A new loan or use savings to buy a car

pns0000

Good evening everyone.

I'm in a very fortunate position where I'm going to buy a car. It will cost £21810.99 and I have been offered the following loan:-

Cost of car - £21810.99
term - 3 years
deposit - £10000
charges - £1344.21
Balance - £13155.20
Acceptance fee - £145
Final doc fee - £60 (payable at end not included in finance)
Total payable - £23360.20
APR - 8.5 %
36 monthly payments of £369.45

Now after using an online calculator if I put my £11810.99 into a savings account for 3 years at an interest rate of 4.65% gross the original investment will be worth £13575. (£1764 interest gained). This way I will pay the £369.45 monthly payment from my salary.

Does this mean I will be £420 better off having the loan and saving my savings! Is it as simple as that?

However if I use my savings to pay for the load (i.e. my £11810.99 is decreased by £369.45 a month) is there a calculator I can use which will work out the interest I will make? This way I know I will earn more interest at the beginning (on my savings compounded) but it will gradually get less as the 36 months nears its end.

In either case I will still make the £10k payment. If I don't use the finance I will not have to pay the acceptance fee and final doc fee.

I'm a basic rate tax payer.

Look forward to any comments you may have.

Many Thanks

CLAPTON

No, there is no way that you can borrow at 8.4% apr and then save at 4.65% and make a profit... otherwise we could all stop working and live off the proceeds.

the reason is you are not comparing equal things

you need to compare equal things

option 1

use your saving for the car and save 369 per month for three years in a decent savings a/c

or

option 2
keep your 11,810 in a savings a/c
and spend the 369 on the loan for three years.

when you do the maths using you savings wins comfortably

pns0000

Thanks Clapton for your reply,

Sorry, but I'm having a thick moment here!

Can you give me an example if I use option 1 please

Thanks

CLAPTON

Obviously you don't really believe you can borrow money at 8.4% and save at 4.65% and make money do you?


so
we start at savings of 11810
and a monthly spending of 369 per month

option1
use you saving for the car and save 369 at 4.65% for three years
after three years you have a car and 14,261 in savings

option 2
keep your saving and use the the 369 for the car
after three years your have a car and 13,575 in savings

pns0000

No I don't!!

But I just couldn't seem to work out the difference as logically as you have displayed.

Makes sense now

Many Thanks