New car? it's a lot of money....

jarv81178

Hi, so I start a new job next week and should be able to save around £800 per month?!

I'm thinking, should I buy a car....

Then I thought, a bank loan would probably be best as then I'd own the car and would be able to sell it if I lost my job and pay the loan off

I'm a bit scared as I'm thinking about borrowing £25000 which is a lot of money, should I borrow a bit more and go for the hybrid model to save petrol costs?

I could set to pay back in 72 months
hmm, I don't know

DrEskimo

Why does it need to be £25k?

There are plenty of options for much much cheaper. My general rule of thumb is never to borrow for a high cost depreciating asset. Save and buy outright (potentially using a finance deal to get additional discounts/perks, but then settling next day).

If you must borrow as you want a higher price car and don't mind the additional interest costs, then aim for no more than 50% of the cars value and for no longer than 3yrs. This ensures the cars value is never likely to be lower than the amount owed.

How much have you got in savings? Have you factored in everything else you want from life before you get to that £800/month saving? Other short to medium term cash purchases, all items fully budgeted for (like annual bills) and a suitably funded pension to meet your targets for retirement?

jarv81178

oh yeah so I factored all bills and mortgage I just have £850 a month now I could be saving or putting towards a new car

jarv81178

yeah actually I can actually get a classic car for half the price of a brand new motor

DCFC79

I just find its a huge amount but end of the day its your choice.

Alice_Holt

jarv81178 said:

oh yeah so I factored all bills and mortgage I just have £850 a month now I could be saving or putting towards a new car

        On the assumption that you have no debt (other than the mortgage), and have your emergency savings sorted (6 months expenditure),  I'd be putting some of that into your pension - preferably via salary sacrifice.
       
        What mileage will you be doing ?   Hybrid's work better for short journeys.
       
      I tend to buy nearly new and then keep the car for the longer term. However, the current car market is unusual, with used cars appreciating, and likely long waits if you order a new car. 
        

            
       

Grumpy_chap

jarv81178 said:

Hi, so I start a new job next week and should be able to save around £800 per month?!

I'm thinking, should I buy a car....

Then I thought, a bank loan would probably be best as then I'd own the car and would be able to sell it if I lost my job and pay the loan off

I'm a bit scared as I'm thinking about borrowing £25000 which is a lot of money, should I borrow a bit more and go for the hybrid model to save petrol costs?

I could set to pay back in 72 months
hmm, I don't know

Half, or more, of your potential savings will be going on the car payments for 6 years.

Are there any other demands likely on the remaining savings, or are all other needs such as emergency fund and other comforts of life (not just the necessities) already taken care of?

Does your credit history support £25k of unsecured borrowing?  

No-one can comment on the choice of car with so little information given.

MalMonroe

jarv81178 said:

Hi, so I start a new job next week and should be able to save around £800 per month?!

I'm thinking, should I buy a car....

Then I thought, a bank loan would probably be best as then I'd own the car and would be able to sell it if I lost my job and pay the loan off

I'm a bit scared as I'm thinking about borrowing £25000 which is a lot of money, should I borrow a bit more and go for the hybrid model to save petrol costs?

I could set to pay back in 72 months
hmm, I don't know

Hello, and congratulations on your new job. 

Do you really need a car immediately and also, do you really need one that's so expensive? I feel a bit hypocritical saying that, as I'd really be lost without my car - but then again, the value of it is about a fifth of the one you're thinking of buying.

If I were you I'd wait until I'd been in the job a while and received some salary before considering taking out a loan for anything, three months at least. Lenders won't be interested in your projected savings, they'll want to know exactly what your incomings are, what your expenditure is and what your disposable income is. It's a bit worrying that you are talking about losing your job before you've even started it. Also, how will you actually own your car if you have a loan of £25k?

I have to admit that I've made many foolish decisions in respect of money in the past and learned my lessons the (very) hard way. I would urge you to sit down with pen and paper and work out exactly how much you will be able to afford to spend on a car and maybe look at something cheaper. Much cheaper.  You say "yeah actually I can actually get a classic car for half the price of a brand new motor" but why would you want a classic car? Maybe I've missed something here but to me a car is just a mode of transport and if it goes then I'm happy. If you look after a car, it will generally be kind to you. In my experience, that is!

You can get some really decent used cars for around £5k, sometimes even less. If you can save £800 per month you should be able to buy something outright in 6 or 7 months. Something to think about, and a much better prospect than paying a loan for 72 months. Patience is a virtue and, in this case I think, very sensible.

jarv81178

MalMonroe said:

Also, how will you actually own your car if you have a loan of £25k?

A bank loan will buy a car and then I will OWN it and I think I can get a bank loan quite easily. I might (as you say) save in the new job for at least 3 months, yes I know you can get any old crappy car for £5k, I want something nice! Patience is a virtue but.. you only live once and I have learnt too the hard way

jonesey1985

YOLO! is rarely a great way to manage your finances.

Grumpy_chap

jarv81178 said:

A bank loan will buy a car and then I will OWN it and I think I can get a bank loan quite easily. I might (as you say) save in the new job for at least 3 months, yes I know you can get any old crappy car for £5k, I want something nice! Patience is a virtue but.. you only live once and I have learnt too the hard way

You seem to have done your calculations that you can afford a car at £25k, so the only query now is how to finance it.

How does the cost (interest) on a bank loan over 6 years compare to the finance available through the Dealer?  If this is a brand new car, there may be attractive finance available from the Dealer.

Of course, before looking for the best finance cost for the £25k, ensure you are getting the car at the best possible price.  Is it possible to buy the £25k car for, say £23k?  £22k?  Discounts vary and are tightening but can still be available.