Finance or bank loan?

JustAnotherSaver

Ok so i have a relative who's looking to buy a car & they've gotten to the stage where they're tired of buying £1k cars that end up as money pits so they're seriously considering 'finance' ... as that's what everyone has, right? That's what everyone says you should get, right? :doh:


Bank loans are pretty simple to me - take out X-amount, pay back over Y-months and pay Z-per month. Job done. Go spend your cash on whatever you wish.


Finance though i know absolutely nothing about.



What would be the best thing for them out of the two? Best to me would be cheapest but can the dearer option be better for some reason?


I think they'd be looking in and about the £5k-£8k range. They wouldn't need the car being serviced to be part of any deal (because can you really trust them anyway?) - so they'd be doing their own servicing. Basically they just want to own the car, not to be renting it. So at the end of the time they want it to be theirs & not have to give it back.


Would a loan be better than finance? Would finance be better than a loan in this case? Is there something else (lease is one term i've heard although i think this is where you don't own the car?) that'd be better than the two?

Mercdriver

There are hundreds and hundreds of threads on this forum asking the same question as you are. Can't you make up your mind based on threads that already exist?

JustAnotherSaver

Mercdriver wrote: »

There are hundreds and hundreds of threads on this forum asking the same question as you are. Can't you make up your mind based on threads that already exist?

I read your response there.


The first thing i did was to head back out on to page 1 & scan down the threads on there & just randomly select one.


No offence to henrik but the one i stopped at was https://forums.moneysavingexpert.com/discussion/5858008/is-a-warranty-worth-it. I could've stopped at someone elses but i stopped at henrik's.


Since there's no doubt countless other threads somewhere down this forum asking whether warranty is worth it .... is there any particular reason why you're saying to me that you want to respond to my thread but not actually answer my question yet you don't want to do the exact same with henrik's for some reason (& everyone else who may have posted a thread that has been asked before)?

Ectophile

The disadvantage of a bank loan is that you lose the protection of the Consumer Credit Act. Suppose the car turns out to be a lemon, and the dealer won't fix it, or goes bust. Then you're still left paying back the bank loan. With car finance, the finance company is jointly liable with the seller for any problems with the car.


The two common finance deals are traditional HP, or PCP. With HP you pay a lump sum at the start, then regular payments until its paid off. With PCP, there's a lump sum at the beginning, regular payments, then another lump sum at the end if you want to keep the car. The second lump sum is roughly the second-hand value of the car at that point.


There's nothing inherently wrong with either, if you go in fully understanding them. But don't go for PCP just because the monthly payments are cheaper. People can do that, and end up either handing the car back, or rolling on to another credit deal for another car, because they can't afford the "balloon payment" at the end.



As you realized, leasing, is just a form of long-term rental. You never own the car.

JustAnotherSaver

Ectophile wrote: »

The disadvantage of a bank loan is that you lose the protection of the Consumer Credit Act. Suppose the car turns out to be a lemon, and the dealer won't fix it, or goes bust. Then you're still left paying back the bank loan. With car finance, the finance company is jointly liable with the seller for any problems with the car.

Thanks very much. I wasn't aware of the above & could be a key factor.

Mercdriver

Ectophile wrote: »

The disadvantage of a bank loan is that you lose the protection of the Consumer Credit Act. Suppose the car turns out to be a lemon, and the dealer won't fix it, or goes bust. Then you're still left paying back the bank loan. With car finance, the finance company is jointly liable with the seller for any problems with the car.


The two common finance deals are traditional HP, or PCP. With HP you pay a lump sum at the start, then regular payments until its paid off. With PCP, there's a lump sum at the beginning, regular payments, then another lump sum at the end if you want to keep the car. The second lump sum is roughly the second-hand value of the car at that point.


There's nothing inherently wrong with either, if you go in fully understanding them. But don't go for PCP just because the monthly payments are cheaper. People can do that, and end up either handing the car back, or rolling on to another credit deal for another car, because they can't afford the "balloon payment" at the end.



As you realized, leasing, is just a form of long-term rental. You never own the car.

Just to add that you can get section 75 protection by paying part of the balance with a credit card.

JustAnotherSaver

Just a thought but regards finance - where do you stand regards modifications? For example a remap. Is it technically not your car so you can't change it?

Consumer credit act and section 75, is either 'better' than the other or is it much the same thing?

foxy-stoat

I would go bank loan - maybe pay a few hundred on a credit card too.

System

Sick of buying £1k cars and spending a few hundred quid a year on them in repairs so are going to buy a new/nearly new car and waste a few grand a year just in depreciation.

Yep, that'll save them money.....

JustAnotherSaver

Tarambor wrote: »

Sick of buying £1k cars and spending a few hundred quid a year on them in repairs so are going to buy a new/nearly new car and waste a few grand a year just in depreciation.

Yep, that'll save them money.....

Read the other thread i posted in this forum today & you'll learn that it's a bit more than a 'few hundred quid'.


And if you can't think beyond that viewpoint then there's little point in it being explained to you.

foxy-stoat

He bought a £500 car for £1000 from a trader - get his money back and buy a £1500 car from a private seller for £1500, he will have better luck. Look at gen 8 Civic's for this money, golfs are ok but I would choose the Civic instead.