As you may or may not have worked out I’m not a huge fan of car finance deals and PCPS’s. They trap many people into incredibly expensive finance deals and burden them with huge monthly payments. They are inflexible and unnecessary. Most of the recent tech with cars is tech for the sake of it! I’d much prefer to have the money in my pocket to shape my life in different ways.
In the years of low interest rates, you could argue that having a brand-new car with a monthly payment was worth it. I think those days are gone now. Your typical car finance is nearly 6.9% and many families face the burden of hefty car finance payments, often exceeding £400 per month. With rising living costs and the growing cost of living crisis, more people are questioning whether a new, financed car is truly worth the expense. I would recommend all families question the popular narrative and look at the difference it could make to their lives if they opt out of this.
Families can enjoy significant financial, health, and social benefits by opting for a reliable second-hand vehicle and incorporating cycling into daily routines.
Let’s explore this transformational shift in depth and provide several scenarios to help you make what I believe is a life-changing decision for your health and your wealth.
Financial Benefits of Switching to a Second-Hand Car
The typical scenario: A four-year car finance deal with an average monthly cost of £400 (including interest at 6.9%) equates to £21,456 over the term. Once the agreement ends, you’re often left with a balloon payment of £10,500 or the need to upgrade to another finance deal.
Many are pressured into this due to not wanting to pay the balloon payment or believing the waffle from the sales manager that the car will begin to pick up faults once it gets over 4 years of age. There are scenarios where this may be the case but the average car in the UK drives between 5,000 and 8,000 miles per year so for the vast majority of the UK population this just doesn’t apply.
The alternative: Purchasing a second-hand family car outright for £8,000 or less.
Example cars under £8,000:
- Volkswagen Golf (2015, estate model): Practical for a family of four, reliable, and economical.
- Ford Focus Estate (2014-2016): Known for its spacious interior and affordable running costs.
- Skoda Octavia (2014-2016): A great all-rounder with excellent boot space for family trips.
Note: I would add that these cars are on the ‘extremely cautious side’ and a far newer model car could be purchased. This is just an example for the purpose of the exercise.
Cost Comparison Table
| Expense Category | Financed Car (£35,000) | Second-Hand Car (£8,000) | Savings in 4 Years |
| Purchase Price | £35,000 | £8,000 | £27,000 |
| Deposit | £3,500 | £8,000 (outright) | -£4,500 |
| Monthly Payments (£400 + interest at 6.9%) | £21,456 | – | £21,456 |
| Final Balloon Payment | £10,500 | – | £10,500 |
| Maintenance & Repairs | £1,200 (warranty-covered) | £2,000 (estimate) | -£800 |
| Residual Value After 4 Years | £17,000 (trade-in value) | £3,500 (depreciation) | – |
| Net Savings | – | – | £28,656 |
What Could You Do With the Savings of not having car finance?
Invest into an Investment ISA:
- By investing the £28,656 savings into a broad-based index fund with an average annual return of 7%, you could grow this amount significantly.
- After 10 years, this investment could be worth approximately £56,250, creating long-term financial security for your family (based upon not contributing any further).
Take a Family Holiday to the South of France:
- A two-week camping holiday in the South of France for a family of four typically costs around £2,000, including travel, accommodation, and food.
- The savings could pay for 14 years of annual holidays to create unforgettable family memories.
Upgrade Your Home:
- Use the savings to fund a much-needed upgrade, such as a new kitchen or bathroom. A high-quality kitchen renovation can cost between £10,000 and £20,000, making this an achievable goal with these savings.
Work-Life Balance:
- The financial savings of £7,164 per year (on average) could enable someone to reduce their working hours and go part-time.
- The average UK salary is around £33,000. Dropping to a 4-day workweek might reduce income by 20% (about £6,600), but the savings could comfortably offset this loss.
- Benefits of this include more time for family, personal hobbies, and improved mental health.
Of course, the financial benefits are quite clear when looking at the numbers but what does cycling have to do with it? Well, cycling offers a further dimension to an already compelling argument and this is in the shape of shorter journeys.
Cycling as a Viable Alternative for Short Journeys
Incorporating cycling into school runs and local commutes offers tremendous benefits. Let’s examine why cycling just one mile each way, daily, can make a big difference.
Health Benefits
- For the Parents:
- Cycling burns approximately 50 calories per mile for an adult, leading to improved cardiovascular health, weight management, and reduced stress levels.
- Regular exercise enhances mental health, reducing risks of anxiety and depression.
- For the Children:
- Builds fitness and stamina while reducing risks of childhood obesity.
- Fosters independence and road awareness skills when cycling with adult supervision.
Research of fresh air first thing in the morning gives children a cognitive boost. It’s an incredible way for a child to start the day given most school time is spent cooped up in a classroom.
Social and Environmental Benefits
Meet the Johnsons
Before: The Johnsons financed a new SUV for £450/month, including interest, over four years. This amounted to £21,600 in payments. At the end of the term, they opted to hand the car back instead of paying the £10,500 balloon payment. Rather than entering a new finance deal, they decided to purchase a second-hand 2015 Skoda Octavia for £7,500.
After: With the extra savings, they bought two second-hand adult bikes (£300 each) and a child’s bike (£150), totalling £750. Now, they cycle to school daily and use the car only for longer trips.
Outcomes:
- Saved over £23,850 during the potential second finance agreement term as they chose to purchase a second-hand car instead of signing the new finance deal.
- Both parents lost weight and reported improved mental health.
- Their children became more active, confident, and engaged in outdoor play.
Note: This calculation excludes maintenance, taxes, and insurance for both scenarios.
Summary: Why This Switch Makes Sense
I think as a country the UK has commoditised the humble car. What is arguably one of the best inventions in history enabling adventure, work and family connections to grow has become a financial burden for many households. What once ‘may’ have made financial sense no longer does due to the increase in interest rates and many are trapped within finance deals; limiting their life options.
By swapping a financed car for a reliable second-hand model and incorporating cycling into daily routines, families can:
- Save thousands of pounds over the subsequent years.
- Improve their physical and mental well-being.
- Strengthen family bonds and contribute to environmental sustainability.
- Build strong, resilient, self-sufficient children.
- Change their entire life for the better.
It’s a simple yet impactful lifestyle change that frees families from financial pressures while promoting a healthier, happier way of life. Why not start today?
Last Updated on January 29, 2025 by Ryan
Hello. I am Ryan and along with my wife Beth and our two children Matilda and Barney, we love all things cycling and exploring. We spend our weekends exploring fun places to cycle and discover and wanted to help other people do the same too. There’s no better way to travel than via bike and it’s an amazing activity for the whole family to enjoy.