The flash that will cost you a lot of cash: New financed cars

Financed cars are becoming ever more alluring to young people who have recently got on the job market, a chance to drive around in a brand new car, looking cool amongst friends etc... You regularly see adverts on the TV or on billboards saying 'Buy now for only £75 per week'

On the surface this can look like a reasonable purchase, especially in a £15-£20k starting salary job with no outgoings. However I would argue the exact opposite.

I have done a bit of light research and looked at the figures and was shocked by how mad of an investment financed cars are.

I looked at a BMW 116 d as I regularly see people driving around in these around my home town who can't be any older than 22.

An initial deposit on the vehicle was £299 with monthly payments of £348 (Inc interest) over the course of 47 months. On a car that is worth £22,359.39, that works out at a total price over the 4 years of £25,379.95 (With a one off payment of £8707.50). Already a loss of £3,020.56 on interest payments.

Of course the argument you could say is that after the whopping £25,379.95 price tag, you still retain the car at the end of it which is an asset and has a resale value. I then looked at the equivalent model but 4 years old, to come up with a rough estimate of how much the car would be worth after the 4 years. I found the model up for £7,595.00, which would mean the buyer of the car would have lost £17,784.95 by the end of the 4 years due to interest payments and depreciation.

Which is probably around a years salary for the young buyer after tax.

My advice: buy a second hand car, go travelling with some of the savings and stop wasting your hard earned money on materialistic products.

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The figures break down: 

BMW 1 SERIES 116d

£300 deposit
Loan payments £16,373.45

Baloon payment at end £8707.50

Total payable: £25,378.95
47 months of £348.37

Value of 4 year old equivalent model: £7,595 with 37,000 miles on the clock.

Total cost of car = £25,379.95

Depreciation loss = £14,764.39
Interest payments loss = £3,020.56

Total loss of capital = £17,784.95 @ end of 4 year term.  

Student Finance’s Ignorance to London-Living

As a student studying in London, I am fully aware of the costs incurred in living in the country’s capital. However Student Finance missed the memo.

Student finance gives loans to students based upon their parent’s household income, this allows for poorer students to receive a larger loan whilst also getting some free money in the form of a grant, to ensure that they are able to get their degree.

Another criteria that changes the amount of the student’s loan is whether you are living in London or not. Student finance’s largest maintenance loan available outside the capital is £5,555 in comparison to £7,751 for the contrary, modest 39.5% larger.

MAXIMUM MAINTENANCE (LIVING) LOAN

Academic year	Living with parents	Living away from home	Living away from home (London)	Living away from home (overseas)
2012/13 and 2013/2014	£4,375	£5,500	£7,675	£6,535
2014/15	£4,418	£5,555	£7,751	£6,600

You may think this is quite a lot and could more than cover the extra costs.
But you couldn't be more wrong!

The main out goings for a student will of course be the price of his/her rented accommodation, and this will be expected to mainly be paid for by his/her student loan. 

So let’s have a look at average rental prices in London and in the rest of the UK.

This shows average prices for a 2 bed flat in greater London (orange) compared to outer London average (yellow).
- Per person per week in London in May 2014 it cost £155.
- The average outside of London was half of that (£77.50)

Over a university term (42 weeks) the two would pay very different prices for their accommodation.
- Non-London student: £3,225
- London Student: £6510

Deducting the rent from the student loan, the two students after rent would have very different personal finances, the non-London student would have £2,330 left over to contribute towards living costs whereas the London student would have only £,1241 – nearly half of the non-London student.

This is even more shocking as the price of living is more expensive in London, so the London student is even worse off than just the hit they take from the high property prices.

But who ultimately pays this deficit of funds? The parents.

Therefore Student Finance England truly fails those students seeking a top class education from the country’s capital and the parents of these students.

Personally I would like to do a study into how much of a financial strain student finance’s cock up is on families with children that go to London universities, however I don’t have time – I've got to hunt for a job.