Advice on Financing £20k Car Purchase
Discussion
Any advice much appreciated, always bought bangers for £3k or less or leased on 2 year contracts. Currently getting bored of the banger I’ve had for several years.
Looking at some ‘fun’ cars now to rekindle my love of driving and seen something around £20k.
I have £15k in savings but I wouldn’t splurge all of that towards a car, maybe half, at a real push perhaps £10k but the less the better. I wouldn’t want to spend more than £300 a month on car payments.
What do people normally do in this sort of scenario? What makes the most financial sense? What I mean by that is, I guess I’m not too confident in having a lot of my money tied up in a vehicle which I’m buying privately that could potentially die on me, guess whether it’s my own money or or money I’ve borrowed it doesn’t really matter though in that scenario. I don’t know at the moment how long I’d keep this car but I think I’d rather pay a bit of interest on a loan than have the majority of my savings tied up in a car.
A quick Google tells me I can potentially borrow £12.5k over 48 months for about £300 per month. I haven’t loaned this kind of sum before therefore I’d look into how easy it is to completely pay it off early halfway through the agreement without any fees hopefully should I decide I want to sell the car at some point.
Looking at some ‘fun’ cars now to rekindle my love of driving and seen something around £20k.
I have £15k in savings but I wouldn’t splurge all of that towards a car, maybe half, at a real push perhaps £10k but the less the better. I wouldn’t want to spend more than £300 a month on car payments.
What do people normally do in this sort of scenario? What makes the most financial sense? What I mean by that is, I guess I’m not too confident in having a lot of my money tied up in a vehicle which I’m buying privately that could potentially die on me, guess whether it’s my own money or or money I’ve borrowed it doesn’t really matter though in that scenario. I don’t know at the moment how long I’d keep this car but I think I’d rather pay a bit of interest on a loan than have the majority of my savings tied up in a car.
A quick Google tells me I can potentially borrow £12.5k over 48 months for about £300 per month. I haven’t loaned this kind of sum before therefore I’d look into how easy it is to completely pay it off early halfway through the agreement without any fees hopefully should I decide I want to sell the car at some point.
Personally I would look at a personal loan from a bank or other lender and would likely go to a comparison website such as Money supermarket (other comparison sites are available). they will usually have a calculator on there to show how borrowing different amounts affects the repayment
Any personal loan from a proper lender will give you an option to repay the loan early with a reduction in the interest charged adjusted.
Any personal loan from a proper lender will give you an option to repay the loan early with a reduction in the interest charged adjusted.
If necessary, get a personal loan for the balance and buy yourself a Fiat 124.
https://www.autotrader.co.uk/car-details/202302164...
https://www.autotrader.co.uk/car-details/202302164...
iceyfuel said:
Out of curiosity why do you think this? I'm guessing the much higher APR & residuals but would love to understand more.
Look at the interest rate on a PCP. I've been getting quotes from some third party finance companies at around 9%, some PCP finance sold through the dealerships is 13%. PCP is good at bringing the actual monthly payments down but over the term of the agreement you are paying more in interest than a personal loan at 5% (if you could get one at that rate)iceyfuel said:
Out of curiosity why do you think this? I'm guessing the much higher APR & residuals but would love to understand more.
With used PCP interest rates now typically ~11% you’re renting the car for more than it costs to own.For example a 2023 Seat Leon £22,995 (Completely random car)
PCP
PCP they want a cash deposit of £2300
Then 48 monthly payments of £380.
Total paid on finance is £20,695
Optional final payment is £9869
So total to own the car assuming you buy at the end is £30,056.
Personal loan
M&S is offering 5.6% APR.
Deposit £2300
Personal loan amount £20,000
Monthly cost (5 years) £380
Total paid on personal loan £22,846
Equity you have in car after 5 Years ~£7K
For an older car that's lost the biggest chunk of depreciation, I went for a personal loan. I looked online and got one with MBNA at 5.3% and intend to pay it off earlier.
