0% Credit cards to buy used car?

Laura1984

Hello,

I'm wondering what are people's general opinions are on using 0% credit cards to finance a used car. I'm very organised with money and keeping up with payments etc so that area will not be a problem but I am looking to repay the full amount in 48 months so will most probably need to transfer to a new 0% card at least 3 times. What kind of effect will this kind of activity have on my credit score, I have to be careful as I will be looking to take out a mortgage in 2 years time. Looking to borrow around 8k and transfer every 12 months. Opinions welcome!

Thanks

YorkshireBoy

To answer your questions...

Using cards could be cheaper than a bank loan.

There's no such thing as a "credit score". Your credit-worthiness and credit rating will be affected by the sheer size of credit card debt, especially in the early months/years. Any credit card debt will be taken into account when the mortgage provider calculates how much they're willing to lend based on salary multiples/affordability.

Additional points...

I, and others, could give you 10-15 reasons why you shouldn't go ahead with your plan at this time, at your age, and with your plans for the short term future. Would you like to hear them, or are you just happy with the answers to your specific questions?

CLAPTON

curious ... if you are to get a mortgage in 2 years time what are you going to do for a deposit?
Why spend 8k on a car when that would be much better put towards a deposit.
Maybe think 2k for the car and save for the deposit.

Laura1984

Yorkshireboy, I would like to hear the reasons why - i'm interested.

I've been saving up for a few years and already have a fair amount saved up which I want to keep for the deposit and obviously continue adding to over the next two years and luckily I will also get a bit of help from family. I would like to pay for the car gradually using monthly repayments over the next 4 years, it would be crazy to sink any savings into a car right now. 8k because unfortunately i've had my heart set on a mini for years - its more than affordable as long as i get a good deal and spread the payments well, whilst continuing to save for my deposit at the same time.

I suppose the issue is not so much whether I'll be able to save for a deposit because (touch wood) i don't think that will be a problem - it's more trying to anticipate how any borrowing behaviour will affect my application when the time comes to go for a mortgage.

Moggles_2

What are people's general opinions are on using 0% credit cards to finance a used car?

Are your credit files in good shape?

Please bear in mind that lenders launch these 0% promotions, which are sometimes heavily advertised, to draw in new customers. Often they are flooded with applications and can afford to cherry-pick applicants.

Moggles_2

If you will have savings to fall back on, that's something. The risk in paying for a car this way is that you can't be sure of another 0% credit card offer with a sufficient credit limit when your initial deal ends and the interest rate leaps to anything up to 34% APR variable. For all we know, 0% BT deals may be a thing of the past in 12-15 months time and BT fees could have jumped to 5% or even 6% :eek:

Please be aware that the reason cc providers can afford to lend you money at 0% for X months is because, more often than not, customers do not clear the debt and end up paying crippling interest when the promotion period ends. This is one of the ways lenders claw back the cost of these promotions. If this were not the case, these 0% offers would have dried up long ago.

YorkshireBoy

Laura1984 wrote: »

...<snip>...

It's going to cost you 2-3%, and maybe even 4-5%, to transfer the debt each year...that's if 0% BT cards are still around in 2/3/4 years time?

What's the return on your savings account (both now, and likely to be over the next 2 years say) AFTER tax? Bet it's less than 3% (unless you're using regular savers)? So you could be worse off financially by NOT spending your savings in the current climate. That is unless you're worried about job security? In which case why are you spending (over?) £8K on a motor car?

Obviously we know nothing (else) about your circumstances, but from here it looks like your heart is ruling your head...and "for that reason I'm out".


EDIT: Moggles, you're typing quicker these days.

YorkshireBoy

Moggles wrote: »

The risk in paying for a car this way is that you can't be sure of another 0% credit card offer with a sufficient credit limit when your initial deal ends and the interest rate leaps to anything up to 34% APR variable.

And of course you then have to get a loan for £4K when you have a £4K credit card debt on an £8K credit limit card...in a credit crunch, and with lenders pricing for risk more than ever.

Laura1984

You lot are right I don't want to be bitten in the bum by those ugly transfer fees. I'll have to look into other options - shame my shoddy ka clapped out on me for the final time this week!