiesta which I will pay for. Put whatever equity you have from the sale of the Gti towards the deposit for a mortgage. You will save on running costs and a Fiesta will get you from A to B just as well as a Gti will. You may lose 'face' with your mates but so what? You'll get over it and then you can put the monthly savings aside towards that deposit that you need.

If you do not have a well off grandparent I would still sell the Gti and buy the Fiesta but you will need to finance it yourself. It will still be a lot cheaper than the Gti to run though.

Dod

[GrahamPlatt]

I’d suggest you read Rich Dad, Poor Dad. It’s badly written, but full of good sense and highlights the difference between assets and liabilities. The car is in the latter category.

[Charlottesquare]

It seems to me that your goal is actually to have a nice car, and the goal to get a mortgage ASAP is of secondary importance.

I think you are mis-reading the situation. Owning a Golf GTi is an old goal now achieved. The new goal is to get a house using a mortgage. (I'd suggest few people have 'getting a mortgage' as their primary goal, rather it is a tool to achieving the goal of home ownership.)

The trouble is, cars are something of an impediment to achieving true wealth. I remember a social meet-up of the TMF property board members many years ago and it was amusing to note that there were a number of property millionaires sitting around the pub table yet the sum total value of the cars we'd all turned up in was probably less than about £15k. The richest man I ever met (an Arab sheik) liked routinely to drive around Windsor in a rusty old Ford Sierra.

Yes it's nice to have a posh car but once you can afford one really easily, the desire to own one seems to evaporate for some, if not many.

Agreed. A friend of mine , Colin, now long deceased worked as a salesman in a local Ford dealership.

He one evening whilst we were all in the pub pointed out that most people think their home is the most expensive purchase of their life, his observation was that the habitual changer of cars every three years spends far more on cars through his life than most people spend on their home.

I have not done the exact maths re our house but know we paid on average £12,000 pa for 25 years to buy it (edit- plus a £30k deposit), a total cost of circa £330,000, the house is now worth nearer £500,000 so he was correct, it has cost us nothing.

I have only ever bought two brand new cars in my life, one from Colin ( 1990 Escort Eclipse, great trade in and interest free HP if we put down in total 50% of cost,) the other was buying a brand new Fiat 500 for, net of government scrappage £2,000 , £6,600 in 2009.

[Lootman]

The trouble is, cars are something of an impediment to achieving true wealth. I remember a social meet-up of the TMF property board members many years ago and it was amusing to note that there were a number of property millionaires sitting around the pub table yet the sum total value of the cars we'd all turned up in was probably less than about £15k. The richest man I ever met (an Arab sheik) liked routinely to drive around Windsor in a rusty old Ford Sierra.

Yeah, unless you know what you are doing and buy collectors' cars that will appreciate, and can do your own repairs, then you are almost guaranteed to lose money on vehicles, especially new and/or fancy ones. Houses, on the other hand, are an investment that longer-term will pay for itself and more. I have always driven cars that many would consider "old bangers". They were decent cars (e.g. MGs, Volvos, a Jag etc.) but were all several years old when I bought them.

Whether the average 22 year old man thinks that way is another matter of course. I never helped my kids buy a car, but I did help them buy their first house each, which was a six figure gift, each.

[PhaseThree]

You have the rest of your life to worry about mortgages, pensions, kids education and other such fripperies and nice to haves. Being old and sensible creeps up on you without forcing the situation.

You are only 22 once - enjoy being young and enjoy the car.

[Lootman]

You have the rest of your life to worry about mortgages, pensions, kids education and other such fripperies and nice to haves. Being old and sensible creeps up on you without forcing the situation.

You are only 22 once - enjoy being young and enjoy the car.

Sure, but that is not something you can teach them anyway.

In 2015 at age 26 my youngest son bought a 4-bed flat in London, with my help. He immediately turned around and rented out the spare 3 bedrooms to flatmates his age, and collected about £2,000 a month in rent from them. That made a huge and immediate difference to his finances, which in turn enables him to buy and run a better car than he could otherwise.

His ability to see that way forward was rewarding to me, as I felt I had helped him financially and in terms of opportunity and learning.

[Urbandreamer]

I’d suggest you read Rich Dad, Poor Dad. It’s badly written, but full of good sense and highlights the difference between assets and liabilities. The car is in the latter category.

I would second the idea of reading it, but please take it with a pinch of salt. Some good ideas/insights but a number of fictions (artistic license) and he gets significant income from books, courses and seminars.

Re car's, I took out a loan to buy a car when I was young. Rote it off quickly and bought a clunker, that someone else wrote off in a matter of months. Then bought a fast car with all that on my insurance history!

Financially not a good idea. So I can't say "I would never", though I can say "I would advise against" or "I won't do it again".

