Buying a New Car

mattrobbo99

I want to buy a 3 year old car for 28K. I have an 8K car to sell (part ex-value). I'm leaning towards remortgaging for 20K and paying back over 4 years (on a 5 year fixed at 1.9% overpayments allowed). I would plan to keep the car for 6-8 years.

To me, this is the most logical solution. But are there any other decent options available to me?

PCP/leasing a new car doesn't strike me as being a better solution (no equity in asset), nor does a personal loan (higher interest).

Car is a Q5 or Merc GLC if that has any bearing on the matter.

any advice? any reasons why PCP/lease might be a better option?
thanks.

tonyh66

very risky to remortgage to add debt, your circumstances might change (im sure there's other reasons). Also there is no equity in a used car unless its a classic that appreciates in value. As soon as you buy a car by any means it depriciates in value you will never get what you paid back.

foxy-stoat

Keep your £8,000 car and save up £350 a month, which would of been the loan repayments if you got the loan.

After a year you should of saved up £4,200 - you current car should last as long as that, then rethink spending nearly £30K on transport.

Ebe_Scrooge

I concur wholeheartedly with the previous posters. If your current car has a trade-in value of £8000, that must be a bloomin' decent car already and will last you for a long time yet.

As for re-mortgaging to raise the funds for a new car - madness in the extreme. If you are unable to make the repayments for whatever reason, you could potentially lose the roof over your head. And that's even assuming the mortgage company would lend you the money for a car, which is doubtful.

£28k is an awful lot of money to spend on a car. If you have the cash available and that's what you choose to spend your hard-earned pennies on then no problem. But if you're having to borrow money to fund it, I'd question whether you need to be spending so much. You could get a very nice youngish car for half or even a third of that price. I know people have different priorities, and what they choose to spend their money on is their own business ... but that's just my thoughts :-)

parking_question_chap

mattrobbo99 wrote: »

I want to buy a 3 year old car for 28K. I have an 8K car to sell (part ex-value). I'm leaning towards remortgaging for 20K and paying back over 4 years (on a 5 year fixed at 1.9% overpayments allowed). I would plan to keep the car for 6-8 years.

To me, this is the most logical solution. But are there any other decent options available to me?

PCP/leasing a new car doesn't strike me as being a better solution (no equity in asset), nor does a personal loan (higher interest).

Car is a Q5 or Merc GLC if that has any bearing on the matter.

any advice? any reasons why PCP/lease might be a better option?
thanks.

Buying a cheaper car springs to mind.

ethranes

Don't remortgage your house for a car my dude

mattrobbo99

Thanks for the replies, all good info.

The money comes from a car allowance. I already overpay my mortgage by £500/month and have about 250K equity in the house.

So lifestyle choices aside, I was just thinking about the best way to go forward. I can easily set aside this money, so really, I'm just "borrowing from my mortgage" over 4 years and at the end I have a car with value that's paid off. Alternatively, i could get a loan at a higher rate which isn't secured against my house, but i still think remortgaging and repaying over 4 years is a better option, right?
PCP or leasing appeals less as they are products aimed at people who can't really afford these cars. I'm naturally suspicious of this as it usually works out as the more expensive option (why offer it to the masses otherwise)?

but i take these comments on board and might not spend so much on a car. i just wanted to weigh up my options properly.

btw, i suppose you can have equity in a depreciating asset if the repayments out-pace the depreciation? or am I using the wrong word? nevertheless after 4 years i have something of significant value even if it has depreciated. Houses can also lose their value, but equity is still possible, just not a lot of it.

andrewf75

ethranes wrote: »

Don't remortgage your house for a car my dude

THIS ^^^^^

Utter madness if you ask me. You can get loads of nice cars for less than 10k

I wouldn't generally recommend PCP, but its certainly more sensible than taking equity out of your house to spend on a car!

philbo2

mattrobbo99 wrote: »

Thanks for the replies, all good info.

The money comes from a car allowance. I already overpay my mortgage by £500/month and have about 250K equity in the house.

So lifestyle choices aside, I was just thinking about the best way to go forward. I can easily set aside this money, so really, I'm just "borrowing from my mortgage" over 4 years and at the end I have a car with value that's paid off. Alternatively, i could get a loan at a higher rate which isn't secured against my house, but i still think remortgaging and repaying over 4 years is a better option, right?
PCP or leasing appeals less as they are products aimed at people who can't really afford these cars. I'm naturally suspicious of this as it usually works out as the more expensive option (why offer it to the masses otherwise)?

but i take these comments on board and might not spend so much on a car. i just wanted to weigh up my options properly.

btw, i suppose you can have equity in a depreciating asset if the repayments out-pace the depreciation? or am I using the wrong word? nevertheless after 4 years i have something of significant value even if it has depreciated. Houses can also lose their value, but equity is still possible, just not a lot of it.

You are talking about adding the debt to your mortgage, that would suggest you also can't afford this car.

mattrobbo99

ok thanks for the comments. I'll take your advice and not do it :-)

Clive_Woody

Aside from the risk of securing this debt against your house you would also most likely incur a fee for remortgaging which you would need to factor into your calculations of total cost. I would echo what others have said and avoid this option.

There are some pretty low loan rates out there at the moment (assuming you are offered the headline rate). Recently I took out a £20k loan for a car; I initially applied for a loan with TSB at 2.9%, was approved then took it to my bank (Nationwide) who will beat any offered rate by 0.5%, so down to 2.4%. I can make penalty free over-payments and clear it faster and my car allowance from work more than covers the payments.

I would also caution against buying a 3 year old premium car unless you are comfortable with it being out of warranty and you are prepared to pay high servicing and maintenance costs if they arise. I went for a 6 month ex-demo Skoda that still has a big chunk of the warranty left, was highly specced and being the vRS model is great fun to drive.

Just a few thoughts of mine. Car buying is a very personal thing and some folk would never advocate spending more than a couple of thousand on a car and are horrified at anyone that would.