State Pension-Loan query

kaMelo

pedro9955 said:

Thanks for the comments. Our savings make virtually zero interest despite moving things around from time to time. Its more the safety net argument. Never having a lot of savings in life  its a thought to ship out a few K's on something that will depreciate when you drive it off the forecourt when for £200-£300 pounds per month you can have a newer, reliable(?) product which I need in a modern family life. A dilemma!!!!

I get the point about a safety net but it's not really a dilemma. If you have savings to cover the purchase price then it makes absolutely no sense to take on an interest bearing loan. The car depreciates however you pay for it, with the loan you are paying interest as well as it depreciating.
Buy the car and put the £300 per month away, you'll build your safety net much faster than you'd pay the loan off.

The only way borrowing makes sense is if it's at a lower rate than your savings are generating, either 0% finance or 0% purchase credit card. Anything else is simply burning money you don't need to do.   

DrEskimo

kaMelo said:

pedro9955 said:

Thanks for the comments. Our savings make virtually zero interest despite moving things around from time to time. Its more the safety net argument. Never having a lot of savings in life  its a thought to ship out a few K's on something that will depreciate when you drive it off the forecourt when for £200-£300 pounds per month you can have a newer, reliable(?) product which I need in a modern family life. A dilemma!!!!

I get the point about a safety net but it's not really a dilemma. If you have savings to cover the purchase price then it makes absolutely no sense to take on an interest bearing loan. The car depreciates however you pay for it, with the loan you are paying interest as well as it depreciating.
Buy the car and put the £300 per month away, you'll build your safety net much faster than you'd pay the loan off.

The only way borrowing makes sense is if it's at a lower rate than your savings are generating, either 0% finance or 0% purchase credit card. Anything else is simply burning money you don't need to do.   

^ This.

OP, your logic is a bit strange. Your worried about depreciation on buying a used car, and your solution is to buy a newer car with higher depreciation and potentially thousands in interest costs on top....

[Deleted User]

Depreciation is only an issue if you are intending on selling it at the end or hoping it has some value at the end. Cars, like almost anything you buy, are worth less as they get older (indeed, in places like Japan, even your house does this), this is simply how it works. It isn't a problem, it isn't a cost or a concern if you intend to look after the car and run it to the ground. My car has "lost" about 2/3 of the price I paid nearly 7 years ago. So what? I drive a 7 year old car, I am hoping to drive it to 2030 or so and it will be worth scrap value by then. I used it for what it's intended for, I didn't buy it hoping to sell it in the future, I bought it to use it!

Ironic too you are worrying about depreciation of the car while your savings are in effect losing you money by earning less than inflation. At least with a newer car you are less likely to end up with a money pit that needs work every few months