Buying a new car with a personal loan.

VW28

hey,

I'm thinking of buying a used car with a personal bank loan, instead of HP or PCP, as these interest rates seem high and i just keep getting quoted Flat rates!

To get the monthly figures down to a reasonable price (£250.00) per month i would need to spread a £12,000 loan out over 5 years (9.9 APR).

However i would not want to keep the car 5 years and would look to sell the car after 2-3 years and pay the rest of the loan off early, I know the bank has an early repayment charge of 58 days. But that doesn't seem a huge amount?

Does this seem a good idea or have i overlooked something

Thanks

andymc29

Why are you buying a new car to just sell it after 2-3 years?

Tixy

Where would you get the money to pay off the loan early in 2-3years? are you assuming you would get enough from the car sale to pay the loan off?
Cars don't depreciate equally so its likely your loan will be more than the car is worth.

If you want to pay £250 a month and keep a car for 3years then why not look for a car priced so that you'd only need to borrow £8k (or thereabouts).

VW28

I would be looking to part-ex my car worth £4,500 and take out a £12,000 for a total of £16,500 for a golf. I'm hoping in 2-3 years the car will be worth more than the remaining loan because of the £4,500 i have put down initially.

I would then look to buy another car in 2-3 years.

This idea seems similar to that of a PCP =

deposit - monthly repayments - final end value.

The gamble is i don't know the final value.

Tixy

Yes, that would be the gamble.

Have you been approved a loan for £12k yet?

Its usually much harder to get a personal unsecured loan than car finance and thats a reasonably large loan to be looking at. How much do you earn and what other existing debts and credit available do you have? Are you likely to pass any banks affordability tests?

CLAPTON

I'm not sure what advice you are looking for but it makes no sense to borrow 12k and buy a rapidly depreciating object

pjcox2005

I think the logic is similar to PCP so could work if approved and at a lowish rate of 9%.

On the flip side have you considered shopping around on cars, or are you desperate for a Golf.

I ask, as for example, we brought a new DS3, nice car around £16k price. Brand new, small deposit up front (less than the value you'd get for your car), Citreon added a grand (makes up for some excessive dep'n), pay £250 for the next 2/3 years and can then either hand back for nothing, upgrade or choose to buy.

That seems competitve against what you are looking for, effective APR was lower due to the free deposit, and more flexibility at the end.

Ford also are currently doing a number of offers on new, including funding at 4.4% with a extra deposit given by manufacturer.

izools

Zopa will quote you on a loan based on your circumstances and credit file without leaving a footprint - they do a soft search.

You can also put an ad up in the Zopa markets with a "Target" APR explaining to lenders why you feel you should be trusted with the money and why you're a good bet - the more convincing your listing, the lower the APR you are offered.

http://www.zopa.co.uk/

VW28

I earn 20,000 and would be looking to split the loan with my partner who earns 30,000. I have discussed this with my bank and they didn't seem concerned? but I haven't undertaken any credit checks yet. i have no other debits.

Clapton- I'm not saying this is this best way- but how do people buy cars worth 16K without credit- no one pays for cars in cash

Tixy

Lots of people pay for cars in cash.

Usually people who perhaps either earn more than you, or who are prepared to buy a cheaper car that they can afford to purchase outright, or both.

Personally I have used personal loans to buy cars in the past, but never over a term longer than I intend to keep the car.

chalkie99

You need to work out what your settlement figure would be after 2 and 3 year periods, bearing in mind you will be paying more interest in the early part of the loan.

At the moment your existing car is worth, you hope, £4500.

To make your plan work the Golf would need to be worth at least enough to pay off the loan plus the £4500 you currently have or you are not in a position to buy another car on the same basis, as seems to be your idea.