Financing a car

jdandi

Here's a question on a theory I had - please give me your thoughts on it's correctness

£10,000 to spend on a car
-£10,000 borrowed over 2 yrs 5.6% with Moneyback - Total Payable £10,583
-£10,000 saved in an instant access high interest account at 5% - deducting the monthly payment over time.

Am I better off using this method of finance to fund the vehicle taking into account depreciation, I thought it would leave me more flexible with my cash or is this a daft thought?

Please let me know - The Overthinker

jdandi

from the overwhelming response I appear to be talking a whole load of tosh, apologies for disgracing these pages
cheers
J:eek:

grumbler

• Forget about depreciation. It doesn't change anything.
• It is absolutely clear without any calculations that you cannot be better off by borrowing money at 5.6% and saving the same amount at 5% gross (4% net). Even if you don't pay taxes :rolleyes: you'll lose about 0.6% of average balance during 2 years, i.e. about £5K*0.6%*2=£60.

P.S. If this is not convincing enough, would you trust to Martin: Pay off debts with your savings! The Golden MoneySaving Rule ?

Phoenix79_2

Hi,
Not sure i understand the question. You have £10k to spend on a car? You already have the money i guess but you are thinking of borrowing another £10k through a loan and sticking the £10k you have into a high interest account for two years? Is that the jist of it? Plus you'll be deducting the monthly paymemt out of the savings account which will reduce the interest being earned?

Sorry just want to get it clear in my head first