Car Finance

blairw

blairw

blairw

Soldato
Joined
19 Mar 2006
Posts
3,856
Location
Scotland, UK
Hi all,

Pretty much sure of the answer to this question already but I thought I'd check with other people for opinions.

For example:

Say I have £20,000 in cash saved (personal savings) and want to purchase a new car coming in at just under this 20k. Baring in mind this money was saved over a 3 to 4 year period where I have been saving on a wage under my full wage (I am coming to the end of an apprenticeship) how would you go about purchasing said car?

I would initially think paying the full lot in cash would be the best option, would mean I would have the car, without any monthly payments and it would be 100% mine.

However while I don't have any pressing plans to move out, circumstances can change quite quickly, and I would like to be in a position to buy rather than rent and having access to funds for a deposit would help greatly here.

What is everyone's general opinion on keeping back say 10k of 20k saved up, and financing half of the car over a 3 year period (which would be very affordable to myself).

Not having access to 10k if I did just buy the car upfront wouldn't be the worst thing in the world, as if I did feel the need to save for a deposit living at home affords me the option to save large amounts of my wage without consequence.

Thoughts?
 
I think in the near future you would wish you had a £10,000 for a house desposit.

You can get a very nice car for £10,000. Please don't spend £20,000 on a new car if it is everything you have! Buy the same car that you would be buying new but 2-3 years old.
 
I would ask 'Is this the most efficient way to buy the car I want? Can I buy the exact same car another way, perhaps a tad older, for a significant saving?'

If the answer is 'Yes I can buy it for less' I would do that. If the answer is 'No, I cannot', then the 50/50 approach sounds sensible.

For example, if the car you crave is a Focus 1.6, you can buy the same car a year older for £10k. So do that. If the car you crave is a Jaguar XF, you cannot, so do the 50/50 thing.
 
Yep very true there with the 10k car if 20k is all I have. The money I have been saving has been specifically for a car at the end of my apprenticeship as a sort of reward to myself. I do finish into a fairly good paying job, so financing the car isn't a problem in my opinion as the amount such a loan would come to each month is less than what I would be looking to save each month if I do buy the car fully in cash.

But yeah ultimately I do want to have the flexibility of having a largish sum of money available should the time come for buying a house :)
 
Also, another important question.

'How long will it take me to replace this £20k?'

If the answer is 'A very long time' then do not blow it all on a car.

If the answer is 'Not very long really' then feel free to blow it on a car.
 
Yep that is something I will need to sit down and work out closer to the time. Realistically living at home to come back up with the 20k again? Just over two years if I have the same lifestyle as I do right now and buy the car in cash so only have maintenance on it to pay and fuel costs.

2.0tsi scirocco but that's not set in stone at all, I have test driven it and loved it but there are plenty of more cars out there, and I won't be buying till post summer, I have just been reviewing my finances over the last few days :)
 
[TW]Fox;18669248 said:
I would ask 'Is this the most efficient way to buy the car I want? Can I buy the exact same car another way, perhaps a tad older, for a significant saving?'

If the answer is 'Yes I can buy it for less' I would do that. If the answer is 'No, I cannot', then the 50/50 approach sounds sensible.

For example, if the car you crave is a Focus 1.6, you can buy the same car a year older for £10k. So do that. If the car you crave is a Jaguar XF, you cannot, so do the 50/50 thing.
Click to expand...
^this. The majority of the time buying brand new is the best way to lose a whole load of money really quickly. Buy a couple of years old ideally something fully dealer-serviced and with a decent warranty if you can, to save eating into your other 50% with repair bills.
May seem obvious, but also bear in mind that a personal loan from your bank can work out quite a fair bit cheaper than traditional car finance. I believe car finance is typically 9-12% interest where as a loan can be 7-8% and you shouldn't have any 'arrangement fees' or 'final payment fees'.
 
Good choice of car, exactly what I am saving up for!

The 50/50 idea sounds good as finance has become very good since law changes in feb. As far as I am aware there will be no 'final payment' and your 10k deposit will mean that the borrowed 10k over 3 years at approx 7.4% will amount to just over £300 a month. Which is fairly good!
 
