Men are twice as likely to find themselves in this situation.
Almost half of young drivers are spending as much on car finance as they are on housing, according to new research. A study by gap insurance provider InsureTheGap.com found 47 percent of drivers aged 18-34 say they are spending just as much, if not more, on car finance than on rent or a mortgage.
In comparison, the study of 2,000 drivers found the same is true for just 24 percent of drivers aged between 35 and 54, while just 16 percent of over-55s are in that position. Men are almost twice as likely to find themselves spending more on their car than housing, with 33 percent of men in that situation. In comparison, just 18 percent of women are spending more on their car than their housing.
The survey also revealed more than half of all motorists (56 percent) “do not worry” about the total cost of a car when paying monthly as they know they won’t upgrade the car in the end. This was especially true for drivers aged 18-34, of whom 71 percent said that was the case. Among over-55s, that figure fell to 48 percent.
“Buying a car on finance may be a convenient way to get a new car and may feel like the only option for many young drivers,” said Ben Wooltorton, the chief operating officer at InsureTheGap.com. “But it could be too easy to lose track of the ultimate costs of motoring if people are only concentrating on the affordability of monthly payments rather than the total amount paid over the course of a finance agreement.
“As our survey reveals that almost half of under 34s now pay more per month for their cars than they do for their accommodation, the days of buying an old banger as your first car for a few hundred quid may be long gone. These costs look set to continue for the vast majority as almost three-quarters of under 34s state part of the reason they like the ‘pay monthly’ model is their ability to simply ‘upgrade’ when their finance deal runs out. This is something that we’ve got used to doing with mobile phones, and it seems that applying the same model to car purchases is increasingly popular with younger consumers.
“When so much of their income is going on a car, drivers should be looking for ways to protect their investment. If a car is written off or stolen, the insurance company will usually only pay the market value of the car, not what was paid for it, so drivers could face a financial shortfall, particularly if they still have a finance agreement or loan to pay off. A gap insurance policy from a specialist insurance provider, like InsureTheGap, protects drivers from this.”