The debt trap – or, what you give up to own a car…

We’re going to let you in on a little secret. Despite being “Cardiff By Bike”, up until 2017 we had been paying off a car loan.

Heresy, you may say, but life was very different five years ago and it seemed like a good idea at the time. However, hindsight is a wonderful thing…

Living and learning

Whether we like it or not, we’re all facing a very uncertain future. Whilst we’re not talking about the whole EU thing right now, it’s one variable we need to consider. However, the other major variables we need to consider are automation and that much of our economy is based on conspicuous consumption, unsustainable production and fundamentally, debt.

There may well be some lean times ahead as jobs are lost; as buying power is diminished and; as the current economic model receives a significant shakedown. Many of us may find ourselves tightening our belts as we settle into whatever it is that will replace the economy we have.

This brings us onto the car. After a few years of owning a succession of rust-buckets with annual MOT bills that were far more reliable in the financial devastation stakes than the cars ever were as transportation, a new car seemed like the wise choice. As luck would have it, the finances worked out and a very nice Suzuki Swift was acquired.

Here’s the thing. When you are on the forecourt looking at the new shiny thing that isn’t supposed to break down, you don’t really think about the money too much. You sit in the dealer’s office, handing over details of where you’ve lived, where you work and all that usual credit-check stuff. You hold your breath for a few seconds as the finance application goes through and you get a yes or no at the end. You sign a few forms and that’s that.

It’s only after you’ve taken delivery of the car and the first payment is unceremoniously lifted from your bank account that it hits you exactly what you’ve taken on. Now, the little Swift was a pretty cheap car in the grand scheme of things, at a little over £11,000. However, with a relatively small deposit and with the interest on top the payments worked out around £220 per month…over five years. The insurance worked out around £40 per month…because…ageing.

Of course, for the first three years of that there’s no MOT to worry about, but then again you are expected to service the car. Mercifully Suzuki is quite reasonable on the service front, but that’s still £200 per year (or £15 ish per month).

So, for argument’s sake we’ll call it £275. Now £275 per month is £3,300 per year, or to put it bluntly, probably bigger than your annual pay rise —if you still get one. Over five years these monthly payments add up to £16,500.

Believe it or not, you can do quite a bit with £16,500, including some pretty epic holidays or buying a new kitchen if you are lucky enough to afford your own home. You could also pay for your child’s first year of university…almost.

You could also work less and spend more time with your family; experiencing new things or seeing new places.

Of course, we are forgetting fuel. You may go through one, possibly two tanks of fuel per month at say £45 a pop. Let’s add on another £1,000 per year for fuel. We’re up to £4,300 per year now, or £21,500 over 5 years.

Working on the basis that none of us is blessed with immortality, if you had £21,500 burning a hole in your pocket and you could blow it on something memorable, perhaps something that would define your existence on this planet, we very much doubt that a 5-year-old car worth a fraction of what it used to be would be quite what you had in mind.

Then there is the depreciation. The moment you drive off the forecourt a new car loses value and never stops losing value, meanwhile the rigours of living in an Oxygen-rich environment start to work on your new shiny. Rust and corrosion will start to reclaim the metallic parts until you have to pay someone to take it away. Some cars will lose value almost as fast as the capital on your car loan and it is not unheard of to be in negative equity on your car!

But I need my car…

Do you?

Whilst we will concede that if you do travel out of Cardiff into somewhere more rural, you may well need a car. Rural public transport is, after all, hopeless. We are very fortunate that we are not Rural Powys By Bike. However, if you live and work within Cardiff, chances are you may be making a few excuses to use your car if you have one.

You may find yourself driving to the local shop or driving a couple of miles across Cardiff to work. Culverhouse Cross to Pontprennau is a 9 mile cycle ride; Tongwynlais to Cardiff Bay is also around 9 miles. You probably can manage without.

On the other hand, an all-you-can-ride annual bus pass with Cardiff Bus is £715 per year, or £61 per month on a direct debit. If you are in the frozen north, or beyond Tongwynlais, that’s £63 per month with Stagecoach. We’re recommending the bus because getting on a Valley Lines train these days is considered an extreme sport…and it’s more expensive.

So, take £715 out of that £4,300 and you are left with around £3,500 to play with. Even if you are a family of four it’s only £2,350 per year, leaving you with just under £2,000 left over from the £4,300 you would have spent.

There will of course be times when a car simply makes the most sense. For us it is taking three cats to the vet for their jabs, but on those occasions you can rent a car rather inexpensively for a few hours. £50-£70 for an ordinary hatchback when you are no longer spending thousands paying to own a car should be a drop in the ocean.

Alternatively, spend that money on bikes for the whole family. We are a cycling website after all.