Interest Free Loan, a good idea?

JimmyTheWig

kteara wrote: »

Can I ask, for your personal opinion. When do you feel it would be best for me to purchase the car? Either the 4k car or the 10k dream car.

As I said in my last post, I don't know much about cars.
You seem to.
Some people have a knack for buying and selling used cars. E.g. they can spot a bargain and identify any problems with it so. Then they can keep it properly maintained and looked after and sell it for a decent price. So the car doesn't end up costing them much money.
I can't seem to do that. If I buy a cheap car it turns out to be garbage. If I buy an expensive car it halves in value when I drive it away. Then the value seems to plummet over the years I keep it and the whole buying and selling process seems to cost a fortune.

So if it were me I would be looking to minimise the number of cars I was buying. I wouldn't buy a car with the view of only keeping it 8 months. In fact, selling a car for £2000 and buying a car for £4000 I wouldn't be sure I'd be getting anything better than I was selling.
So I would patch up the current car if it really needs it and keep saving. Then when I had money in the bank to cover the car I wanted plus leave some for emergencies I would buy the dream car.
It looks to me like you could do that in 4 months (using the money you get from selling the current car as your emergency fund) if you carry on saving £500 a month and add your £1000 bonus.

But if you want the new car now and know what you are doing buying and selling then I see no reason not to use your savings to buy the cheaper car now then carry on saving for your dream car. In both cases I would only buy if I had the cash to pay for it and leave some for emergencies.

[Deleted User]

I'd suggest that, if you do borrow the money, you keep the equivalent amount stored away as savings.

This is because, you never know what might happen in the future.

Suppose you had a falling out with your parents?

If that happened to me, I'd want to be able to move out, knowing I didn't owe him/them anything.

What if he/they passed away suddenly?

Any other beneficiaries to the estate (eg. brothers and/or sisters) might object to the estate being short a couple of grand.

Indeed, in the event of only one parent passing away, the remaining parent might desperately need that £2k.

I know parents passing away, isn't the sort of thing people want to think about, but it's still something which needs to be planned for.

kteara

Appreciate the replies. I have made the decision that should I choose to purchase this car I will indeed use my own savings because I can't really see the benefit of taking out the interest free loan.

My last question. Granted I can take out a larger interest free loan, when would be the best time for me the purchase my dream 10k car? As soon as possible or later?

Tixy

kteara wrote: »

My last question. Granted I can take out a larger interest free loan, when would be the best time for me the purchase my dream 10k car? As soon as possible or later?

My opinion - not until you have at least £10k in savings/car value or not until you are earning quite a bit more than £800 per month.

fwor

kteara wrote: »

when would be the best time for me the purchase my dream 10k car? As soon as possible or later?

Unless it's a very unusual car, the thing to bear in mind is that the sooner you buy your £10k car, the sooner its value will start depreciating. If you buy a £10k car from a dealer, it will probably have lost at least £1000 in value as soon as you drive it away from their forecourt. That situation is likely to be a bit less severe if you buy privately, provided you buy with care - but even the most desirable cars depreciate in value quickly.

If you want to avoid this loss of value, you should delay buying for as long as possible. I have used this rationale to delay buying my dream car for around 25 years, and it has saved me a fortune...

Foxy-Stoat_3

fwor wrote: »

If you buy a £10k car from a dealer, it will probably have lost at least £1000 in value as soon as you drive it away from their forecourt.

Do love it when people say this, because generally people buy a new car, drive it straight out the showroom and then sell it dont they !!

Its only depreciates when you sell it, as long as you plan on keeping it for a number of years then depreciation shouldn't be a major factor as most cars will depreciate over time.

OP, just continue to save until your current car breaks beyond economical repair and buy a car outright then with your savings, I wouldn't be indebted to your family members just so that you can own your dream car without taking out a loan for it.

Money_maker

You might want to check out the insurance costs too for a 21 year old male in London driving his 'dream car'.

JimmyTheWig

Foxy-Stoat wrote: »

Do love it when people say this, because generally people buy a new car, drive it straight out the showroom and then sell it dont they !!

Its only depreciates when you sell it, as long as you plan on keeping it for a number of years then depreciation shouldn't be a major factor as most cars will depreciate over time.

That was exactly fwor's point (I believe).
The longer you keep a car the less harsh that drop when you leave the forecourt is.

27col

In my humble opinion, you do seem to be rather over thinking the whole project.
But what do I know. I've just drawn out some savings and bought year old Citroen C4 Picasso.