Dealer Finance vs Loan

ceetp

Hi All!

Seeking advice on car dealer finance vs a car loan based on my personal circumstance. I've included as many details I could think of that you might need to help me but let me know if I can provide anything else....

I need a new car ASAP as my current one is old and has broken down for the last time I am willing to plug money into it. I have £3000 saved but as I don't want to keep up the cycle of buying older + cheaper cars, have been thinking about using my £3000 as a deposit and financing the cost of the rest of the car.
I don't want anything brand new or fancy. Just newER than i'm used to and reliable. So was thinking to look for cars around the £6000-7000 mark. (Is that a good budget for a "new enough", reliable make?)

My query is:
What would be best - Find a car that I like at a dealers and seek finance?
or take out a loan? Opinions please!

Overview:
- Credit Score: 697 (May be low because despite having utility bills etc, I only took out my first credit card last year)
- Savings: £3000
- I bank with Nationwide
- Full Time Employed
- Can comfortably afford to pay £300-400 per month on repayments
- Wouldn't want a long repayment. 12-18 months would be ideal

I'm open to any other suggestions and any advice is greatly appreciated!

jimjames

Personally I wouldnt tie myself into a loan at £400 per month. If you have £3000 you should be able to get a decent car with that.

If you do decide you want to borrow then I'd just see what the dealer offers compared to the best loan you can get. Sainsburys were offering at 2.8% which is probably lower than a dealer will give.

motorguy

jimjames wrote: »

Personally I wouldnt tie myself into a loan at £400 per month. If you have £3000 you should be able to get a decent car with that.

If you do decide you want to borrow then I'd just see what the dealer offers compared to the best loan you can get. Sainsburys were offering at 2.8% which is probably lower than a dealer will give.

+1

A payment of £400 a month would become tiring very quickly.

Jlawson118

Oddly enough, I was just researching into this myself about ten minutes ago and then stumbled across your question.

For the last few days I've been looking at car finance deals. I personally can't afford anything new at the moment and my car isn't running all that well, but I'm hoping perhaps in the future I might do, and was wondering which was cheaper.

My friend has a BMW 1 series worth around £21,000 ish, he pays for it on finance. I looked up this same deal and with a £5000 deposit, I can pay finance for £250 per month which is £13,000 after four years, so £18,000 including the deposit. Then there's a £9000 final optional payment or hand the car back. So if you want to keep the car then overall you've paid £27,000 for a car worth £21,000.

Although I was just looking at First Direct's loan (as that's who I bank with) and I can borrow £21,000. I pay back £467 per month over four years and overall pay just less than £22,500 back, and I get to own the car. That's saving £4500.

Though you have to work it out, and obviously different cars have different values and your price range and length is different, but that's just an example I was curious about how much my friend pays compared to a bank loan. With the bank loan you avoid an initial deposit and a final purchase of the car, but the monthly payments are increased a lot more. Though I would prefer the bank loan instead of finance. Providing I was earning enough money to pay it off monthly

forgotmyname

£3000 or £8000 the car your going to buy is going to get older. Whilst paying your finance imagine an MOT or service where it neeeds a few tyres and brakes and you get a bill for £500. Can you afford your £400 loan and a bill for £500 that month, without further borrowing?

ceetp

forgotmyname wrote: »

£3000 or £8000 the car your going to buy is going to get older. Whilst paying your finance imagine an MOT or service where it neeeds a few tyres and brakes and you get a bill for £500. Can you afford your £400 loan and a bill for £500 that month, without further borrowing?

See I have heard that there are finance deals where your servicing/MOT/repairs are covered as part of what they offer. Is this not true?
It was that aspect alone that I thought made financing more attractive than getting a loan where everything is up to you.

bigadaj

ceetp wrote: »

See I have heard that there are finance deals where your servicing/MOT/repairs are covered as part of what they offer. Is this not true?
It was that aspect alone that I thought made financing more attractive than getting a loan where everything is up to you.

Yes, most options are available but that depends on how much money you have.

No such thing as a free lunch.

macman

ceetp wrote: »

See I have heard that there are finance deals where your servicing/MOT/repairs are covered as part of what they offer. Is this not true?
It was that aspect alone that I thought made financing more attractive than getting a loan where everything is up to you.

That's usually a facility you can have when you lease a new vehicle: you can choose to include servicing and maintenance within the monthly fee or not. But you are wanting to buy rather than lease I think?.