≡ Menu

Rollin Rollin Rollin

Last week1 the Money Tree household has been carless. After driving to the start/finish point for our Sunday morning walk we both noticed a distinct burning smell once we got out of the car. Doing my best to ignore the problem we were sitting on the tail gate putting on our walking boots when I noticed some smoke drifting over my left shoulder.

Despite being mechanically dyslexic, even I know that’s not supposed to happen. After watching the smoke get worse I decided pouring some water on the brake cylinder was required and thankfully we were parked next to a small stream!

To cut a long story short after a tentative drive to the local garage, they could not find the problem. After cleaning the dust from the cylinder, the car was dutifully picked up and driven back to base. As soon as I got home and stuck my head under I noticed a small brake fluid leak so back to the doc it went. So, after 5 days and one new fluid pipe and we’re finally driving again, uncertain that the cause of the smoke had been resolved.

The main benefit from being car less for a week was that it gave me a fantastic excuse to cycle to the train station everyday. The journey is only 4.5 miles but I always take a longer scenic route which makes it at least 12 miles each way, sometimes 20.

After a week of multiple trips and calls to the garage I got thinking about whether our strategy of owning a small (0.9l engine) old (16 years) car is an economical one.

How do you roll?

I’ve recently discovered a couple of friends/colleagues recently that lease their cars. Essentially paying a monthly fee for a lease that is essentially a long term car rental agreement.

If I were to lease a Fiat 500 from Ling’s (you really should follow that link, if only check out the incredible website design) it would cost just £125.50 per month including VAT. Let’s say my NISA portfolio returns 5% per year, I’d need approximately £30,000 invested to be able to pay for the lease out of the dividend income. Two years worth of NISA allowance (2 x £15,000 = £30,000) yielding 5% per annum would be enough to lease a Fiat 500.

Assuming income returns grow in line with inflation I could effectively use two years worth of NISA allowance to keep me in a lease car for the rest of my driving career. That’s worth thinking about….

…until you factor in that you could buy a brand new Fiat 500 for £9,655 inc VAT. So after 6.5 years of leasing one I would have lost.

So before you go spend your hard earned cashbuying a new car, remember that every idiot knows that buying a new car is a sure fire way to lose 10-15% of the value the moment you drive it off the forecourt. For example you can buy a second hand model from a FIAT dealer with 25,000 miles on the clock for £6,500 – that is only 4 and a quarter years of leasing one. In other words leasing is a bit of a mugs game.

If you’re a car snob and don’t like buying second-hand then go buy a new Dacia Sandero for £6,000. That’s not a lot of $ for a new car. For the same money you could:

  • lease a Fiat 500 for 4 years
  • lease a Range Rover Sport 5l V8 for 3 months!

The value gap between a Dacia Sandero for life and a Range Rover Sport for three months is massive. To me this highlights the huge financial trap that car ownership can be.

After getting a decent pay rise at work several years ago I remember my sister advising me to buy an Audi TT! After some brief thought I opted against it and instead put the extra money towards my first buy to let investment.

What a decision that turned out to be.

If I’d got hooked into upgrading my car every 3-4 years like many of my friends I’d likely be a lot worse off than I am now. Instead I own an asset that will one day (when I finally decide to pay off the mortgage) provide an income over £800 per month that will rise with inflation. I dread to think about what would have happened if i’d bought that Audi on the never never like most people do.

The Way We Roll

Unlike some of the school run mob TEA mentions, the bling factor isn’t an issue for us. We have (by a long shot) what most of my fellow commuters would describe as the ‘worst’ car in the car park.

You may need to de-ice the inside of the windscreen on a winters morning but to date our Fiat Panda has done us proud since my wife (foolishly) bought it new2 12 years ago. It starts in the mornings, it gets us to where we need to go and we even once managed to move house with it (boy that was a long weekend!). It may not cut the mustard to the playground mums but it’s everything a car should be and easy on the walet to boot.

Insurance is £120 per year (third party only, no fire or theft3), it’s so small you can park it anywhere and there is minimal amounts of electronics on-board that usually lead to expensive hard to diagnose repairs. Repairs are cheap, it sips fuel rather than drinking it and frankly it’s size and power encourage the avoidance of long road trips!

