Loan or 0% Credit Card for car purchase

ab1385

Slightly odd question, but...

My wife and I have just had our first baby. I'm quite keen to change her car (Mazda 3) for a BMW 3 series estate, so I'm shopping around for one at the moment. This is as much to do with the fact that the Mazda is getting on a bit as getting an estate, but I quite like the idea of the 3 series.

Anyway, my question really is around how best to finance this. As I'm being forced with work to move to North Wales, my wife will be on maternity leave for 2 years, and so not earning for that time. After that she'll have some income again.

The two options I'm thinking about are:

1. Trade in the Mazda and pay for the rest of the BMW (around £15000) with current credit card (Capital One Cashback). After this, transfer some of the balance (around £7500?) to a 0% interest on transfer card (3% ish fee - around £225) and then pay off the rest with a loan of around £7500. This would cost about £500 in interest over the first two years, and after that I'd increase the loan to £15000 once the wife is back in work (to pay off the CC balance) and pay it off over three years. That bit of the loan would cost about £1400. Total cost would be around £2200 for finance.

2. Trade in the Mazda and pay for this with a loan straight away, over around 5 years. The total cost of a loan for this would be around £2400 in interest.

Either way is fine in terms of organisation, and actually the cost over 5 years of finance isn't much different. The benefit would really be much smaller payments when Deb isn't working with the 0% card idea.

The main question I had really was are there any disadvantages to this?

The other question is whether, generally, you can pay higher amounts on your credit card than your credit limit if you put some money on it to put it into positive balance to start with? Only as I have a cashback credit card this has obvious advantages.

Thanks for any advice!

19lottie82

Can I just ask, if you are down to one wage is getting 15k in debt for a fancy car, a good idea?

chanz4

Unless your taking the loan/finance this will be your prob, if any debt and "Anyway, my question really is around how best to finance this. As I'm being forced with work to move to North Wales, my wife will be on maternity leave for 2 years, and so not earning for that time. After that she'll have some income again."

wwfc_2

At least with a loan you know where you stand. whats to say youll be offered a credit card with 0% for that amount in a year or so time.

I'd shop around for the car, have you checked out motorpoint?

I believe putting a credit card in to a positive balance is against terms and conditions and can result in you losing the benefits of the card, but i could be wrong.

[Deleted User]

you are making too many assumptions OP,and tbh spending 15k on a car when you have a new baby and only one income is madness

chalkie99

Borrowing a wedge of money to buy German products ..... :undecided

How is that working out for people nowadays? :mad:

ab1385

Point taken, but part of the reason for asking was whether putting half of it onto a 0% credit card negates the issue with being on one less salary. The salary loss is an issue, but not as big as you might think.

My salary which would continue is about twice my wife's, and we're just about to finish paying off a loan we used to do the house up. My student loan is just coming to an end as well, which will mean an extra £350 a month income too.

I've done the sums and the car is affordable on just my salary, but what I wanted to know is whether spending half of it on my CC, transferring that to a 22 month 0% interest CC and then paying that off when my wife is back in work is a sensible way of making things easier while she is off work?

chalkie99

I wonder if you have seen the newer thread, not too unusual on here, entitled:

Car loan is crippling me!
.......

Three years into a car loan my circumstances have changed. .........

:question::question::question:

Tixy

Obviously we don't know your income level, or what other existing debts and commitments you have - as you haven't told us them.

But often people are finding getting 2 new credit agreements can be harder than getting 1 item (even when they add up to the same amount overall). Simply due to the fact that one has to be credit checked before the other, and the second one can potentialy be negatively affected by the first check.

You presumably have the £15k spare capacity on the cap 1 cashback card? What happens if you put the purchase on there and then are unable to get a new loan or cc to move the debt on to - you could be stuck with it at standard rate APR (don't automatically assume you'll get new credit - you might think it affordable, the banks may not).

Have you asked the dealer if they charge a fee for paying by debit card?

What is the reason for paying on the cashback card (is it to get the cashback and is this limited to quite a low amount each month).

Why a 0% bal trans card rather than try to obtain a 0% purch card and save the transfer fee?

R_P_W

Hi - Don't take this the wrong way - but I think what you are suggesting here is madness! Why do you want to saddle yourself with £15k of debt for years on something that is going to depreciate in value very quickly. Are you looking to buy brand new or 2nd hand?

You have just had a baby, your wife isn't going to work for 2 years and even after that is there any guarantee that she will be able to walk into a job?

You say that putting it on a zero % card negates the issue of being on one salary? how exactly - its still a debt! Plus if I'm reading it right, you dont have a 0% card yet and you are assuming you are going to get one in the future.

Why don't you keep the Mazda, you never know it might last another 2-3 years without too many issues - if you say you will have 350 a month spare then save that. In 3 years you will have over £12k saved and if you want to go and blow it on a car in cash then it will be entirely your choice to do.

Joeler

I would go down the Loan route as you know where you are and you know what it will cost you.

Like other people have said if you can't get future credit you will be screwed, and who knows the what will happen in the next few years...

You should work out the potential depreciation of the car plus the loan cost over the next three years and you should come to terms with that fact that is the money you will lose if you are forced to sell the car because circumstances change. I dont think a new baby is a reason not to do it, but you should change the way you think about it.

Good luck