Millennials more likely to face financial issues after buying used cars
Around three in three in ten people have found themselves facing monetary troubles after committing too much of their savings to buying a used car outright, with millennials the ones most likely to face money issues, according to new research.
Millennials are far more likely to express regret at buying a used car outright than other age groups, with 48% of 18-24 year olds and 50% of 25-34 year olds running into money trouble after buying a used vehicle, AA Cars has found.
Of those who used their own money to pick up second-hand cars and then found themselves in hot water, 55% say they had to dip into savings put aside for something other than a car, while 35% say that the purchase left them without a rainy day fund.
A further 33% admitted that buying the car meant they had to cut back on recreational expenses like nights out and gym memberships, while a quarter (24%) said that it meant not taking a holiday.
James Fairclough, CEO of AA Cars, commented “Lots of drivers prefer to use their own savings to pick up their next car as they might be reluctant about having any ongoing financial repayments, paying off interest or having a commitment on their credit score – but there can be downsides to relying purely on your own cash to buy your next car.
Usership vs Ownership
The research comes after our own look into the millennial phenomenon. In the US, there has been a 46% jump in leasing by millennials over the last five years, and the UK is beginning to follow suit. So why are millennials turning to leasing?
They’re more used to not owning things outright, for a start. They will pay a monthly subscription for their films, music and smartphone. Many rent the property they live in, and they see nothing wrong in using credit to pay for holidays and other luxuries.
Commenting on the research, Fairclough added: “Buying a car outright can be a great option for many, but you should be careful not to dedicate all your savings to one single purchase and potentially leave yourself short further down the line.
“Unfortunately in some cases, spending your cash savings on a car might mean depleting your rainy day fund and having to seek another source of finance should you need to call on emergency rations. This can be problematic as unsecured loans from the bank can be tougher to justify than a car finance loan.”
Have you ever got into difficulties buying used? Got any horror stories? Let us know in the comments below.