I love cycling so a 100 mile round trip to my fathers house for Sunday lunch may as well be done on a bicycle rather than a car. When your car isn’t a blingmobile it encourages you to cut down on unnecessary journeys, get about on your own power which increases the longevity of both you, the car and your bank balance. Literally everyone is a winner.

Every day as I stroll through the station car park I walk past rows and rows of cars costing £25k, £35k, £50k and much more in some cases. I always wonder if the owners of these motors understand the true cost they’ll ultimately pay for owning these machines. When the time comes for me to tear up my season ticket I suspect the vast majority of them will still be paying off the loans on the Range Rover.

Hell, even the little gaggle of teenage boy racers that often hang out in the station car park send smirks my way as I walk past their suped-up Corsas and head for the Panda. Every time it happens I think about that Audi TT that never was then the house with my name on the deeds that sends me a pay check every month.

So I’m interested to hear how you other FI nuts roll?



1This was actually about 3 weeks ago now, it’s just taken me a while to finish writing this post!
2Just before we met
3Let’s face it nobody is going to steal this thing and ignoring our smoking brake incident, how many cars do you see catch fire?


{ 22 comments… add one }
  • The Escape Artist October 8, 2014, 11:03 am

    In ridiculously decadent LUXURY with a Skoda

    • Under The Money Tree October 8, 2014, 11:17 am

      An excellent choice. They’ve certainly improved from the Panzerwagen (Skoda 120) my late Grandad used to roll in. The fact that many of the Tour de France teams use them makes them an excellent choice in my book!

  • Matt DB October 8, 2014, 11:10 am

    Mazda 5. We do need it for the school run, quite economical (I think MMM highlighted it as a good family option once, to my satisfaction!). If I need to start going to the City again I think I will be tempted by a moped for the station run, friends of mine swear by it.

    • Under The Money Tree October 8, 2014, 11:32 am

      Matt DB,
      Mazda, another good choice. Strangely my late grandad used to roll in a Mazda too (an 818 to be precise), he obviously had good taste in cars!
      I used to ride a scooter around London. It’s ideal: cheap, fun and quick, thoroughly recommended.

  • ermine October 9, 2014, 2:56 pm

    Oh boy, that Ling’s website is really something else – it’s like the 1970s on acid…

    I have owned five cars since 1986 – I’ve never bought new and never paid more than £5000 in real terms for them. And yeah, prized performance of sorts with the madness of a 2 l engine in my mid 30s but got it out of my system. Two I scrapped at end of life and I sold two. And after stupidly buying the first one with a loan always paid cash through the simple process of starting to save for the next car as soon as I bought one.

    I’d be able to go into a car dealership with the money to buy a new one (isn’t it amazing how much cheaper cars are now than they used to be?) But I just don’t think I’d be able to open my wallet to actually conclude a sale!

    • Under The Money Tree October 10, 2014, 12:41 pm


      I love Ling’s site. Maybe I’ll bear it in mind next time UTMT needs a new look!

      It sounds like I’m following you down your automotive path. I could never bring myself to buy a new car unless I was really stupid rich. Maybe I’m just (financially) lucky that I don’t have cars as a passion like some people do. Hell, I’ve even started driving like a grandad to conserve mpg!

  • Craig October 9, 2014, 3:42 pm

    You make many good points in this piece but realistically it isn’t always as simple as you have put it. Many companies that pay a car allowance stipulate the age of the car and even have a say on the type of car you run along the lines of ‘your car should match the profile of your position’. Seems crazy I know but I’ve had it my employment contracts previously.

    Leasing can often seem like dead money and in many respects it is however, in my experience you get MUCH better finance deals purchasing new than you would buying second hand. In fact, some manufacturers actually subsidise lease deals in order to guarantee future second hand stock and get cars on the road. Merc are notorious for this. If however you receive a fixed monthly car allowance for a car that must be under a certain age then some lease deals can make sense.

    Nowadays I’m self employed. Given the distance I must travel for work a day without a car is a day without earning money. On top of this i love driving. Whilst I often think it would be great to run a super cheap car that is fully paid up I’m just not sure I can bring myself to doing it just yet.

    • Under The Money Tree October 10, 2014, 12:45 pm

      I fully agree that everyones circumstances (and passions) are different.

