Two years ago I acquired my Nissan Qashqai. I love this car dearly. It has cameras to help me to park in tight spaces, is big enough to fit my children’s bikes, scooters and ginormous teddies, and is also new enough to not fall apart. Or so I thought.
In the 730 days I’ve had this car I have had to: change all four tyres; replace the battery; fix all the wipers; and have the engine stripped and repaired.
I’ve gone from being someone who knew nothing about cars to someone who knows an awful lot about valve failures and cylinder compression issues. I’m also best mates with my mechanic.
What a dud. I never needed anything fancy, but is it too much to ask for a working car to ferry my children around?
At least I’m not alone in my car woes. Car insurers paid out £3.2 billion in claims during the first three months of this year, the highest quarterly payout since the Association of British Insurers started collecting data in 2013.
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The soaring cost of repairs is one of the main reasons behind the increase — amounting to £2.1 billion between January and March. Across the whole of 2024 they cost insurers £7.7 billion, up from £4.7 billion in 2022. More expensive parts and labour are one issue but it’s also that modern cars are no longer built to last and are extremely complicated to fix.
For example, wing mirrors have evolved to include actuators, motors, lights, signals and sensors to enhance functionality and safety. This trend of technological advancement can be seen in every part of a vehicle, from bumpers to windscreens, making modern vehicles more sophisticated but also significantly more costly to repair.
Covid only exacerbated the issue. A friend who has a car made in 2022 was told by her garage that all the vehicles built in the aftermath of the pandemic will soon fall apart — if they haven’t already — as they were built using spare parts due to a massive shortage.
Having a car that breaks down regularly is not cheap, even if you have insurance that covers some of it.
Despite having a special insurance policy covering repairs, my broken engine still cost me more than £1,000 after factoring in items not covered. All in the name of car ownership!
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No wonder the car finance industry, where you can essentially rent a car for a couple of years, is booming. About 240,000 new and used cars were bought on finance in March, according to the Finance and Leasing Association, an industry body, up 11 per cent compared with the same month last year and the biggest rise since February 2022.
The most popular option for new cars is a personal contract purchase (PCP) plan. Repayments are cheap because you only cover the interest on the loan and the depreciation in the car’s value (some lenders offer interest-free deals too, so you only pay for depreciation). At the end you can choose to pay a “balloon payment” based on the car’s value to own it outright or, more commonly, hand it back and use any equity as a deposit for a new model.
And because you’re getting a new car it is still under warranty, which means that if your engine fails it’s the manufacturer’s problem. Warranties on new cars typically last for about three years — and given that this is usually how long a finance deal lasts, and how often you change your car, you can make it so you are unlikely to get caught out.
It’s a similar scenario if you lease. Any issues and you can just send it straight back to the manufacturer. (Note: you still have to pay for car insurance, breakdown and MoTs.)
Car finance could be cheaper than using a bank loan. The average rate on finance for a new car is 5.4 per cent, according to AutoTrader, compared with 8.3 per cent for a £25,000 personal loan from a bank, according to the financial data firm Moneyfacts.
Now you could say you don’t necessarily get to keep the car and that you’re simply throwing your money away (unless you pay the balloon payment to get the car at the end of a PCP contract, which most people don’t).
But is owning one really that important? Just like renting a house, if the boiler breaks it’s your landlord’s problem, not yours. But while it can be argued that home ownership is a good investment because property prices tend to rise over the longer term, the opposite is true for cars.
I have always been in favour of buying something outright but my latest bill for simply keeping my car on the road has pushed me over the edge.
Depreciation and repair costs? No thank you. Next time I’ll get a car on finance.
Do you think it’s better to buy a car outright? Let us know your thoughts in the comments
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.