Take finance or Use your Savings

lona43

I'm going to be trading in my car soon.

I have the cash to pay up front.

My question is, is it better to take finance at 4.5% interest and leave my money in savings account at 5.25% interest.?

nomoneytoday

Depends on if its 4.5% apr or 4.5% as a "flat rate"

*flat rate is a term used by unscrupulous (sp) dealers to stitch the unsuspecting public into paying about double the APR

Creditcardkid

Don't forget the tax on your savings would make it closer to 3%.

Also if you have cash you can usually negotiate a discount and get more off.

Hope that helps.

lona43

Creditcardkid wrote: »

Don't forget the tax on your savings would make it closer to 3%.

Also if you have cash you can usually negotiate a discount and get more off.

Hope that helps.

I don't pay tax on savings so that's ok

I tried getting a discount for cash but they weren't interested.

reddevilled

Have you tried a different dealership if they won't offer a discount for cash? Somewhere will offer a discount for cash and if they have the same model which you want then it would be worth finding out so you can do a fair comparison.

LittleVoice

Think you need to just work out what the car would actually cost if you used the offered finance deal - over the whole period that you would be paying.

Then look at what interest you would receive on the money you already have over the same period.

If the difference is clear, you'll know what to do. If the difference isn't much then just decide which you feel most comfortable with - whether you actually dislike having a loan or you want the flexibility of having the money available to you in case of an emergency not covered by other savings.

lona43

Thanks everybody for your advice.

I'm going to dealer on Friday so I'll see what their terms are and weigh it up with the difference if any by keeping my savings.

Middlers

I had this quandry in January and in the end decided to 'borrow' the money from myself and then repay back into savings a monthly amount equivalent to what it would have cost be if I had taken finance. My savings were in Premium Bonds only and so I was only getting small wins but probably equivalent to High Street interest.