Get a loan or use savings?

hufc2002

Hi all

My wife is wanting a new car as the one she has is nearly 10 years old now and starting to cost money.

New car will cost £6k after part-ex and was wondering which way would be best to fund this. We have £9.5k in savings as we are saving to move in the next 3 or 4 years so could either use £6k out of this or get a loan.

Any advice?

Thanks

HappyMJ

hufc2002 wrote: »

Hi all

My wife is wanting a new car as the one she has is nearly 10 years old now and starting to cost money.

New car will cost £6k after part-ex and was wondering which way would be best to fund this. We have £9.5k in savings as we are saving to move in the next 3 or 4 years so could either use £6k out of this or get a loan.

Any advice?

Thanks

If you've got the money then use the savings.

Unless....the finance offered is at 0%..i.e free. Then you can earn more keeping your savings in high interest current accounts than you would pay out in interest.

YorkshireBoy

The £9.5K savings should currently be making at least 5% AER (gross)...is it? From April 6th you won't be paying tax on the interest this generates.

So, can you get the finance cheaper? For me the answer is yes*, but your situation may be different.


* I'd use the Virgin money transfer card (1.69% fee for 32 months 0%)...so less than 1% APR.

fresvinog

Always live a debt free life, if you acquire a loan this will be your liabilities and a possible headache for you in the future.

if the car still working, why not to consider using it until you have the money to buy a new one.

hufc2002

Fixed ISA has just matured so plan was to split it in half and put it in Club Lloyds (one in my name one in my wife's) which earns 4% on balances up to £5k

YorkshireBoy

hufc2002 wrote: »

Fixed ISA has just matured so plan was to split it in half and put it in Club Lloyds (one in my name one in my wife's) which earns 4% on balances up to £5k

A nice fit, but the moment you have a bit of a spend (and the balances fall below £4K) your interest rate will plummet.

Going with TSB and Nationwide would see you making 5% AER on everything...even down to a few quid in each account, so no penalties. Plus, play your cards right and you could get £600+ in switching incentives along the way.

And £600 is the equivalent of over a years interest @ 5%, so you're getting well over 10% on your £9.5K over the next year.

Puddylove

Petert0204 wrote: »

Hi, it’s always a good idea to go for a loan instead of exhausting current savings. By doing so you will always have a good amount of money in savings, which could be used for the future home you are planning to move to in the next 3 to 4 years.

No, no it isn't.

foxy-stoat

Puddylove wrote: »

No, no it isn't.

Dont worry about Peter, he is post building !

ChemistDude

Don't get the loan, it may impact how big a mortgage you can get for your next place. Hopefully the new car will be more fuel efficient / less or no road tax. Just save all that and continue saving up again. Never get into debt for cars.

(I'm a hypocrite having recently taken out a loan for my wifes car too but I intend to pay it all back in within 12 months and it was for cashflow). She said yes to all my other property investments so couldn't really say no to her.