Car loan vs cash

newuser78

Hi

Am looking to buy a used car - around 13k - what's the "best" way for purchasing a car?
- Use savings
- Car finance (if 0%)
- Personal loan (5%)

I have enough savings to buy a car outright but given that loans are "cheap" (according to the guide here), unsure if this is a good idea or not? So should I get a loan which further improves credit rating (at the cost of interest added) vs savings?

Many thanks in advance!

[Deleted User]

Never pay interest just to build a credit history. There are free ways of doing it.

Calculate the various costs of finance versus cash and take the cheapest route.

YorkshireBoy

What's the average interest rate your savings are getting?


If you use "around £13K" of the savings, will you be left with a sufficiently large balance...say 3-6 months living expenses? And will you replenish the savings each month with an amount at least equal to what the loan repayments would have been?

newuser78

Thank you both - much appreciated! Sorry my post wasn't clear - I have a max budget in mind of 13k for a car purchase.

I have total savings of approx 24k and add to it every month although I am looking at diversifying my mostly cash-based portfolio to investment and property next 2 years (depending on Brexit!).

The only debt I have is a 0% credit card which allows me to spend up to 3.5k however I never go above 2k. I have no dependents.

Highest interest for savings is 5% but this is due to fall this year, I have a couple of 2% which is fixed for next 2 years, the rest are measly 1%.

swindiff

When I bought a new van for £15k I use 2 x zero% interest balance transfer credit cards. I have a 3rd card which allowed me to withdraw cash into my current account free of charge.

newuser78

swindiff wrote: »

When I bought a new van for £15k I use 2 x zero% interest balance transfer credit cards. I have a 3rd card which allowed me to withdraw cash into my current account free of charge.

This is interesting! I thought all car dealerships reject credit cards for full car purchases. Can you elaborate?

swindiff

I bought from Evans Halshaw, they had no problem taking credit cards for payment. However if needed, with the cards I have I could have got the cash together. I have a Halifax Clarity card which allows you to withdraw 50% of your credit limit into your bank account. They do not charge a fee for this but they do start charging interest from the day of the transfer. So the trick is to time the balance transfer to coincide with the cash withdraw.

So to get £15k I could do 3 cash withdraws of £5k each and then transfer the balance to the 0% BT cards. I than have £15k cash at 0% for whatever the term of the BT cards are.

motorguy

newuser78 wrote: »

Hi

Am looking to buy a used car - around 13k - what's the "best" way for purchasing a car?
- Use savings
- Car finance (if 0%)
- Personal loan (5%)

I have enough savings to buy a car outright but given that loans are "cheap" (according to the guide here), unsure if this is a good idea or not? So should I get a loan which further improves credit rating (at the cost of interest added) vs savings?

Many thanks in advance!

0% Car Finance is paid for "somewhere". Its never free.

Particularly on a used car where the dealer is offering the 0% finance deal, hes having to pay for it, and that usually means you're not getting discount you otherwise could have.

forgotmyname

As above 0% finance but very little discount or pay cash and get a decent discount.

Having a credit card and using it each month and paying it off in full improves your credit rating. Cost = nothing.

Possibly an exception where they offer £1000 cashback if you take finance. But quite often better cash only deals are out there.

newuser78

Thanks all! Had my car valued - just under 3k so I guess I could part exchange it thus only needing approx 10k cash.

I guess, I need look into credit cards again and transfer to 0% one where I pay XXX/month at no extra cost.

Pixie5740

newuser78 wrote: »

I guess, I need look into credit cards again and transfer to 0% one where I pay XXX/month at no extra cost.

Except for any balance transfer fees.