Dealer finance or Bank Loan?

SammenForLivet2

Hello all,

I was just to get some advice, as I need to (quite soon) purchase a used car, since my previous T reg Vauxhall Corsa, is now on it's last legs and after consulting 4 mechanics, they have all quoted me £1000+ to fix it up to MOT standards.

Most of the cars, that meet my needs are around £3,500-4,500 and I would most likely have to purchase this utizlizing finance.

So, I need to know which are my best options:

• 1.) Bank Loan - £5,00 - I have softsearched using Nationwide and they have offered me £5,000 at 7.4% (approx) and I could over re-pay the difference and a deposit (around £300 - £500) more, free of charge.
• 2.) Dealer Finance - I'm most likely going to purchase this car via Arnold Clark, who want to broker me finance - but will charge me £289 for the pleasure of doing so , but the 'Sales Rep' said that it could leader to lower rates - versus Main Stream banks and around 5.25% Flat Rate - What does this equate to as APR?
• 3.) I found carloan4u.co.uk and they are offering around 13.9% APR - for a loan of this size.

Is there any guide to this and what are the benefits/disadvantages to using each option. If there is any cheaper loan companies, I would be grateful to know.


Finally, thanks for everyones advice. :j

EmmaHerts

Weird- when we got finance via our dealer it didn't cost us anything.

SammenForLivet2

EmmaHerts wrote: »

Weird- when we got finance via our dealer it didn't cost us anything.

I thought the same thing - I think the guy said it was due to some EU law about commission or something along those lines?

jellie

Bank loan - the car is yours and can't be repossessed if you don't keep up the repayments. You can sell the car when you like, but you will still need to repay the loan in full.

HP - the car isn't yours until you have made the last repayment, and it can be repossessed until you have repaid more than one third (after which only by a court order). Once you have repaid half of the total amount repayable for the car, you can hand it back without owing anything else for the car. Obviously in this scenario, you would have repaid quite a bit with nothing to show for it.

Sorry, can't help with cheap loan options..

tonycottee

5.25% Flat rate would be about 11% APR. Add their fee which is about 5% of £5000 and you're looking at about 16%. Plus you will only own the car once you've paid it off. So if the worse should happen and you need to sell, there could be a few complications.
I would go for the loan with your bank.

You-kip

Arnold Clark and 5.25% APR should not be mentioned in the same sentence as this is a typical sales approach for their customers to believe they're competive with the high street bank APR's.

You'll actually pay around closer to 12% without taking fees into account.

KittyRiley

Better to go with Bank loan since it’s safe and a legit way and if you go with other options there may be some involvement on loan sharks.

bigadaj

EmmaHerts wrote: »

Weird- when we got finance via our dealer it didn't cost us anything.

You are, it's just hidden in there somewhere. Could be inflated selling price, fees, increase in rate etc, if they weren't getting anything then they wouldn't be pushing the finance in the first place.

tonkinator

I've always preferred to not finance with the dealer.

so many threads on here where dealers have talked about the flat rate, as if it was the APR, or at least didn't mention the fact that it wasn't and people have assumed (yes I know, them assuming and not researching is as much to blame) that they should be comparing the flat rate with the dealer, to the APR with their bank.

I just get put off by the whole pushy salesman vibe you get from a lot of dealers.

+ you've always got more bargaining power when you have the money in your hand, IMO.