Car Financing

Nitrojan · 27 Nov 2010 at 17:57

TONY said:
Bank loan, ideally with you having about a third of the cash already so the car will always be worth more than you owe.

I put 11k out of my own pocket and borrowed 24k from the bank when I bought my car so it will always be worth more than I owe the bank.

Sorry to bring up an old thread.. but I was reading through it again and I may regret saying this through stupidity.. but how does this work?

[TW]Fox · 27 Nov 2010 at 18:21

Nitrojan said:
Sorry to bring up an old thread.. but I was reading through it again and I may regret saying this through stupidity.. but how does this work?

Errr it's pretty self explanatory!

You simply own enough of the car outright that the balance you owe the bank is never more than the value of the car.

Ie if you spend £20k on a car and finance £20k 3 months later your car is worth less than the outstanding balance you owe.

But if you spend £20k and pay £10k cash £10k finance you always owe the bank less than the car is worth so you can always sell the car and pay the loan off in full.

Witor · 27 Nov 2010 at 18:24

You stay ahead if the depreciation curve doing that. Done it with any car I bought with a loan.

Kenai · 27 Nov 2010 at 18:29

Nitrojan said:
I dont have £5k to hand at the moment.. But what I was planning is to keep the car for 2-3 years so for that reason, looked towards the financing option. Nicer car to last.

I got a half decent car as a first car. I had it 6 months before I wanted something else.

To plan on keeping a 1.2 corsa for 3 years, you must have zero interest in cars, in which case, why saddle yourself up with debt for one?

edit - I say half decent, it was half decent as first cars go I think