In the economy we have now with higher interest rates, I didn't expect it to be so quick and easy. Very little info given, never spoke to anyone and the money was in my account just 2 hours after the applying!
In the economy we have now with higher interest rates, I didn't expect it to be so quick and easy. Very little info given, never spoke to anyone and the money was in my account just 2 hours after the applying!
stabilio said:
For an older car that's lost the biggest chunk of depreciation, I went for a personal loan. I looked online and got one with MBNA at 5.3% and intend to pay it off earlier.
In the economy we have now with higher interest rates, I didn't expect it to be so quick and easy. Very little info given, never spoke to anyone and the money was in my account just 2 hours after the applying!
If banks are actively advertising then they often have a big chunk to sell, if you come in under their normal thresholds then it is often pre-approved.In the economy we have now with higher interest rates, I didn't expect it to be so quick and easy. Very little info given, never spoke to anyone and the money was in my account just 2 hours after the applying!
I bought a pre-reg car in October last year, £22.5k.
I sold my old car privately on Facebook for £3600 (trade in offer was £3000), and topped it up with £4k from savings.
I borrowed £15k on a personal loan from Tesco, at 4.9% over 5 years - £282 a month.
So far, I've made 2 lump sum payments (£5k and £3.5k) as regular saver accounts have matured, and been credited with nearly £1500 off the interest charges.
Very easy to make overpayments with Tesco, all done online using my debit card.
Paying from savings would have been an option for me, but I thought that savings rates would be higher than the loan interest rate by now. Not going to happen, so I'll get the loan paid off within the next year as more accounts mature and drop to the standard savings rate.
I sold my old car privately on Facebook for £3600 (trade in offer was £3000), and topped it up with £4k from savings.
I borrowed £15k on a personal loan from Tesco, at 4.9% over 5 years - £282 a month.
So far, I've made 2 lump sum payments (£5k and £3.5k) as regular saver accounts have matured, and been credited with nearly £1500 off the interest charges.
Very easy to make overpayments with Tesco, all done online using my debit card.
Paying from savings would have been an option for me, but I thought that savings rates would be higher than the loan interest rate by now. Not going to happen, so I'll get the loan paid off within the next year as more accounts mature and drop to the standard savings rate.
The PCP interest is definitely a concern. I too am seeing dealer rates of 11% (12.4% quoted by a MB dealer on Saturday!). I can get a PCP through my bank (Halifax) at 7.4% which is not too bad, or through other finance specialists at 9%
I can get a car loan from Halifax (HP) at 5% which is far more appealing.
My M3 is on HP, and is the first car in a long time (recent cars have all been PCP) where I have a decent chunk of equity in the car which is the deposit on whatever I buy next. I usually change cars every 2-3 years or so on a 4 year PCP... there is normally minimal £ in the car (or negative) and so deposit on the replacement car is savings.
I was going to PCP my new car, but instead will lower my sights a bit and get something that hopefully helps me continue to have some equity
I can get a car loan from Halifax (HP) at 5% which is far more appealing.
My M3 is on HP, and is the first car in a long time (recent cars have all been PCP) where I have a decent chunk of equity in the car which is the deposit on whatever I buy next. I usually change cars every 2-3 years or so on a 4 year PCP... there is normally minimal £ in the car (or negative) and so deposit on the replacement car is savings.
I was going to PCP my new car, but instead will lower my sights a bit and get something that hopefully helps me continue to have some equity
Edible Roadkill said:
I’d use the savings get a 15k car and repay the savings over whatever term you see fit, f
k using finance currently !!
Unless you have a need for cash to be liquid imminently, it would be silly to do it any other way then mentioned above.k using finance currently !! Why borrow money when with interest when you have most of it and can borrow it from yourself interest free?
Should also add, the remaining 5k can be financed through a 0% for 36 months (or similar) style credit card
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