Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • VelvetWinner
    • By VelvetWinner 6th Jan 18, 9:27 PM
    • 4Posts
    • 0Thanks
    VelvetWinner
    Car Finance Or Bank Loan?
    • #1
    • 6th Jan 18, 9:27 PM
    Car Finance Or Bank Loan? 6th Jan 18 at 9:27 PM
    Hi everyone,

    I am currently looking into getting a car quite quickly due to needing it for getting to and from work.

    Therefore I am looking into either getting a car finance or possibly a bank loan.

    Please could someone help me understand which one I would be better off with and also what the difference is?

    I am thinking of getting a car older than 10 years old, therefore I have been told if i was to get a car on finance then the company who provide me the loan would charge me a standard fee extra on top of about £300, which bumps the price up quite abit.

    Any advice would be very much appreciated as I have never taken a loan or borrowed money before and also have no idea about the in's and out's of doing them.

    Than you!
Page 1
    • forgotmyname
    • By forgotmyname 6th Jan 18, 9:39 PM
    • 26,418 Posts
    • 10,566 Thanks
    forgotmyname
    • #2
    • 6th Jan 18, 9:39 PM
    • #2
    • 6th Jan 18, 9:39 PM
    10 year old car cash is king.

    Fees + interest is likely to double your costs. Sister paid nearly £8000 for a car that was worth approx £2500. And after a while it needed repairs which she couldnt afford because she had to pay the finance.
    The car sat unused for almost 2 years, she paid the finance and then called to check it was clear and then phoned the scrapman to collect it.

    Cash.
    Punctuation, Spelling and Grammar will be used sparingly. Due to rising costs of inflation.

    My contribution to MSE. Other contributions will only be used if they cost me nothing.

    Due to me being a tight git.
    • ChuckMountain
    • By ChuckMountain 6th Jan 18, 9:48 PM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    • #3
    • 6th Jan 18, 9:48 PM
    • #3
    • 6th Jan 18, 9:48 PM
    Surely it depends on how much you want to borrow, what car, whether the finance is through the dealer, your personal circumstances etc.

    If you are buying a 10+ year old then its likely to be fairly high mileage, has it been fully serviced etc. Any big services coming up, is it likely to reliable enough as your work car.

    There are some good deals to be had but it again it depends on the amount. If somebody is adding £300 to the amount then shop around. There are specific companies that will do car finance and that's what they specialise in and will give you a quote. Your bank might be cheaper but it depends.

    What were you looking at ?
    • ChuckMountain
    • By ChuckMountain 6th Jan 18, 9:50 PM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    • #4
    • 6th Jan 18, 9:50 PM
    • #4
    • 6th Jan 18, 9:50 PM
    Sorry @forgotmyname I hadn't seen your reply before I posted but yes agree with what you saying.
    • forgotmyname
    • By forgotmyname 7th Jan 18, 2:08 AM
    • 26,418 Posts
    • 10,566 Thanks
    forgotmyname
    • #5
    • 7th Jan 18, 2:08 AM
    • #5
    • 7th Jan 18, 2:08 AM
    It happens to me a lot, i start typing and then get called away or i retype the post several time and its many minutes from the actual time i started.

    Posted once and there was 12 replies before i finished mine.
    Punctuation, Spelling and Grammar will be used sparingly. Due to rising costs of inflation.

    My contribution to MSE. Other contributions will only be used if they cost me nothing.

    Due to me being a tight git.
    • Herzlos
    • By Herzlos 7th Jan 18, 8:28 AM
    • 6,313 Posts
    • 5,686 Thanks
    Herzlos
    • #6
    • 7th Jan 18, 8:28 AM
    • #6
    • 7th Jan 18, 8:28 AM
    Which is offering the better rate?

    I went for car finance last time as the Apr was lower and there's some extra protection as the bank own the car u til completion. That was borrowing £4000 on an £8000 car, your situation my differ.

    Sorting out the finance took days though, whereas I'd have had the cash in minutes via conventional loan.
    • ChuckMountain
    • By ChuckMountain 7th Jan 18, 11:54 AM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    • #7
    • 7th Jan 18, 11:54 AM
    • #7
    • 7th Jan 18, 11:54 AM
    You also need to work out what the monthly outgoing would be for the proposed car. This would need to include loan\cash outlay, insurance, tax, servicing, fuel etc

    Then compare it to other options, you can\could get some really cheap PCP or PCH deals there are quite a few at under £100 a month and if its just a work run around it may well be cheaper as you won't need servicing, you have warranty etc.
    • Tarambor
    • By Tarambor 7th Jan 18, 12:43 PM
    • 1,940 Posts
    • 1,384 Thanks
    Tarambor
    • #8
    • 7th Jan 18, 12:43 PM
    • #8
    • 7th Jan 18, 12:43 PM
    I am thinking of getting a car older than 10 years old, therefore I have been told if i was to get a car on finance then the company who provide me the loan would charge me a standard fee extra on top of about £300, which bumps the price up quite abit.
    Originally posted by VelvetWinner
    Where I live £300 would buy you a car older than 10 years old outright.

    Never ever buy a second hand car more than a few years old on car finance as it usually means sub-prime lending with bad rates and the lower the price the worse the rate.

