Car Finance Or Bank Loan?

VelvetWinner

Hi everyone,

I am currently looking into getting a car quite quickly due to needing it for getting to and from work.

Therefore I am looking into either getting a car finance or possibly a bank loan.

Please could someone help me understand which one I would be better off with and also what the difference is?

I am thinking of getting a car older than 10 years old, therefore I have been told if i was to get a car on finance then the company who provide me the loan would charge me a standard fee extra on top of about £300, which bumps the price up quite abit.

Any advice would be very much appreciated as I have never taken a loan or borrowed money before and also have no idea about the in's and out's of doing them.

Than you!

forgotmyname

10 year old car cash is king.

Fees + interest is likely to double your costs. Sister paid nearly £8000 for a car that was worth approx £2500. And after a while it needed repairs which she couldnt afford because she had to pay the finance.
The car sat unused for almost 2 years, she paid the finance and then called to check it was clear and then phoned the scrapman to collect it.

Cash.

ChuckMountain

Surely it depends on how much you want to borrow, what car, whether the finance is through the dealer, your personal circumstances etc.

If you are buying a 10+ year old then its likely to be fairly high mileage, has it been fully serviced etc. Any big services coming up, is it likely to reliable enough as your work car.

There are some good deals to be had but it again it depends on the amount. If somebody is adding £300 to the amount then shop around. There are specific companies that will do car finance and that's what they specialise in and will give you a quote. Your bank might be cheaper but it depends.

What were you looking at ?

ChuckMountain

Sorry @forgotmyname I hadn't seen your reply before I posted but yes agree with what you saying.

forgotmyname

It happens to me a lot, i start typing and then get called away or i retype the post several time and its many minutes from the actual time i started.

Posted once and there was 12 replies before i finished mine.

Herzlos

Which is offering the better rate?

I went for car finance last time as the Apr was lower and there's some extra protection as the bank own the car u til completion. That was borrowing £4000 on an £8000 car, your situation my differ.

Sorting out the finance took days though, whereas I'd have had the cash in minutes via conventional loan.

ChuckMountain

You also need to work out what the monthly outgoing would be for the proposed car. This would need to include loan\cash outlay, insurance, tax, servicing, fuel etc

Then compare it to other options, you can\could get some really cheap PCP or PCH deals there are quite a few at under £100 a month and if its just a work run around it may well be cheaper as you won't need servicing, you have warranty etc.

System

VelvetWinner wrote: »

I am thinking of getting a car older than 10 years old, therefore I have been told if i was to get a car on finance then the company who provide me the loan would charge me a standard fee extra on top of about £300, which bumps the price up quite abit.

Where I live £300 would buy you a car older than 10 years old outright.

Never ever buy a second hand car more than a few years old on car finance as it usually means sub-prime lending with bad rates and the lower the price the worse the rate.

You may not need to borrow at all. There are plenty of good reliable second hand cars on Facebook "stuff for sale in XXX" pages under £1000 all over the country.

System

ChuckMountain wrote: »

Then compare it to other options, you can\could get some really cheap PCP or PCH deals there are quite a few at under £100 a month and if its just a work run around it may well be cheaper as you won't need servicing, you have warranty etc.

Oh jesus. Under £100 a month if you have a four figure deposit. You do need to service them otherwise you get penalised at the end. In many cases if your mileage is more than 200 miles a week in total with some actually as low as 120 miles a week you'll get penalised for exceeding mileage limits. And at the end of spending all that money out you walk away with nothing.

PCP deals are not good deals for anyone but the manufacturers, the finance companies and the dealers.

ChuckMountain

Tarambor wrote: »

Oh jesus. Under £100 a month if you have a four figure deposit. You do need to service them otherwise you get penalised at the end. In many cases if your mileage is more than 200 miles a week in total with some actually as low as 120 miles a week you'll get penalised for exceeding mileage limits. And at the end of spending all that money out you walk away with nothing.

PCP deals are not good deals for anyone but the manufacturers, the finance companies and the dealers.

No there were deals out there where you don't need to put a 4 figure deposit down. Obviously the more you put down the cheaper it will be but that also needs to be factored into a monthly cost.

Sorry but I disagree there are some good PCP deals if you want to buy some cars and you will get a better overall price as opposed to a cash buyer (you won't get the finance contribution). With PCP you may walk away with some equity but I doubt it realistically.

It might not be right for the OP or others but you should consider all the options based on budget etc even if you then dismiss them.

We don't know how many miles the OP does or even if its an older prestige car for example.

What you don't want to do is end up like forgotmyname's sister and end up with junk on your driveway that is costing you money and no return. You could have spent less by shopping around.

ChuckMountain

For PCP then its probably worth only doing new to get the best savings. Used tend to be much higher APRs with no contribution you can often pay the same monthly price (and deposit) for a new car as you would on a 2 to 2.5 year used one.

On the servicing side I should have been clearer. You of course need to maintain it to the manufacturers specs to avoid penalties\warranty loss. However a lot of cars can be 2 years though on variable plan servicing and its generally a cheaper service in the 1st instance or if it makes sense a very cheap service plan.

Again all depends on what you are trying to buy and\or what you are wanting to spend and that differs massively between people.