How to pay for a car

[jimjim150]

Afternoon all,

I'm looking at a purchase of a second hand car around the £27K mark from a small dealership. I can front some of it as a deposit, say £7K, rounding it off to £20K outstanding, though I could pay off more initially if needed.

Considering it will be 2nd hand, I'm not too familiar on the methods to pay a car of this value. I know a car loan is one option and I guess securing a good interest rate is key.


What are people's advice here on paying off the remainder? Interested to hear experiences of people buying second hand of similar values.

Thanks.

[StuTheGrouch]

Bank loan is the only method I've used, as the interest rates are better.

[jimjim150]

StuTheGrouch said:

Bank loan is the only method I've used, as the interest rates are better.

Good point, I wonder if I can get a preferable rate from my current bank?

Edit: Had a quick look:

£20K over 60 months (5 years)
@ 3.5% APR fixed


60 payments of £363.33
Total payable: £21,799.80


3.5% seems pretty reasonable, I can't see how a finance deal would be much better...

Edited by jimjim150 on Wednesday 7th June 15:38

[StuTheGrouch]

Finance deals might appear cheaper per month in some cases, but there will be a big lump sum at the end.

From my limited time looking at those deals the APR seems to be much higher than 3.5%.

[equallytempered]

I took out a loan with Zopa at 3.2% APR, so shop around for a good deal. The dealer offered me their 'best' deal at 5.9%, so there is money to be saved.

[daemon]

If you can get the representative APR, TSB will do it for 2.8% APR.

http://www.money.co.uk/loans/unsecured-loans.htm

We got ours through Halifax @ 2.7% APR but we're customers and have a mortgage with them

[truck71]

Interest free credit cards.

[ScoobyChris]

jimjim150 said:

Good point, I wonder if I can get a preferable rate from my current bank?

Edit: Had a quick look:

£20K over 60 months (5 years)
@ 3.5% APR fixed


60 payments of £363.33
Total payable: £21,799.80


3.5% seems pretty reasonable, I can't see how a finance deal would be much better...

Edited by jimjim150 on Wednesday 7th June 15:38

If you're borrowing the money over 5 years it's worth considering the value of the car in each year - you probably don't want to end up with a car that's worth less than what's owed to the bank...

Chris

[jimjim150]

ScoobyChris said:

If you're borrowing the money over 5 years it's worth considering the value of the car in each year - you probably don't want to end up with a car that's worth less than what's owed to the bank...

Chris

That's a good point. I'm looking at the later model 370z Nismos, which let's be honest, are likely to depreciate pretty hard. Maybe I should pay the bulk of the cost up front and just loan a few £K..

[daemon]

truck71 said:

Interest free credit cards.

I would be very surprised if the seller sucked up the charge for that so it wouldnt be interest free per se.

[daemon]

jimjim150 said:

ScoobyChris said:

If you're borrowing the money over 5 years it's worth considering the value of the car in each year - you probably don't want to end up with a car that's worth less than what's owed to the bank...

Chris

That's a good point. I'm looking at the later model 370z Nismos, which let's be honest, are likely to depreciate pretty hard. Maybe I should pay the bulk of the cost up front and just loan a few £K..

If you're putting down £7K you shouldnt ever be in that position. 370Zs tend to depreciate relatively slowly after the initial hit.

The cheapest Nismo on AT is a 2013 one and its £20,995. Do watch the price you pay though, there is usually quite a big variance across dealers for what may be identical cars.

[truck71]

daemon said:

truck71 said:

Interest free credit cards.

I would be very surprised if the seller sucked up the charge for that so it wouldnt be interest free per se.

Possibly. In that case take the finance option and withdraw settling the balance using said card(s). Something I've done successfully before.

[Ursicles]

truck71 said:

Interest free credit cards.

Ive done this, and its a great way to buy a car.

I got a tesco credit card and a virgin money card, did a balance transfer from both (circa £25k) to another card i had (3% fee) then transferred that cash into my bank account.

Worked out at between 24 months and 30 months for 3% in total - paid it down monthly so a very very cheap car loan, and sold the car before 2 yrs anyway and cleared the cards.

The minimum monthly repayments was less than i sold the car for so i actually had a few quid left - free motoring (of sorts!)

[jimjim150]

Ursicles said:

truck71 said:

Interest free credit cards.

Ive done this, and its a great way to buy a car.

I got a tesco credit card and a virgin money card, did a balance transfer from both (circa £25k) to another card i had (3% fee) then transferred that cash into my bank account.

Worked out at between 24 months and 30 months for 3% in total - paid it down monthly so a very very cheap car loan, and sold the car before 2 yrs anyway and cleared the cards.

The minimum monthly repayments was less than i sold the car for so i actually had a few quid left - free motoring (of sorts!)

A well timed balance transfer to the right deal is a clever way of doing things but need to make sure you keep on top of when the interest free period runs out. Also can be tricky to get the deal you want for the amount you want to transfer, as you can end up only being able to transfer some of it.

[Russ_H]

I'm just about to sign for a new Volvo XC90 using Volvo finance but have just had a thought......

It looks like I'll be around £90/month better off if I take out a £15k loan at 2.8% over 5 years and use that as an additional deposit for the Volvo finance.
I'll have two loans but unless I've missed something there doesn't seem to be any downsides?

Have I missed anything??

Cheers

[MartynVRS]

I maybe in a similar situation too. Will want a loan of around £15k too for something. Thinking M235i, Golf R, etc. Think the 2.8% is only if you credit score if fantastic but since I borrow very little apart from one credit card I'm guess I won't get that rate. I've always paid in pull for cars so I'm not sure how it all works.

[akadk]

Russ_H said:

I'm just about to sign for a new Volvo XC90 using Volvo finance but have just had a thought......

It looks like I'll be around £90/month better off if I take out a £15k loan at 2.8% over 5 years and use that as an additional deposit for the Volvo finance.
I'll have two loans but unless I've missed something there doesn't seem to be any downsides?

Have I missed anything??

Cheers

nope, I've done the same.

[jsims1]

I work for a second hand dealership and can say that if the dealer you're buying from has a good relationship with their finance representative then they will almost definitely be able to do a better rate for you, at the very least match the bank. This is especially easier at the end of the month when the finance rep wants as much business as possible. You might have to push a bit because the dealer will probably lose their finance commission for the trade off of getting you that better deal but they'll bend over eventually.

I guess it's probably a bit different at a main dealer (I've never worked at one) so this could or could not be of any use to the OP but for the rest of you looking for smaller loans on second hand cars at independent dealers, it could save you hassle of going elsewhere for your loan.