Buying a new car with a personal loan.

iolanthe07

no one pays for cars in cash

Well, I do for one, and I'm sure lots of others would look askance at borrowing so much money to buy a rapidly depreciating product. I agree with Tixy that if you have to borrow to buy a car, then the term of loan should be no more than the length of time you intend to keep it.

cajef

VW28 wrote: »

but how do people buy cars worth 16K without credit- no one pays for cars in cash

Simple really, they save up till they can afford one, I have always paid cash for my cars.

izools

I think only one question is relevant:

Do you need a new car?

If not, then your intention is a result of sheer indulgance.

But it isn't our place to judge, so if you want to go ahead and get an APR quote without affecting your credit, check out Zopa.co.uk

pjcox2005

izools wrote: »

I think only one question is relevant:

Do you need a new car?

If not, then your intention is a result of sheer indulgance.

But it isn't our place to judge, so if you want to go ahead and get an APR quote without affecting your credit, check out Zopa.co.uk

Nothing wrong with sheer indulgance as long as the person is happy to accept the cost of it.

CLAPTON

VW28 wrote: »

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

That's I'm afraid why so many people are in serious financial trouble and the number of bankrupties has escalated these last 10 years or so.
The first sign of trouble; many a redundancy or short time working or maybe even a child, the pack falls down

Borrowing to invest (buying a property or renovating or maybe extending it, building a business etc ) may well be sensible

but borrowing just to consume is financial lunacy

one more things one should learn in school.

your total income is 50k; surely you can learn to save with what is decent income

VW28

Hmm thank you for some of your replies perhaps then I should give PCP another go, I suppose then at least I have a guaranteed future value for the car.

To answer some questions

Yes I need a car for work.. I do around 20k miles a year

I could save and buy one with cash, but my car is starting to have some problems and I want to get rid now. Which means I can't afford a newer car without credit.

I could buy a cheaper car / older car but I want something that can handle the amount of miles I do.

lawrie28

I would look a a cheaper car TBH. £16,500 gets you a fair amount of golf. WHy not get a Leon/A3/Skoda instead, they are all the same car underneath.

You could look at a Lease. Think of it as a long term rental, you pay £xxx amount per month, do your agreed mileage and hand it back after 2,3,4 or 5 years. Think of it as this: Fleet company buy car, get discount because of bulk buying power and claim VAT back. You pay monthly payment of £xxx for 3 years (this is usually a 3+33 profile), then hand it back, lease company send it off to auction. If they have done their maths right, and guessed on the future value of the car correctly, they will make their money when it is sold at auction. If they got the maths wrong, then they lose money. The back end risk is the leasing companies, not yours, so you do not need to worry about the future value. Of course, you may pay a little more for the privelage, but seeing as you only ever know the true cost of owning and running a car when you sell it, you won't know till 3 years time whether you got it right. A PCP is similar, but gives you the option to buy, which you won't get on a lease.

JSH_2

The OP asked a question about whether a personal loan is better than HP or PCP products. He/she wants a Golf costing £16.5k - not a Seat/Skoda etc (and an A3 will be dearer). Perhaps they are looking to buy a car with a long manufacturers warranty and to sell it before that runs out. He/she doesn't need brow-beating into spending less money. The fact is that the great majority of people take some degree of finance when buying a car

In my experience, a personal loan at a reasonable rate together with a 25ish% deposit is usually the cheapest method. PCP and HP from the dealer often has front end and back end fees that are not alays transparent. Dealers nearly always quote flat rate finance which you then have a hard time comparing with APRs. The numbers also work better witha a car about a year old that has taken it's biggest hit of depreciation. as long as the car is not new, with a 25% deposit, the OP is likely not to stray into negative equity. A personal loan would not be secured against the car either.

Residuals are always a gamble - but you will have the decent chance with a Golf. People will always buy them.

VW28

Thanks JSH this is the sort of advise I was looking for!

Im currently looking into PCPs again just to make a comparison between them both, i've started another thread called 'Buying a Car on PCP' as i cannot seem to get my head around how they calculate these monthly figures.

Your input on this thread would also be appreciated.

lawrie28

JSH wrote: »

The OP asked a question about whether a personal loan is better than HP or PCP products. He/she wants a Golf costing £16.5k - not a Seat/Skoda etc (and an A3 will be dearer). Perhaps they are looking to buy a car with a long manufacturers warranty and to sell it before that runs out. He/she doesn't need brow-beating into spending less money. The fact is that the great majority of people take some degree of finance when buying a car

In my experience, a personal loan at a reasonable rate together with a 25ish% deposit is usually the cheapest method. PCP and HP from the dealer often has front end and back end fees that are not alays transparent. Dealers nearly always quote flat rate finance which you then have a hard time comparing with APRs. The numbers also work better witha a car about a year old that has taken it's biggest hit of depreciation. as long as the car is not new, with a 25% deposit, the OP is likely not to stray into negative equity. A personal loan would not be secured against the car either.

Residuals are always a gamble - but you will have the decent chance with a Golf. People will always buy them.

In my experience, people do not always know what options are available to them with regards car choice. many people want a Golf because they have heard they are well built,safe cars that do well in the second hand market. And they are. But so are the other cars in the group -the Seat/Skoda/Audi etc. Many people are not aware of this, so by pointing this out can save people a lot of money.

Also, whilst a direct comparison of an A3/Golf will say an A3 is more expensive, some people would be happy with the Audi prestige for golf money, so would buy an older Audi instead.

And if you look at Leasing, (not sure with PCP's) the costing per month between a Golf and an A3 is not always that much, as the residual value on an A3 is even better than a Golf.

I agree with you about getting a 12 month old car that has taken the depreciation hit though, that is bang on.

A rough guide with flat rates is to double it to get an APR. It's not 100% accurate, but don't forget an APR will include any fees into the costs, whilst a flat rate is just the finance.