Car Finance Question

theblessedone

Hi All,
I'm currently in a predicament with what to do with regards to replacing my car.
Current car is knackered, with repair bills far outweighing the value. I had been saving regularly, to replace the car before the ULEZ charge came in October.
I need a car for work. With about £7k saved already, I have enough of a deposit to secure a car, however I was hoping to buy outright by September.
My question really is, should I decide to purchase a car now and take the remaining £7k over a finance agreement, over say, the minimum term allowed (12 months?). Would it be feasible to pay the balance off over 3/4 months? I.e. Would the lender get shirty about me doing so? I understand the credit scoring implications, as having previously cleared a previous car loan early. But with a balance being cleared in such a short space of time, I didn't know if the lenders will see this as sketchy at all.

[Deleted User]

Always aim to clear an interest bearing debt as soon as you can, unless your savings are earning you more.  

It also shows you're less reliant on debt 

Grumpy_chap

The OP has not said what they need / want from a car.
If the objective is simply to be ULEZ compliant, this can be achieved easily within the £7k current budget.

If the OP desires a better car than this, or brand new car, then the OP may find the lowest cost option is finance with "incentives" and then clear very quickly as they suggest.  If going for brand new, then the OP likely wants to be choosing and ordering now to be sure of receiving the car in September (with the new number plate presumably). 
Will the current car limp along enough to support this approach?  If not, there are ways of acquiring a short-term car that need not be outrageous from a cost point of view.

If the OP chooses an options that uses finance, it will be possible to pay-down early.  Front-loaded finance is no longer permitted.  Sometimes finance has an early redemption fee, this should be checked at the outset.  Paying early will save interest and make the overall cost cheaper (unless a "zero percent" deal, where the finance charge is built into the cost of the product). 

For a target of £7k over a short period of a few months, is a zero percent credit card an option?  Even if the OP can get this, many car dealers will not accept credit card for large sums.

Ebe_Scrooge

I have to agree with Grumpy_chap - £7000 is a lot more than I've ever spent on a car.  For that sort of money you can buy a very good used car that ought to be reliable and give many years of service.  Of course, you won't be able to impress the neighbours by driving a brand-new car, but it depends what your priorities are.

theblessedone

Ebe_Scrooge said:

I have to agree with Grumpy_chap - £7000 is a lot more than I've ever spent on a car.  For that sort of money you can buy a very good used car that ought to be reliable and give many years of service.  Of course, you won't be able to impress the neighbours by driving a brand-new car, but it depends what your priorities are.

It's sort of a personal treat to me. Landed a decent job last year and have never been able to save as much as I currently do. So thought why not kill two birds with one stone and actually buy a decent car outright before the ULEZ kicked in. My plans hadn't factored my current car breaking down mechanically beforehand.

theblessedone

Grumpy_chap said:

The OP has not said what they need / want from a car.
If the objective is simply to be ULEZ compliant, this can be achieved easily within the £7k current budget.

If the OP desires a better car than this, or brand new car, then the OP may find the lowest cost option is finance with "incentives" and then clear very quickly as they suggest.  If going for brand new, then the OP likely wants to be choosing and ordering now to be sure of receiving the car in September (with the new number plate presumably). 
Will the current car limp along enough to support this approach?  If not, there are ways of acquiring a short-term car that need not be outrageous from a cost point of view.

If the OP chooses an options that uses finance, it will be possible to pay-down early.  Front-loaded finance is no longer permitted.  Sometimes finance has an early redemption fee, this should be checked at the outset.  Paying early will save interest and make the overall cost cheaper (unless a "zero percent" deal, where the finance charge is built into the cost of the product). 

For a target of £7k over a short period of a few months, is a zero percent credit card an option?  Even if the OP can get this, many car dealers will not accept credit card for large sums.

Thank you for this.
I was unaware that interest can no longer be frontloaded.
It makes my decision making a little easier. I think I will take the finance out for the remaining balance and clear up in 3/4 months.

Grumpy_chap

Are you going for a brand new car?
There are some fantastic motors out there for £14k - look around the online broker sites.  

theblessedone

Grumpy_chap said:

Are you going for a brand new car?
There are some fantastic motors out there for £14k - look around the online broker sites.  

Probably not brand new. No older than five years is what I'm looking for.

Grumpy_chap

Good luck and hope you enjoy the new car

theblessedone

Grumpy_chap said:

Good luck and hope you enjoy the new car

Thank you! And thank you for your most detailed response.

DrEskimo

What's the rush?

If you plan on having the full £14k by September, just plan on buying then. It took me the best part of 6months to find my car for the price I was willing to pay anyway (specific EV).

If anything comes up that means you have to divert some funds away, at least you can do that without having a loan hanging over you....

Big advantage of having the full cash amount is that you can use dealer finance to extra discounts and perks (e.g. I got £1000 deposit contribution and 2 free services on my used car) then settle the finance in full the next day. Trying to do this with two finance agreements is tricky, and you certainly don't want to be paying used car finance rates (mine was 9.9% had I needed it).