Best way to finance car purchase?

RoyalSwank

I’m looking to buy a car (used – prob from a dealer) in the next couple of months for circa £8k. My initial plan was to get a personal loan to finance this, prob over about 4-5 years, but I’m a bit concerned about only being offered a loan on a high interest rate (10%+) so though I’d ask you guys if you had any ideas.

I should have a good credit rating – I earn north of £30k (same company 4+yrs). I live at home with folks and pay everything by direct debit – no skeletons. My main bank account is FD (this is fairly new) plus I have a NW Flex account.

I actually have about 8K in cash, but was going to use that to pay off a virgin cc (c.£4.8k (8k limit)) which is coming to the end of a 0% interest phase. Was also going to pay off the remainder of a tesco loan (c.£1.3k - 6.8%apr). I also have a Barclaycard with a 3K limit (but no debt) and was planning to cancel this. I had some things in mind for the remainder of this cash, but could use it to put towards the car purchase.

How would you go about financing the car in the most cost effective way? Would I be likely to get a better rate by paying off my cc, buying the car on it and then transferring to a life of balance cc for example? Is car finance a better option? What rates might I expect to be offered?

Thanks in advance!
RS

CLAPTON

just out of curiousity .. why does someone earning 30K and living at home have debts at all... surely with low outgoings you should be debt free and a net saver.

If you really need a car then buy one for 1000 and start serious saving.

Davef68

Speak to the dealers about finance - they traditionally could offer cheaper rates. Drawback is that this is usually Hire Purchase, but if that doesn't bother you (and most car finance is HP) you might get a better deal.

That said, I haven't been buying a car since the credit crunch hit - and was shocked when I saw how much interest personal loans were getting these days.

rev_henry

Why exactly do you need an 8k car? If it were me I'd buy something much cheaper as clapton said (its incredible what you can get for, say, £4000 tops these days, but you needn't spend even half that) and not worry about debt at all.

RoyalSwank

Thanks for the responses so far.

just out of curiousity .. why does someone earning 30K and living at home have debts at all... surely with low outgoings you should be debt free and a net saver.

I am a net saver (in fact I save quite a bit at the moment) + I can afford to repay all my debts in full and this was always my intention to do so. I'm happy to finance a car loan though. I just want to find the cheapest way to do it.

Why exactly do you need an 8k car?

I've done quite a bit of research and this is how much the car I want costs. I admit it is a bit of a luxury though, but in the current climate you can get a lot of car for that money.

..shocked when I saw how much interest personal loans were getting these days

Indeed! Hence my query. I see NW Flex loans advertised at 7.9% but wonder how likely it is I'll get that rate. I don't want to do lot's of applying for credit as I worry this might affect my rating adversely.
My gf reckons I should pay off my virgin card, buy the car on that, transfer that to another 0% card and try to pay the card off over the 0% term. My worry is that somewhere along the line I won't get the credit.

Davef68

RoyalSwank wrote: »

My gf reckons I should pay off my virgin card, buy the car on that, transfer that to another 0% card and try to pay the card off over the 0% term. My worry is that somewhere along the line I won't get the credit.

Possible, but unlikey if your credit history is as you say! I applied for a Virgin 0% last month and got a £10K limit - inspite of having 3 other cards with £10k+ limits on each (Balance to transfre was less than £3K).

Putting anything onto your Virgin card is going to cost you money in interest presumably you are past the 0% for purchases - better to get one with 0% on purchases & try and pay that off

RoyalSwank

Thanks for the response Dave, puts my mind at ease a bit regarding getting the credit and makes me think it's going to be cheaper to finance the car via a credit card than a personal loan.

Putting anything onto your Virgin card is going to cost you money in interest presumably you are past the 0% for purchases - better to get one with 0% on purchases & try and pay that off

I'm past that phase for 0% on purchases, but the idea would be to transfer before any interest accrued.

djwolf

I'm in a similar-ish position to you in that I have a bit of money saved but want to get a nice car for around £9000. I've had car loans and HP's for the past 5 years which have been manageable so I don't mind going for another HP. There's not much difference between dealer finance rates and loan rates now. In fact I was getting a 2% lower rate from the dealer. The only negative point is you don't actually own the car until all the money is paid off, however you have the option of handing the car back after the halfway point or you can pay the balance early (like a loan). I believe as long as you can manage the monthly payments there's not a problem, it's always handy to have savings as a back-up for other things.