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Original poster

How I fund a new(ish) car?

17 replies

notasausage · 09/01/2023 19:36

I’ve had lease cars through work for 20+ years so have not bought a car in a very long time but they’ve just closed the scheme. I’m driving 20000+ miles a year which is probably too high for a private lease and don’t have more than a few thousand pounds to put down as a deposit, though have a reasonable monthly income. What is the best way to finance a new or few yrs old car?

OP posts:

RandomPerson42 · 10/01/2023 16:50

Sounds like a bank loan would be best if you want to reduce overall cost (lowest interest rate). A £25k loan over 4 years would be about £600 a month and £4k in interest.

The other main option being buying new on finance - for a £25k car on 4 years finance it would be about £400 a month and then £8k left to pay - which you could get as a bank loan in 4 years time so the car would be paid for in 8 years. But you would pay £25k for the car and £9k in interest or thereabouts.

Chewbecca · 11/01/2023 16:54

Do you have any savings?

I try to save up to buy new cars rather than taking a loan. I like to know I own the car outright if anything happens to my income etc.

As long as the rate you would be paying on a loan is higher than what you are getting on your savings, it is better than having cash sitting there not earning much and paying interest.

catchthedog · 11/01/2023 16:56

Personal loan - Forst direct have lowest rates I've seen at the moment, but you need to have an account to with them already.

or similar rate if your an HSBC premier customer.

Iwasntgettingasandwich · 11/01/2023 16:58

Does your bank do loans specifically for car finance? They pay the dealer directly (just can't be a private sale) and then you pay the bank back.

crochetcrazy1978 · 11/01/2023 16:58

I bought mine from a used car supermarket. Put a large cash deposit down and they sorted out finance for the rest. As it's hire purchase the car belongs to me so no limits on mileage etc. I could chose the length of the term I wanted

Highabovethetrees · 12/01/2023 10:22

We usually do part own payment and part personal loan for 2-3 years. We then usually keep the car for another 2-3 years after loan paid off and start again. Works out best value for us. Haven't had to get a loan since before the interest rate rises however...

MilkyYay · 12/01/2023 19:51

If you have a high monthly income plus a few grand, can you get the longest possible interest free credit card? Pay part in cash with what you have, pay the rest on a 2 year interest free credit card and pay as much every month as you can, then if you can't pay it all off, get a bank loan in 2 years to replace the CC.

MilkyYay · 12/01/2023 19:52

Don't get brand new - get 2 yrs old

MilkyYay · 12/01/2023 19:53

Eg £20k car
£500 a month to spend

£8k cash
£12k interest free CC for 24 months.

Pay £12k in full at 500pcm

Miajk · 13/01/2023 13:07

Jesus Christ don't get a loan for a car!

I'd you don't have it saved, you can't afford it. You can buy a second hand, cheap car - I bought a Toyota for £1500 a few years back that had no issues.

Unless you're a millionaire who has more money than you know what to do with, start saving/investing the money you would have wasted on a monthly car payment and interest.

Miajk · 13/01/2023 13:10

RandomPerson42 · 10/01/2023 16:50

Sounds like a bank loan would be best if you want to reduce overall cost (lowest interest rate). A £25k loan over 4 years would be about £600 a month and £4k in interest.

Buy a cheap used car. Save 20k and put in in an s&s isa.

With a conservative estimate, compound interest would make your 20k almost double over 10 years.

Rinse and repeat for major life choices, retire early!

Itsfridaynightok · 13/01/2023 13:11

Your better with pcp normally 4 year contract. Put a deposit down then pay monthly. At the end of the term you either pay the outstanding balance (this can be on credit payed monthly again( or you can give them the car back. You can also trade it for something else.

Itsfridaynightok · 13/01/2023 13:13

Also should say with pcp there is mileage to consider BUT if you have done more miles it doesn't matter if you keep or trade!

nc8975 · 13/01/2023 13:59

I know PCP isn't always popular amongst the financially frugal, but it's worked well for us for a number of years because it keeps payments low, enables us to afford a new-ish car (we don't go for brand new) which is much lower maintenance and the car has always been worth considerably more than the balloon payment at the end (even more so in recent times with the rising cost of second hand cars).

I don't view cars as assets, we go for a monthly amount that is affordable to us and almost see it like renting, a bill, (I know it's not) any value we have left in the car at the end of the term is a bonus. I'm not sure if that sounds strange. We don't for hugely flashy cars though!

nc8975 · 13/01/2023 14:01

Oh and the mileage thing has never mattered as we've either paid the balloon payment or traded in with a third party that pays the balance off for us so no mileage penalties (obviously the value of the car is impacted if you do huge amounts of mileage though so would need to consider the potential end value)

LondonQueen · 14/01/2023 13:39

Cheapest is usually a bank loan, PCP and HP have pretty hefty interest rates.

user1497207191 · 14/01/2023 23:10

It depends on how long you expect to keep it really. Leasing is good if you want to keep 2/3 years and then replace. Bank loan or HP if you want to buy and keep for many years.

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