Am I right to avoid getting a car loan?

Rich85

Just wondering really as I'm nervous about getting into debt as such and have avoided getting finance where possible.
I've got a small mortgage but chose to have it as small as possible.

When it comes to my car, it's fairly decent, does the job but it's been braking down a little bit more than id like over the last few months.
I don't rely on it for work, so other than annoyance factor the main problem I have is that it seems a little wasteful constantly fixing and improving a car that although is ok, I don't have any interest in.

It feels like I'm fixing all the problems for a future buyer.

I've thought about trading it in for something a little newer but that would mean getting around £5k on a bank loan.
Looking into this quickly, it's very much affordable for me over 2 years and the interest is much lower than I thought it was.

I'm in two minds really, to take the traditional "safe" route and saving up, while spending money to fix my current car or just bite the bullet and trade it in now.

Any thoughts?

Am I being irrational avoiding easily affordable finance?

redpete

Rich85 wrote: »

Any thoughts?

How long will it take to save £5k?
What is the realistic expectation of the cost in maintenance / repair for your current car in that period?
What rate are you likely to pay on the loan?
Would you be able to overpay on the repayments to save the total interest on the loan?

Am I being irrational avoiding easily affordable finance?

No.

Gaz83

You're not being irrational, far from it, but you do need to sit down and do a bit of projecting about possible interest rates / repayment amounts vs. how much it will cost to maintain and repair your current car. I was in a similar position a few years ago. I ended up going for the loan and overpaid it to pay it off early.

dancingfairy

I would imagine that it would also depend on how you finance the car. I presume that a car loan through a dealers would cost an awful lot more than a traditional bank loan (that just happened to be for a car). You also would probably get better value for your car selling it privately rather than doing part exchange I'd guess.
df

Rich85

It's pretty much impossible to predict what I will need to spend in the future on this car but in the last 6 months it's had

Clutch
3 brake callipers
Front pads
Rear pads
Handbrake mechanism
Exhaust mid pipe.

When I look quickly at loans I can get £5k from HSBC at £221 a month making the total interest £315.
Which seems very reasonable to me. I would expect to spend more than that on car repairs over the next 2 years.

I'm still very nervous about getting a loan tho. Even though it's easily affordable

Johnmcl7

What is the age and mileage of your current car and what model is it? You need to bear in mind that buying a newer car (I'm assuming based on your budget it will still be second hand) doesn't guarantee you won't have to spend Even without repair and maintenance work the car is still going to be losing more money in depreciation than your current car.

I think you're right to avoid finance where possible, at the moment if anything happened to your job or you were unexpectedly unwell you don't have to pay anything towards your car but if on finance and anything happened it could be a big weight on your shoulders.

John

forgotmyname

If you have replaced most of the major stuff already. It should be minor stuff for a while yet.

You can spend another £5k on a car and require a clutch and brakes within a year or so anyway.

dealer_wins

Save up, a car is a luxury and should only be bought with savings, and never with a loan!!

27col

Never take out a loan if you can afford to pay cash. Why would you want to pay interest, if you do not have to?

thebritishbloke

27col wrote: »

Never take out a loan if you can afford to pay cash. Why would you want to pay interest, if you do not have to?

Convenience. The ability to have it now.

Obviously doesn't apply to OP, but lets say I have £20k in savings which I'm planning to use as a deposit on a mortgage. I wouldn't want to spend that on a car and have to save up for a deposit all over again.

bigadaj

thebritishbloke wrote: »

Convenience. The ability to have it now.

Obviously doesn't apply to OP, but lets say I have £20k in savings which I'm planning to use as a deposit on a mortgage. I wouldn't want to spend that on a car and have to save up for a deposit all over again.

Makes no sense though, in most instances it costs more to borrow than can be earned in savings. If the car is on low rate finance then the cost is normally tied in the deal so it's always being paid for somewhere.