      Wow, I didn’t realise companies stipulate the age of car you musst acquire with a car allowance (never having had one). What sort of business do/did you work in?

      • Craig October 16, 2014, 12:15 pm

        I used to work for a few large construction companies. It’s quite common to have conditions imposed on the age / type of vehicle. They will generally insist on a 4 or 5 year age limit and some will stipulate a minimum number of doors / seats and also a CO2 emission limit dependant on grade.

        My brother is actually going through the very process of leasing now. He gets a monthly car allowance with all of the above stipulations and has looked at the difference between used / new PCP/HP and lease deals. He has found that lease deals work out cheaper per month than either of the other forms of buying purely due to the lower finance rates and the discounts that leasing companies can get from manufacturers.

        Either way you look at it leasing / buying is essentially dead money. Sadly now I just treat cars like a disposable monthly cost.

        Whilst I could easily go out and find a nice 5 or 6 year old 3 series (or whatever) he cars history is of a genuine concern to me. I’ve been on the end of a few very large bills before when I bought a car with crash history. It cost nearly as much as the car was worth to just keep me on the road.

        • Under The Money Tree October 16, 2014, 1:41 pm

          I’ve found the solution. Buy an old banger then put personalised number plates on it so they can’t tell how old the car is!
          Seriously though, it’s interesting to learn about these restrictions. As you say cars can eat your disposable income in a big way and the fear factor of buying a lemon drives people to spend much more on new.

  • weenie October 12, 2014, 5:45 pm

    It’s all very well paying less for a second hand motor but if you’re unlucky, you could end up with a real dud that could just give you endless problems in terms of repairs, breakdowns etc. You’ve obviously been pretty lucky with your Panda!

    Me, since I know absolutely zilch about repairing cars, I’d rather not take the chance so am willing to pay for a new car with trouble-free motoring. I always buy my car at the end of the lease and keep it until it’s no longer economical to do so.

    Leasing cars is bad if you’re looking at it from an investment point of view – it’s a total waste of money because of the car’s depreciation as an ‘asset’. It’s of course also bad if you can’t afford the lease payments and end up defaulting on the lease, or it stops you from saving/investing.

    However, I see leasing my car as paying for convenience. I’m still able to save/invest whilst paying for my current lease and when I pay off the lease (next year), I’ve got a little extra to invest each month. Also, new cars are more environmentally friendly, so my car tax is only £30 a year.

    However, I am open to not leasing my next car – I’ll just see what offers are out there when the time comes!

  • Sean February 6, 2015, 5:11 pm

    My old gas guzzling 1.8l vectra was unviable to repair a year ago with 155k on the clock. I co-incidentally invested in a Fiat Panda too (albeit a bit newer on an ’09 plate).
    Its great! Cheap tax, insurance, tyres and fuel economy means £1100pa extra in my pocket over the vectra.
    It can be made into a “big” car when needed by making use of the space from the high roof, no frills side panels, a cycle rack and roof bars! I’ll be driving my panda with pride for the next 7/8 years and 100k miles!
    To cure your “mechanical dyslexia” (unless its a phobia of getting your hands dirty), get a Haynes combustion engine model with your new bonus (consider it investing in yourself). Follow the instructions to build it and it will remove the mystery of a car engine. When a garage says “i’m afraid your big end has gone”, you wont have to wonder if he’s having a pop at your sexual prowess!

    • Under The Money Tree February 8, 2015, 11:56 am

      I like the idea of the Haynes combustion engine project to learn the basics! There is something to be said for small basic cars with less to go wrong, cheaper parts and much less expense. That said an ’09 plate is a little extravagant 😉 !

  • theFIREstarter February 8, 2015, 7:40 pm

    I love Lings website. That is a sheer work of interweb art!

    I’ve never spent more than £1300 on a car.

    Apart from my first 3 cars, which I will put down to inexperience and a silly youf boy racer streak (2nd car, Citroen AX GT – wrote it off with a crash), lack of options (first car, was a total dud), and not learning from my mistakes (3rd car, another Citroen AX GT, head gasket went about 3 times then scrapped it!), they’ve all lasted me at least 2 years and most I have sold on for around half the price I bought them for.

    I am not sure this is any more cost efficient than buying a decent 1 owner car for say 5K and keeping it for 5-10 years if you can?