    You may not need to borrow at all. There are plenty of good reliable second hand cars on Facebook "stuff for sale in XXX" pages under £1000 all over the country.
    • Tarambor
    • By Tarambor 7th Jan 18, 12:46 PM
    • 1,940 Posts
    • 1,384 Thanks
    Tarambor
    • #9
    • 7th Jan 18, 12:46 PM
    • #9
    • 7th Jan 18, 12:46 PM
    Then compare it to other options, you can\could get some really cheap PCP or PCH deals there are quite a few at under £100 a month and if its just a work run around it may well be cheaper as you won't need servicing, you have warranty etc.
    Originally posted by ChuckMountain
    Oh jesus. Under £100 a month if you have a four figure deposit. You do need to service them otherwise you get penalised at the end. In many cases if your mileage is more than 200 miles a week in total with some actually as low as 120 miles a week you'll get penalised for exceeding mileage limits. And at the end of spending all that money out you walk away with nothing.

    PCP deals are not good deals for anyone but the manufacturers, the finance companies and the dealers.
    • ChuckMountain
    • By ChuckMountain 7th Jan 18, 1:14 PM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    Oh jesus. Under £100 a month if you have a four figure deposit. You do need to service them otherwise you get penalised at the end. In many cases if your mileage is more than 200 miles a week in total with some actually as low as 120 miles a week you'll get penalised for exceeding mileage limits. And at the end of spending all that money out you walk away with nothing.

    PCP deals are not good deals for anyone but the manufacturers, the finance companies and the dealers.
    Originally posted by Tarambor
    No there were deals out there where you don't need to put a 4 figure deposit down. Obviously the more you put down the cheaper it will be but that also needs to be factored into a monthly cost.

    Sorry but I disagree there are some good PCP deals if you want to buy some cars and you will get a better overall price as opposed to a cash buyer (you won't get the finance contribution). With PCP you may walk away with some equity but I doubt it realistically.

    It might not be right for the OP or others but you should consider all the options based on budget etc even if you then dismiss them.

    We don't know how many miles the OP does or even if its an older prestige car for example.

    What you don't want to do is end up like forgotmyname's sister and end up with junk on your driveway that is costing you money and no return. You could have spent less by shopping around.
    • ChuckMountain
    • By ChuckMountain 7th Jan 18, 4:37 PM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    For PCP then its probably worth only doing new to get the best savings. Used tend to be much higher APRs with no contribution you can often pay the same monthly price (and deposit) for a new car as you would on a 2 to 2.5 year used one.

    On the servicing side I should have been clearer. You of course need to maintain it to the manufacturers specs to avoid penalties\warranty loss. However a lot of cars can be 2 years though on variable plan servicing and its generally a cheaper service in the 1st instance or if it makes sense a very cheap service plan.

    Again all depends on what you are trying to buy and\or what you are wanting to spend and that differs massively between people.
    • VelvetWinner
    • By VelvetWinner 8th Jan 18, 12:32 AM
    • 4 Posts
    • 0 Thanks
    VelvetWinner
    Thank you all for your replies!

    I am thinking of borrowing £2,000, so not alot really.

    From what I can see on the loan checker on here, there doesnt seem to be much chance of me getting a loan easily. I mustn't have a very good credit score i'm gussing, although I shouldn't have anything that would make it a bad one?

    I would prefer to get a loan over a car finance from what i've researched so far, but I have no idea where to start, obviously I can start by seeing how much payments will be each month etc but i'm a little worried incase I either get regected and cant get another loan and also meaning i'll be left with a bad footprint on my credit score or that i will miss knowing something important but it's too late to change company.

    Maybe i'm fussing over nothing, i'm not sure..
    • ChuckMountain
    • By ChuckMountain 8th Jan 18, 8:42 AM
    • 33 Posts
    • 5 Thanks
    ChuckMountain
    £2000 is pretty expensive to borrow on a loan and car finance because you normally get stuck for high interest rates.

    There are a lot of calculators you can use before you need to enter details so you can see how much the loan amount would cost you before you started. (Comparison sites normally ask for some details)

    But as a bad example a quick Google gives Lloyds which to borrow 2k gives an interest rate of 26.7% which over 3 years would be £78.36 a month and £2,820.96.

    The same loan at Santander would be £73.22 saving nearly £200 over 3 years.

    For me that is a ridiculous amount of interest to pay but I appreciate everybodies circumstances are different.

    The same loan calc at Lloyds drops to 3.9% at £7,500.

    Have you thought about other methods, borrowing from family etc.
    • pjcox2005
    • By pjcox2005 8th Jan 18, 8:50 AM
    • 489 Posts
    • 533 Thanks
    pjcox2005
    How urgently do you need the car, can you get a 0% credit card and use that for daily expenses - food shop etc, and save the cash you would have spent to buy the car. That way you should have lower interest costs but it depends on how quickly you'd be able to pay off the £2k loan i.e. within 2 years etc if that's the interest free period.
    • NineDeuce
    • By NineDeuce 8th Jan 18, 9:17 AM
    • 683 Posts
    • 597 Thanks
    NineDeuce
    Just get a cheapo car to avoid interest....
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,277Posts Today

8,466Users online

Martin's Twitter