Should I borrow more on a new mortgage to buy a car?

[notasausage]

Considering taking £10k more on a new mortgage to buy a car. My logic is monthly payments on a similar car would be £250/month pcp and I won’t own the car outright at the end of the 2year period but taking the extra on my mortgage would be £75/month and I’d have the car for as long as I wanted. I’m in a good position with almost 50%LTV on the mortgage from the sale of my current home but no savings so taking a higher mortgage would let me hold more of the capital back for savings and the car. I know there’s the overall cost on the mortgage to consider but am I missing anything else?

Given the rest of your financial circumstances that sounds like a really sensible thing to do, yes. Finance plans for cars are an enormous drain with really poor value for money, you are much better off getting a good quality 3-year-old car and buying it outright without a loan or HP agreement if you can.

I wouldn't put a car (or holiday or anything "consumable") on a secured loan like a mortgage.

An unsecured loan or even long term 0% credit card maybe.

Car finance if and only if it was good value, which is possible, although rare.

But my payment choices would start with using saved money, unless I urgently needed a car that cost beyond that (not just "wanted"). I see you don't have that but adding just for completeness.

Can you get a 0% credit card instead? If your income is stable and you are sensible, you can make the monthly payments and clear the card.

It is outside of typical advice, but sounds reasonable in your situation.
It's just holding off a bit of money from the current house sale for something you need.

Do you need a 10k car? Unless you are ramping up huge mileage every year why not look for something older and cheaper?

Ed to add- I would not put any consumer product on a secured loan. In that position I’ve gone cheaper to reduce the overall cost.

Makes sense to me, its the cheapest money you can borrow with comfortable repayment terms. And buying a car cheaper than £10k is risky, cars that are unreliable cost far more in the end. Just be very careful to get something in good condition that will give you another 10 years and its a good financial decision.

Good grief, of course you can get a car for less than 10k which is reliable. It might not be the car you would buy to do 100k miles a year on motorways but a small “runabout” for commuting/local traffic and the odd longer trip is perfectly doable. What on earth do you think low income shift workers and low income rural dwellers drive?

The leasehire industry has done a good job of convincing the market that their cars are such utter rubbish they fall apart after a few years but that doesn’t make it true. Plus the greenest car (if that is your priority) is the oldest car not the latest electric.

How long do you have left on your mortgage and how long do you plan to keep the car for? If you'd plan to keep the car for 5 years and have 20 years on your mortgage, I'd say not a great idea as you are still paying the car off long after it's gone. If you can overpay on the mortgage to "pay off" the extra borrowing amount or have 10 years left and would use the car for 10 years it might be a reasonable idea.

Do you need a new/different car?

I bought a car for about £10k. I paid half with a personal loan from my bank paying back over 3 years and half on a 0% credit card I have been saving a little each month to pay off when the 18 month 0% period ends. I’ve put the savings in premium bonds and won £25 every few months with a £500 win this month that will help with my final saving’s! Much cheaper for me than a car finance deal or putitng on my mortgage.

The car isn’t secured by the house though. If she defaults on the mortgage, the house is the capital. They wouldn’t take the car.

I’d never put a consumable on my mortgage. While the interest rate looks favourable you’re usually paying your mortgage over a much longer period, so end up paying more. Could you not either take a bank loan over 3/4 years or a 0% credit card that you pay off the equivalent of a car payment on monthly? The last thing I’d do is go for car finance but even that might work out cheaper than paying a car over 15/20 years as part of your mortgage.

But it’s madness to turn unsecured debt into secured debt. There are many ways to buy a car without the debt being secured, rather than securing your car against your house.

“My logic is monthly payments on a similar car would be £250/month pcp and I won’t own the car outright at the end of the 2year period but taking the extra on my mortgage would be £75/month and I’d have the car for as long as I wanted.”

What you are missing in this analysis is for how many years you will be making these payments. How long is your mortgage term? If it’s more than around seven years then you’ll be paying more overall.

If you need another car in five years but still have fifteen years left on the payments on the old one then it doesn’t look such a good deal.

Putting an extra £10k on your mortgage at say 4% is going to cost you £400 a year for how many years? If 10 years, then that's £4000, which makes your car cost 40% more than £10k.

On the other hand, a 6% loan for 3 years will cost you £1800, so much better value.

Even better would be to take out a 0% CC and use that.

This.

My logic is monthly payments on a similar car would be £250/month pcp and I won’t own the car outright at the end of the 2year period but taking the extra on my mortgage would be £75/month and I’d have the car for as long as I wanted

is it a 2 year mortgage?