NathWraith said:
The 50/50 idea sounds good as finance has become very good since law changes in feb. As far as I am aware there will be no 'final payment' and your 10k deposit will mean that the borrowed 10k over 3 years at approx 7.4% will amount to just over £300 a month. Which is fairly good!
Click to expand...

This is true if he takes a bank loan (Which is what I'd recommend is probably the best option), but if he takes something like a PCP there will still be a final payment.
 
Looking at around 9% on say a 10k bank loan, not to shabby but I'd hope to maybe push this down a little if possible. I have zero need to rush into buying a car right now so I won't be buying until such a time I am sure that the car is right for me, and the deal makes financial sense to myself. Luckily at the moment I have a van for work along with my car for personal use.
 
Personally, spend £5K and keep saving.

I'd rather have a cheap car and a house than an expensive car and still live at home.
 
I don't think spending 5k on a car really matches with what I am trying to achieve here - a very nice car as a sort of a reward to myself for the last 3 / 4 years of work coupled with enough financial security to be able to move towards purchasing a house at reasonable notice.

50/50 split is seeming the most sensible option to myself, payments on the financed 10k would still allow me to add to the 10k remaining savings at a fairly decent rate while running the car.

Then again I am not obsessed with the idea of buying my own place, especially as a single man, renting with a friend seems more appropriate to myself, and should I enter into a long term relationship having a large amount of money saved for a deposit would be suitable.
 
How long are you going to keep the car? If you intend on keeping it for some time then it becomes easier to justify a larger expenditure - especially as the extra spent on the car will be, to some extent, offset by the lower running costs associated with a car within warranty (and then, subsequently, new enough for a reasonably priced extended warranty).

As a complete stab in the dark lets imagine that in 5 years time its worth £8k - a 2005 Mk5 GTI is worth this at the moment so its a reasonable figure.

It'll cost you £12k in depreciation to own over the 5 years (Plus running costs, but you incur running costs on any car).

Whilst £20,000 on a car sounds extravagant, £2.4k a year sounds far more modest, especially if you've got a reasonable enough income anyway and the ability to quickly replenish your savings which it seems you have.
 
I laid out 11grand cash on my S2000 along with part-ex and do not regret it.

I have NO intention of owning my own place in the near future, simply not viable financially where I live and the money I laid out is easily replaced, I have a fair old whack of disposable income.

If you won't miss the money in the medium-term (be it for house ownership plans or otherwise) then spend it, don't see why you would want to attract additional cost via interest when you do not need to. All it represents is £10k (in a 50/50 situation) on hand for "some reason" and the long term extra cost of interest.
 
Do not forget to factor opportunity cost into your calculations.

The cost of borrowing the £10k isn't 9%, it's 9% minus the percentage interest you'll get on the money you've got in the bank which you are borowing instead of spending.

Now obviously this never means, despite what some people might think, its a better deal to borrow instead of spend savings. It isnt, it always costs more (Unless you are lucky enough to pick up a subsidised deal or somethign), but just make sure you've got the figure of how much more correct.

Your figure indicate you are saving nearly £1000 a month. This is very impressive, and personally, I'm not sure I'd bother with a loan if you've got the cash for the car in the bank. 4 months after buying the car you'd be back with more in your savings than most people in the UK..
 
I would be looking at around about 4 years I'd imagine, but with the loan only running for 3 of them, perhaps lower depending on how much I am willing to spend.
Beyond 4 years I would expect my income to have boosted to a level where I'd be happy to make another 'serious' upgrade.
Without getting right into it my progression within these 4 years is already mapped out (minimum contracted wage rise before inflation rise / performance rise / promotion) in a way that I know what I will be earning at the minimum and this figure leaves me more than comfortable.
 
This seems about as far from buying a crap hatchback on stupid finance when you can't afford it as I think we've ever got on this forum - I don't think your plans are silly at all.
 
To bring it into perspective, some of the guys I work with on the same scheme of me own currently (full financed)

- Cooper S JCW
- Audi A3
- 500 abarth
- Golf GTI

I decided to make do with my toyota avensis that I bought from my parents, knowing that saving would serve me better in the long run (hopefuilly)
 
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