Car finance, savings and mortgage - help please?

[detoxification]

Posting here for traffic.

I think I already know the answer to this but any advice would be appreciated.

I’m in the process of buying a new car. It’s due to be delivered sometime this week (either Thursday or Friday)

We’ve agreed to part exchange my current car. I have a personal loan with Tesco’s bank for this. My plan is to either increase my current loan or pay the settlement and start a new loan with someone else. I need to sit down properly and compare quotes. I was planning on doing this over the weekend when I have more time.

I currently have enough in savings to buy the car outright and pay off the loan, so my question is, would it be okay if I did that and then sorted the loan out afterwards?

The reason I ask, is that I currently have my own property, but I’m planning on buying a house with my partner in the next couple of years. Would it be an issue or look dodgy if I did this?

So you want to pay for the car and then get a loan to put the money back in your savings?

Why would you do this? Just add the monthly payment of your loan into your savings account and build it back up. That way you're not paying interest.

You'd have to lie on the loan application re. the ownership of the car as you'd already own it when you took out the loan.

I'm confused. You use savings to buy the car. You then take out a loan to do what? Sit in your savings account earning less interest than you're repaying the loan?

Buy the car. Rebuild savings.

Basically, I'd be using my savings to cover all the costs and then taking out a loan to get that money back. I'm guessing that would create a problem when I try to buy a house?

Yes it would cause a problem when trying to buy a house because part of the checks they do is the source of your deposit. The source of yours would be a loan, and so not savings, and you’d essentially be “paying” your deposit back already- a lender isn’t likely to be happy with that.

Yes. Firstly it makes no sense as youre losing money. Secondly you'd have a loan still when you apply for a mortgage which the mortgage company would take into account when they assess your ability to repay.

Buy car + rebuild savings = no loan when applying for mortgage.

This is a strange idea. You just need to buy the car with your savings, then start building them back up again. Or, if you do need a loan, you get the loan sorted and use it to buy the car, accepting that you will pay interest

I was told that mortgage companies know that people need cars to get to work so a loan for a car is not as bad as you think. If you are moving and need the deposit soon I would get the loan sorted asap and use that to buy the car

That sounds quite confusing to me, what I can tell you is we applied for a loan from our bank a few months ago for a car, it was an ok rate none were great as we were customers, less than an hour after applying the money was in our account.

It makes no sense to take out a loan to replace money in your savings because you’ll be paying interest.

Why don’t you use some of your savings as a lump sum payment to make the rest of the car payments smaller/pay less interest/decrease the loan length and then just continue to pay monthly.

Think you’re saying though that if you spend your savings on a car you won’t have a deposit for the mortgage?
agree with PP that a car loan isn’t unusual. You wouldn’t not get a mortgage but it would affect the amount you could repay and therefore borrow overall.
Also I think you need to demonstrate that the loan is for the car. If you buy the car now out of savings then get a loan later, you’re really getting a loan for your mortgage deposit which may be frowned upon by the mortgage company. So I would get the loan now so it’s visibly linked to the car purchase. Or delay house buying till you’ve resaved the money, avoiding a loan altogether and allowing you to borrow more.

Huh? You have the money to buy the car but will then take out a loan to get that money back? That doesn't make sense. Even if you put it into a savings account, presumably the interest rate will be lower than the loan rate.