Car - best way to finance?

alflavor

We have a real dilemma on our hands at the moment, as I have taken a new job that means I lose my company car, a benefit I have had for 8 years plus.

The new job however is a significant salary increase, so that combined with a much improved tax code means I am confident we can run the new car.

I am looking at needing between 16-20K for the car in mind, possibly a new shape ford focus or mini countryman (to be decided), and we're looking at ex-demo or something upto 1 year old, as it will do approx. 20K miles over 4-5 years ownership.

I have to have the new car in place before 31st July, as this is the day I will lose the company car currently on the drive. (new job starts 1st Aug)

What is the best way to finance this car - we were thinking of taking the money out of the house, or is this frowned upon? Prior to taking this new job we cleaned out our savings apart from 2.5K on house improvements so to use any savings isn't an option (we also have 2.5k on a credit card which needs clearing!)

Our house is worth £235K approx, and our mortgage owing currently is £125k so there is a good LTV there - we've been quoted £142PM to release 20K on a 4.49% fixed - by the way our mortgage has 17 years left currently, although we do overpay £170pm.

Car loans look expensive, so another route was personal leasing, we liked the look of mini 50/50 where you put down 50% and pay the other in two years - we obviously would need to save up for that scenario.

Any advice at all would be much appreciated, if I need to provide more info I would be happy to.

DCFC79

Just have to ask but why a car worth 16 - 20k, surely you can get a car thats a year or 2 old thats worth half of that value ?

somethingcorporate

£20k for a ford focus :eek: You could get a decent second hand Porsche for that!

If you have got a decent income (and available credit limits) then have you considered tarting at least some of the value of the loan at 0%?

If you increase your mortgage and don't increase the rate of overpayment that £20k that you borrow could cost you twice as much over the life of the mortgage.

chalkie99

Do you really mean you will only do a total of 20k miles over 4 or 5 years?

Or do you really mean 20k per year?

If you enter into any sort of lease or PCP scheme the mileage will make a big difference to the cost, yet i cannot really believe you would even need a company car for less than 20 miles a day - if your estimate is correct.

It's a huge leap to spend big money on a car just for a new job when you cannot be sure the job will even work out. There are plenty of examples of that scenario which have turned up here before now and who knows what will happen with the current Eurozone crisis. Your job could be gone before you even start and you will be saddled with a huge loan for something which you neither need nor can afford.

I am sure you will be confident of it all working out but please think carefully before acting.

alflavor

Thanks for replies so far - 16-20k was based on what I am used to I guess with the company car! Also was thinking with the mileage I will do, a newer lower miles car would be better?

Southend1

Get a the newest car you can find with a higher than average mileage. As your mileage is so low by the time you come to sell the car will have average miles. Cheaper to buy, better residual value = more pounds in your pocket.

Ps £20k for a focus?! Get a 3 or 4 year old BMW instead or like the other poster said, go for a Porsche!

pippitypop

If you don't have any other debt, you could get a Barclaycard Platinum, Tesco CC or similar with a good % purchase rate to pay the first 50% on the Mini 50/50 deal or whichever car you're getting. I got my Mini for under 15k 1 year old with low mileage, don't have to pay hardly any car tax as it's a diesel an all my servicing paid for up to 50k. Love it

Alternatively you could get a Virgin Money balance transfer card if they won't accept a credit card for partial payment and balance transfer money to your bank account. Even taking into consideration the transfer fee, that would still probably be cheaper than a loan. Good luck!

somethingcorporate

pippitypop wrote: »

...Even taking into consideration the transfer fee, that would still probably be cheaper than a loan...

It will definitely be cheaper - there are no loans for sub 4% APR. Even if the OP uses this to part fund their purchase it will cost significantly less than almost any other option (including mortgage etc).

Eonel

I fund cars through my mortgage but you do have to be careful & it is not something that should be widely recommended.

You should not be looking to pay off the car loan over 20 years- that will cost you a fortune in interest as well as erode the capital in your house over a longer term.

Instead you should manage it more like a car loan - making sure by overpayment you pay off each month the true amount the car depreciates.

alflavor

To clarify - I will do 20K miles each year!
My mistake!
Some good advice here thanks.

alflavor

Regarding the new job, I work a very specialised field which is typically recession proof (food flavours) so whilst I cannot be 100% confident, I am highly confident it will work out - but I agree you never know!

Why a focus - well it's at the top of list as I currently have one as a company car - I love it, I know they depreciate like gone off milk, but this really is the best car I have had yet, and it is loads better that the A3 S Line I had prior!

If I went for the Mini I would be looking at the Countryman - might have a look at one this week.