Car Purchase/Finance

markybates

I'm not sure if this is the right place for this but here goes anyway.

I am considering the purchase of a nearly new car for £12,700. I have existing finance on my current car but should be able to achieve £6,700 trade-in. Does anyone have an opinion on the best way to finance the rest.

I am 2 years into paying £248 per month to Renault selections for 3 years with a lump sum at the end and don't want to pay any more than that per month.

Are motor company finance schemes generally regarded as something to be avoided?

I know it's a bit of a vague post but I could use some advice
Thanks
Marky Bates

System

No advice from me i am afraid but i wanted to say welcome to the boards!!

DiggingOut

A couple options to consider.

1. If you have a mortgage, you may be able to get an additional drawdown facility. Advantage -- very competitive interest rates, low payments if you need them (it spreads it out over many years), flexibility to pay it off when you have the money without penalty. Disadvantage -- if you can't make the payments, your home is at risk. If you pay it off slowly (over the life of your mortgage), you will pay much more in interest because of the time involved, so you need to plan on making overpayments to clear it in 3-4 years.
2. Flexible loan. The interest rate on most of these is not as good as most loans, but because it is flexible you can pay it off early if you have the money. If you get a bonus, or can just get a better rate, you can pay it off.
3. Standard loan. May get a better interest rate than a flexible loan, but likely to get hit with penalties if you pay it off early. I hate to see anyone go for a loan with rule of 78 -- the penalties can be horrific.
4. Credit card tarting. Get an MBNA card with an introductory 0% rate, balance transfer the funds to your current account, and then pay for the car with that. Advantage -- if you can get a card with a large enough credit limit, this is the cheapest route, because you get 0% finance. Disadvantage -- risk. At the end of the 0% period, you have no guarantee that you can get another 0% card, so you could get stuck with high interest rates for the £6K.

If you have a good credit record, you are likely to be able to get another 0% card to transfer the balance onto. Either that or, if they stop offering 0% (few people expect this to happen), you may be able to transfer it to a low rate life of balance offer. Failing that, you can go for a flexible loan at the end of the 0% period.

So my personal inclination (assuming you have a good credit record) would be to try the credit card approach. You are likely to be able to get 0% for at least the first 9 months, which means your balance will be over £2K lower before you have to start paying interest -- and the chances are good you'll be able to roll it to another 0% card, and you may never have to pay any interest.