best loan for a new car

redbull5

Apples2 wrote: »

You have a weird logic.

Why don't you take it out of your savings and replace the money in 18 Months?

Because everyone has different ways of savings, if i have the money in the bank i wont spend my savings, but trying to save is a whole different story! so if its a loan, i still have my savings, yes the APR and interest, but for me this is the best way, and i can bet that i wouldnt be able to save the ammount back, some expense would pop up

CLAPTON

redbull5 wrote: »

Because everyone has different ways of savings, if i have the money in the bank i wont spend my savings, but trying to save is a whole different story! so if its a loan, i still have my savings, yes the APR and interest, but for me this is the best way, and i can bet that i wouldnt be able to save the ammount back, some expense would pop up

truely bizarre but bankers must love you

property.advert

Paying 7%-10% plus on a loan and getting 3% before tax on your savings is true madness.

JimmyTheWig

property.advert wrote: »

Paying 7%-10% plus on a loan and getting 3% before tax on your savings is true madness.

While that is obviously correct from the numbers point of view, I can see what they are saying.

Lets say they have worked really hard to save up £10,000.
They have the mindset that they can't touch this money. Maybe it's for a deposit to buy a flat.

They need a car and can either borrow £5,000 from the bank and pay £238 a month for two years at 10% APR (costing £494 in interest) or "borrow" £5,000 from their savings (which would have been earning 3% AER) and repay £238 a month for 1 year and 10 months (losing out on £140 in interest).

Clearly the numbers show the second option leaves them £494 - £140 = £354 better off at the end of it.
But they've now broken the mindset of not touching the money in savings.
With the first option they have no choice but to pay the money back each month.
With the second option they do have a choice.

Maybe one month they want to buy themselves a new suit.
Maybe another month it's new branded trainers that catch their eye.
Another month they want the latest games console.
Before they know it, Christmas has come around and they need a bit of extra cash for more presents and more partying.

Now it would be quite easy for them on those four months to not replace the savings money.
So it actually takes two months longer to repay the savings than it would have done to repay the loan. And what have they got to show for it? An old suit, dirty trainers, a games console in the back of a cupboard somewhere, friends with more tat than they need and a bigger hangover.
Taking the money out of savings has actually cost them more than taking out a loan.


Personally I'd take the money out of savings and be rigid with myself about repaying it.
But I can see that for others that wouldn't be the best plan.



As to the OP, I agree with what's been said.
Save up the money and buy a car you can afford.
Then start saving for your next car and if you look after the first one properly, by the time it dies you'll have enough in the kitty to buy the car you want.

davetrousers

At 21 you'll probably need about £5k to insure it!

ie remember to consider the cost of insurance.

RichGold

redbull5 wrote: »

Because everyone has different ways of savings, if i have the money in the bank i wont spend my savings, but trying to save is a whole different story! so if its a loan, i still have my savings, yes the APR and interest, but for me this is the best way, and i can bet that i wouldnt be able to save the ammount back, some expense would pop up

Unbelievable.

If you plan on repaying any loan you get then why not pay for it out of your savings and create a standing order to pay the loan back to your savings at the same rate (or even slightly less) than you would repay a loan.

This is basic money sense and you seem not only to have it all backwards but you also seem blissfully ignorant of the fact.

JimmyTheWig

RichGold wrote: »

Unbelievable.

If you plan on repaying any loan you get then why not pay for it out of your savings and create a standing order to pay the loan back to your savings at the same rate (or even slightly less) than you would repay a loan.

This is basic money sense and you seem not only to have it all backwards but you also seem blissfully ignorant of the fact.

Did you see my post #15?

I do think that there is sometimes a psychological side to it as well as just looking at the interest rates.

DCFC79

I know its been beaten but id like to ask if you could afford the repayments plus insurance plus the upkeep of the car plus spending what your money on what you want.

dresdendave

JimmyTheWig wrote: »

Maybe one month they want to buy themselves a new suit.
Maybe another month it's new branded trainers that catch their eye.
Another month they want the latest games console.
Before they know it, Christmas has come around and they need a bit of extra cash for more presents and more partying.

But surely someone who wastes money as in the above scenario would never have been able to build up the original savings pot in the first place.

System

jass_123 wrote: »

Visit to any Bank like Axis ,FAHD compare rate and have loan for your car.

I'm relatively new to this, but am I right in thinking jass_123 is probably building his post count in order to be able to post links?