Best for Savings

jack_tyler

Hi everyone. I am looking for advice or pointed in the right direction for the best account to put a lump sum of money in. Through very tragic circumstances I am due to receive a large amount of money in the next few months (possibly before Xmas) and I would like to put some of this money into an account where it will gain the best interest. I will be hopefully buying myself a new car, and my idea was, whatever the cost of the car is, put that amount of money in a separate account, and use the interest that that money makes to make the monthly payment (so in affect my money is working for me) I appreciate that there isn't a lot of savings accounts out there that are paying great rates of interest at the moment, but I was hoping I could find one that at least gave me something back for my money. Thanks

kingrulzuk

jack_tyler wrote: »

Hi everyone. I am looking for advice or pointed in the right direction for the best account to put a lump sum of money in. Through very tragic circumstances I am due to receive a large amount of money in the next few months (possibly before Xmas) and I would like to put some of this money into an account where it will gain the best interest. I will be hopefully buying myself a new car, and my idea was, whatever the cost of the car is, put that amount of money in a separate account, and use the interest that that money makes to make the monthly payment (so in affect my money is working for me) I appreciate that there isn't a lot of savings accounts out there that are paying great rates of interest at the moment, but I was hoping I could find one that at least gave me something back for my money. Thanks

How much are you talking about?

Eco_Miser

Sorry for your loss.

For really large amounts the best place is probably NS&I - unlimited guarantee, as opposed to the £75,000 FSCS guarantee deposits in other banks have.

https://forums.moneysavingexpert.com/discussion/5374614 lists the highest paying accounts.

Why not pay cash for the car? (Or pay off the finance immediately if this gets a better deal.) The interest on a loan is going to be higher than anything you can get in a bank or building society.

jack_tyler

Thankyou for the replies. To kingrulzuk, I was thinking about £25,000 - £30,000.....to Eco Miser, I have considered paying cash for the car, but I have been told by a few people that this wouldn't be the best idea because once that money has gone, its gone.....where as if I pay the car via finance, I will still have my initial amount....to be honest im totally confused as to what would be the best way to buy the car

Seanymph

Finance rates are upwards of around 5 - 6%.

Have a look at rates for bank loans, and for loans with cars.

You would have to get more than that, after tax, to break even, by investing the same amount of money.

You would, almost certainly, and under all circumstances, be better off by paying for the car.

Perhaps you should ask those who are advising you otherwise how they see that stacking up financially.

kingrulzuk

jack_tyler wrote: »

Hi everyone. I am looking for advice or pointed in the right direction for the best account to put a lump sum of money in. Through very tragic circumstances I am due to receive a large amount of money in the next few months (possibly before Xmas) and I would like to put some of this money into an account where it will gain the best interest. I will be hopefully buying myself a new car, and my idea was, whatever the cost of the car is, put that amount of money in a separate account, and use the interest that that money makes to make the monthly payment (so in affect my money is working for me) I appreciate that there isn't a lot of savings accounts out there that are paying great rates of interest at the moment, but I was hoping I could find one that at least gave me something back for my money. Thanks

when you said that you want your interest to pay for the monthly payments for the car, I was thinking you were talking about 100k or above, with 25 to 30k you will earn around £500 a year, but if you spread that money in different current accounts you will earn little more.

enthusiasticsaver

I will be hopefully buying myself a new car, and my idea was, whatever the cost of the car is, put that amount of money in a separate account, and use the interest that that money makes to make the monthly payment (so in affect my money is working for me) I appreciate that there isn't a lot of savings accounts out there that are paying great rates of interest at the moment, but I was hoping I could find one that at least gave me something back for my money. Thanks

If you were to borrow money to pay for a car then any interest on savings would have to be higher than the loan interest which is extremely unlikely.

I was thinking about £25,000 - £30,000.....to Eco Miser, I have considered paying cash for the car, but I have been told by a few people that this wouldn't be the best idea because once that money has gone, its gone.....where as if I pay the car via finance, I will still have my initial amount

I don't follow this logic. Yes, the money is gone because you have spent it on a car. If you don't want to part with that much money why not buy a cheaper one?

xylophone

http://www.moneysupermarket.com/c/news/how-to-pay-for-a-new-car/0016660/

may be worth a read.

How much do you plan spending on the car?

markwilkinson

With a bit of effort you can get between 3-6% on your lump sum. Depending on the cost of the car it is extremely unlikely that interest earned will cover the cost of interest on a loan. I think you have a simple choice here, do you like the idea of a new motor more than having a lump sum which could be growing and providing you with a bit of financial security?

By the way, I have quite a bit in savings and investments and my car is worth about £2.5k. my previous car I bought off eBay for £1.2k and it lasted 5 years and I didn't even bother to service it.

Eco_Miser

jack_tyler wrote: »

to Eco Miser, I have considered paying cash for the car, but I have been told by a few people that this wouldn't be the best idea because once that money has gone, its gone.....where as if I pay the car via finance, I will still have my initial amount....to be honest im totally confused as to what would be the best way to buy the car

Unless you get a 0% finance deal, finance will cost more - you will still have the initial amount, but if you use it for anything else it won't be earning interest, so you'll have to find the payments somewhere else.

If the price of the car were nearly all the money you had, then buying with a loan would conceivably let you keep an emergency fund (but you would be paying for that privilege).

I will be hopefully buying myself a new car, and my idea was, whatever the cost of the car is, put that amount of money in a separate account, and use the interest that that money makes to make the monthly payment (so in affect my money is working for me)

On re-reading, that plan simply won't work. You need the interest from 20 - 50 times the price of the car for the interest to cover the payments. Otherwise, the money is still gone when you've bought the car, and you've paid extra to spread the payments out.
ETA: sorry, that's for paying off in one year, so 4 - 10 times to pay off in 5 years.

newuser78

Can you get a credit card with 0% interest rate? So buy a car with that, you are protected and as long as you make minimum monthly payments, you could pay off the loan (clear balance) before the 0% deal expires.