To card or not to card, that is the question...

lef

Hey all, long time reader first time poster.

I hope you'll forgive my first post here being one asking for advice. I'm more than willing to offer advice back where I can.

I need a new car. I want to spend around £6,000 on a second hand one from a dealer and I'm looking at how to best finance it.

So I called my bank today, and was offered a loan at 20% APR! I'm not quite sure why, as creditexpert reckon I have a decent credit rating.

I have a credit card I don't use charging 0.95% monthly (so I think that's 11.4%APR) with a £7,200 credit limit, so I've considered just using that instead of mucking about with a loan. It occurred to me that I could perhaps do a 0% balance transfer in a couple of months to save some cash perhaps?

The dealer is going to try and sell me finance but that'll probably be expensive won't it?

I see the pros and cons of using a credit card like this:

Pros

1. I can overpay without being penalised and pay the borrowing off earlier.
2. I don't get another loan to manage or increase my credit footprint.
3. I get a degree of consumer protection by buying a car on a credit card.

Cons

1. I use a large proportion of the credit extended to me which might have some effect on my credit rating.
2. The APR could change and make borrowing more expensive.
3. I could perhaps if I searched hard enough find a better deal on a loan.

Does this seem sensible? Is there a reason I shouldn't?

I'm just finding myself prognosticating about this too much and would really appreciate some sane advice if you have the time to give it

Thanks in advance!

YorkshireBoy

Some more cons...

The dealer is extremely unlikely to take a credit card payment of £6K.

Any credit card payment, other than a small deposit, is likely to incur a fee of circa 3%.

If you do get any success with the above, you paid too much for the car!

Moving this debt on will likely incur another 3% fee 2 months down the line. So that's 6% paid plus the interest at 1% per month until you BT. Soon starts to mount up doesn't it?

What's your income? A £7.2K limit on the existing card says it should be half decent. How about getting an MBNA card and making a money transfer? 4% in fees will buy you up to 22/23 months 0%. No 'protection' though, so pay the deposit on your existing credit card.

lef

Thanks for the advice Yorkshireboy.

It did occur to me that dealers don't like accepting credit cards because of the transaction fees they have to pay, but I assumed they just passed the fee onto the customer. 3% of 6 grand is £180, so I'd pretty much resigned to adding that much onto the final bill and write it off against the added peace of mind.

I'd not heard of MBNA money transfer until you just mentioned it. Googled it and it looks interesting

Thing is that I didn't really want to spend more that £200 P/M.

If I paid a £2K deposit on a credit card, and did a £4K MBNA money transfer for the remainder, It'd look like this:

MBNA balance transfer method
£4000 (+ the £160 fee) at 0% APR
£190 P/M repayment to clear in 0% period of 22 months

The the credit card deplosit of £2000 at 0.95% per month
£66 P/M repayment to clear in 36 months

I'm presuming here of course that the dealer wouldn't want to accept more than a couple of grand if paid on credit card.

Credit card only method (if possible)
£6000 (plus £180 3% fee) at 11.4% APR
£202 P/M repayment to clear in 36 months.

YorkshireBoy

There's a 3rd option...

£100 deposit (could even be just a pound for the section 75 protection!) on your existing card, followed by the balance with cash from the MBNA money transfer.

Then, as you're approaching the end of the MBNA intro period, BT any residual debt onto another card for the last 14 months.

You'll pay a 4% fee on the £5,900 plus a 1-3% fee in late 2014 for any residual balance.

That'll be considerably cheaper overall than your 36 month option above, whilst still meeting your max monthly payment objective.

lef

That sounds interesting. I'll run the figures. I guess I'll have to cross my fingers that MBNA give me a card.

Thanks again YorkshireBoy. Have a beer on me :beer:

vonniejenks

YorkshireBoy wrote: »

There's a 3rd option...
Having looked at this,i wonder if Hsbc only offered me a small amount of the deposit paid on their card back "as a good will gesture" if i could now go back to them (over 7 years) an request the full amount that i paid to the holiday company,who have now gone bust,as Hsbc neglected to advise that they were actually liable for the full amount -Any help would be much appreciated believe me i.ve tried all those years to get the money back from the holiday company too Thanks

Fruit_and_Nut_Case

vonniejenks wrote: »

There's a 3rd option...
Having looked at this,i wonder if Hsbc only offered me a small amount of the deposit paid on their card back "as a good will gesture" if i could now go back to them (over 7 years) an request the full amount that i paid to the holiday company,who have now gone bust,as Hsbc neglected to advise that they were actually liable for the full amount -Any help would be much appreciated believe me i.ve tried all those years to get the money back from the holiday company too Thanks

Something not quite right here. Have you posted in the wrong thread?

vonniejenks

well,maybe-what I was looking at was the section 75 queries,and having seen many post that were slated for putting too much detail I tried to keep what I wanted to know to a minimum without explaining the whole sorry eight years story