    I would guess in depreciation my more recent cars have cost around £300 per year max. I can’t imagine you could sell your already used £5K car for £2K 10 years later (considering I am buying my ~10 year old cards at around the £1000 mark). So I would guess that depreciation wise it is best to buy much older cheaper cars and flip through them every 2-3 years and sell them before they get to scrap level, or make sure you really take care of them and get 5+ years out of them.

    Obviously you could argue that an old “banger” will have more repairs but any used car is a bit of an unknown quantity so I don’t really buy that argument.

    • Under The Money Tree February 9, 2015, 9:08 am


      It’s a fine line between buying a banger that soaks away your money in repairs and a second hand bargain. Speaking as someone who has pretty poor mechanical knowledge I think the only real way is to try and minimize the risks of buying a lemon. Things like buying from a private owner (who you can meet/question), look for full service history, do lengthy research on common problems with the make/model you’re looking for can all help minimize the risks.

  • RobS May 26, 2015, 10:21 pm

    Classic vehicle? Obvs depends on usage requirements but for some could be the answer.If you’re lucky and have basic mechanical skills then you may be able to sell for more or at least the same as you paid for it. Prob a bit ‘niche’ for most folk though – but it is possible…

    • Under The Money Tree May 27, 2015, 1:45 pm

      I like the idea. It’s something I’d like to pursue once I’m out of the rat race and have the time to tinker/fettle!

      • RobS May 27, 2015, 9:30 pm

        Being the age they are, these cars are usually very simple compared to modern ones. Also, the major ‘cost’ of running a vehicle is depreciation, so even if you shell out a relatively large sum for a good ‘sorted’ classic, you’re unlikely to lose due to depreciation. In some instances, it could even be classed as an appreciating asset – not something you can say about many newer cars! Same goes for motorcycles

  • Anon June 6, 2015, 6:55 pm

    I would regard myself as an FI fan but recently went against every piece of FI advice and bought a Jaguar XF (£33k) which will roughly cost me £500 per month.

    I suppose I can’t possibly rationalise this against the FI mindset. Instead, what I’ve probably done is just move away from FI itself slightly.

    I’m 25 and I’ve done exceeding well at saving so far in life, and have managed to save around £100k already. (I live in the North, so this does equate to a fair chunk of a house).

    However I’m single and have no need to own a home. I rent a houseshare room for £315 a month all in. I looked at my trajectory and was very pleased – but then a thought hit me. All I’m currently doing is scrimping and saving so that future self will have an extraordinary amount of money. What will he spend that on? Cars, is the answer.

    And would myself in 30 years time, in a Lamborghini or whatever, decide in his generosity to instead let younger self drive a nice car then? I’m confident he would. The idea of going through a self-induced poverty of X years of life (the important years, I’d add) and then having too much money sloshing around later on, suddenly seemed a bit arbitrary. So that’s what drove the jag decision anyway.

    (FYI – Total total income circa £3k. Rent & Bills £315 Car £500 Other £300.

    • Under The Money Tree June 9, 2015, 11:33 am

      You make a good point in that you need to get the balance right. Self induced poverty is certainly not something I advocate, it’s more about minimising unnecessary excess. Ironically the older I get the less I want a nice car of a flash watch. The more i value the simple things like a nice bottle of wine shared with close family or friends.

      Good luck and enjoy the new car!

  • Borderer June 30, 2015, 10:37 pm

    I once was given an excellent piece of advice from a car dealer owner who was a friend of my Father. Buy second hand, but always buy the ‘GT’ or ‘Sport’ model. He reckoned that generally everything is upgraded by the manufacturers (suspension, shock absorbers, clutch and the like).

    As long as you are not clobbered by the higher insurance premiums on this type of car, which fortunately I’m not.

    I’ve had several, and it is has worked out great for me.

    • Under The Money Tree July 3, 2015, 9:19 am

      Sounds like reasonable advise but wouldn’t the parts on these ‘superior’ models tend to be more expensive? Mind you if the parts are better in the first place then I guess they should last longer. The other thing that strikes me is ‘sport’ models would all tend to have bigger engines which tend to be less efficient. I like to drive like a Granny so small engines are fine for me 😉

Leave a Comment