Ps, it cost me 3x to insure the fast car (Ford Capri) as it cost me to buy it!

[Lootman]

it cost me 3x to insure the fast car (Ford Capri) as it cost me to buy it!

Plus how many speeding tickets?

[Urbandreamer]

it cost me 3x to insure the fast car (Ford Capri) as it cost me to buy it!

Plus how many speeding tickets?

Actually I never got one and still have not. That car was a lot of fun. My wife still tells stories of the few times she drove it. Overtaking a tractor, shift down and put your foot down, by the time your past you're doing 60. This was when the road sign did mean unregulated speed limit, rather than "don't drive faster than 60".

[Dod101]

You have the rest of your life to worry about mortgages, pensions, kids education and other such fripperies and nice to haves. Being old and sensible creeps up on you without forcing the situation.

You are only 22 once - enjoy being young and enjoy the car.

I was tempted to say that as well but I am not sure that is good advice for the OP who seems very torn. Young people nowadays tell me that many young people do what he has just done but come badly unstuck if/when something goes wrong with the pride and joy having no other assets and has been pointed out, it is very much a losing asset.

Dod

[Gerry557]

Hi guys,


I am 22 years old I am currently employed full time. My goal is to get a mortgage ASAP. I purchased a golf gti a year ago and spent loads of money on it. I could never get that money back even if I sell the car. Now I pay £400 a month for it I could afford it but then I want to save up as much as possible. If I sell the car the money could go towards my deposit but I love the car also if I keep it I’ll carry on spending money on it. I’m confused I don’t know what to do. Have any of you guys been in a situation like this? If yes what did you do?

Its about balance and priorities. How much do you need to save to obtain your mortgage? How much are you saving? That should give you a timescale to be able to get your mortgage, which really means House.

If the timescale is too large, then you need to see what can be done to close the gap and at the expense of what. You seem to think getting rid of the car is a possible option. Do you need a car so are you downgrading or getting rid completely so no on going costs of ownership. Offset that with other transport costs if there are any. Buses, trains, taxi and or petrol money to a mate.

Are there other outgoings you can save? Then recalculate the timescale. Is this now more doable with the associated temporary hardships.

You have to think that house prices might rise over time too if you dont take action or at least you will be in a better place if they fall if you have a deposit. Can you buy a GTI later if needs be?

When starting out, I too downgraded my car, I still needed one unfortunately, changed my lifestyle (less nightclubbing and beer) lived with parents cheaply etc to build our pot. I knew it was a temporary situation and a means to an end. I remember a work colleague commentating on how I could afford to get on the housing market as he couldn't and we were on exactly same salary. I told him he could afford it but he said the same thing about getting a sufficient deposit. He drove an Astra GTE which was worth the same as the deposit needed but said he wouldnt sell. I wonder if he ever got on the housing market?

I would have thought insurance would be a big issue for that car at 22

[BigB]

IMO having the car at 22 is not necessarily a problem, but being unable to stop hosing money on it is. You could keep the car (Golf GTI?) legitimately as an all time classic (unless it's a mk3/4) and just run/maintain it

Continuing spending money on it freely is both a financial and behavioural issue, which will be incompatible with having a mortgage, generally.

I had a couple of fun cars in 20s, but mortgage/family/etc cut in mid-late 20s. In my 50s now, just approaching my 2nd mid life crisis car selection.......

Good luck with your decision - well done for seeking input.

[dealtn]

You have the rest of your life to worry about mortgages, pensions, kids education and other such fripperies and nice to haves. Being old and sensible creeps up on you without forcing the situation.

You are only 22 once - enjoy being young and enjoy the car.

Conversely you only get to retire once, so make it as long and enjoyable as you can. Early repaid mortgage, large enough pension to retire early, well educated children in high income jobs to look after you ...

They might be fripperies to you, but to me they are more than nice to haves. A car at 22 for me was sharing my mum's, and certainly nothing more than a practical A to B one.

Guess we are all different, so deciding which set of "fripperies" to have is a difficult one for some.

[DelianLeague]

Your question at the end of your post was "have any of you guys been in the same situation"

I don't know if its a generational thing but for me it is no. I never had any money when I was 22 but also I have never been materialistic especially when it comes to cars. I used to buy old reliable models and maintain them myself. I consciously taught my brain to dislike cars and my attitude towards them is that they are a necessary evil. I never get attached to them and I only see them through a practical lens such as a way of getting from A to B.
I use mine to go to work.
I have had my present practical car for 14 years and I owned my previous car for 15 years.

I worked in a manual job in a factory and I decided that this is a hard life and what little money that I had would only go into assets and not liabilities.

Good luck, D.L.