What do we do about new car?

Flight3287462

Better the devil you know OP than buying something else secondhand.  You will struggle to get a new car in a short time frame.

If it was me I would use my savings and replenish them at the same monthly rate as the car payment you are now paying or keep a percentage of your savings and take out a smaller loan.

motorguy

iwb100 said:

DrEskimo said:

The second hand market is crazy, but you currently have the opportunity to buy a 4yr old Tiguan that only you have personally used since it was brand new for £9k, when it's worth over £15k on the open market.

I would say that's a bit of a no brainer personally....as above, right after you buy it you can always go and trade it in to whoever will pay the most and get the money back.

Use a 0% CC or cheap personal loan for some of the £9k if needed.

No brainer apart from they’d need more borrowing or to use all their savings with uncertainty over their income. That’s the bit that would worry me. 

Borrowing at most £9K against an asset worth £15K and with circa £9K of savings anyway doesnt feel like much of a risk.

jimjames

Any other second hand car you get will have questions over reliability, you know the car you already have.

Dot2dot2

Thank you all. Loads of helpful points here.

@Ebe_Scrooge - a second hand Skoda Octavia would be great but we can’t find one that’s much less than we would be paying for a new Kia. New Octavias have a year long wait, which we could do if we refinance.
I think we are perhaps unduly biased against second hand cars because we had really bad luck with our last one. It was only 3 years old when we bought it and over the next 4 years needed new gear box, brakes and air con as well as tyres and battery.
Maybe we should be less sceptical about second hand reliability.

@iwb100 - as I understand it equity doesn’t reduce our payments. In fact if we refinance (i.e. go on paying monthly) our payments would go up as the interest rate increases.

I think the point about there being equity in the car now and not in the future is key for us. Right now it’s an asset that gives us £7k to spend on the next car but that won’t always be the case because of the depreciating value of the car and the unusual strength of the second hand market at the moment (because of supply chain issues delaying new cars).

Our car has done 23k (less than expected because of the pandemic).
It has been very reliable.

We are paying £275 pcm at the moment.
So it would take 2 years 10 months to build our savings back up and we would have the possibility of a fault developing with the car and depreciation. Or we could pay roughly the same over 3 years for a new Kia.

Of course if the VW runs okay for another 6 or 7 years then that could be the most economical option.

We don’t care at all about having a new car. What we care about is a safe and reliable car for holidays and visiting family with the children.

I was hoping that when we started this process that we’d either find a deal on a new car that would bring our payments down a bit or we’d fine a reasonable newish second hand car. The second hand options seem to be almost as expensive as new at the moment.

Dot2dot2

Basically I want to either buy a car outright without spending all our savings or I want to bring our monthly payments down closer to £200. Every where we have talked to so far has quoted us between £250 and 320, even for second hand options.
But we haven’t looked at anything older than about 3 years old.

theoretica

Dot2dot2 said:

We are paying £275 pcm at the moment.

So it would take 2 years 10 months to build our savings back up and we would have the possibility of a fault developing with the car and depreciation. Or we could pay roughly the same over 3 years for a new Kia.

But at the end of the 3 years with option 1 you would have a 7 year old car worth £X, yours outright and could run it for as long as it behaves itself.  With option 2 you would have £Y equity, but need to either find a balloon payment or trade in again and commit to more monthly payments.  On current figures (which are all we can know really, and the ratio may well stay similar) is £X - the value of a 7 year old Tiguan, likely to be greater than £Y - the equity above balloon of a 3 year old Kia? 

iwb100

Dot2dot2 said:

Thank you all. Loads of helpful points here.

@Ebe_Scrooge - a second hand Skoda Octavia would be great but we can’t find one that’s much less than we would be paying for a new Kia. New Octavias have a year long wait, which we could do if we refinance.
I think we are perhaps unduly biased against second hand cars because we had really bad luck with our last one. It was only 3 years old when we bought it and over the next 4 years needed new gear box, brakes and air con as well as tyres and battery.
Maybe we should be less sceptical about second hand reliability.

@iwb100 - as I understand it equity doesn’t reduce our payments. In fact if we refinance (i.e. go on paying monthly) our payments would go up as the interest rate increases.

I think the point about there being equity in the car now and not in the future is key for us. Right now it’s an asset that gives us £7k to spend on the next car but that won’t always be the case because of the depreciating value of the car and the unusual strength of the second hand market at the moment (because of supply chain issues delaying new cars).

Our car has done 23k (less than expected because of the pandemic).
It has been very reliable.

We are paying £275 pcm at the moment.
So it would take 2 years 10 months to build our savings back up and we would have the possibility of a fault developing with the car and depreciation. Or we could pay roughly the same over 3 years for a new Kia.

Of course if the VW runs okay for another 6 or 7 years then that could be the most economical option.

We don’t care at all about having a new car. What we care about is a safe and reliable car for holidays and visiting family with the children.

I was hoping that when we started this process that we’d either find a deal on a new car that would bring our payments down a bit or we’d fine a reasonable newish second hand car. The second hand options seem to be almost as expensive as new at the moment.

Looking at the VW website if you put 7K equity into a new deal for the basic Tiguan with smallest manual engine your monthly would be £266. I’m talking a new car not refinancing your existing one. 

And that’s without discount you would get through negotiation or better carwow.

Now perhaps you have a more expensive version now.

And that’s a Tiguan. If you look at an Ateca for example which is basically the same car different badge you could no doubt pay less.

You could look for something a little smaller like a troc or even t cross that would be cheaper still if you want new.

I think your best option would be buying a second hand car with the 7K you can make selling it after clearing finance. But that would be my cautious brain clicking in.

L9XSS

DrEskimo said:

The second hand market is crazy, but you currently have the opportunity to buy a 4yr old Tiguan that only you have personally used since it was brand new for £9k, when it's worth over £15k on the open market.

I would say that's a bit of a no brainer personally....as above, right after you buy it you can always go and trade it in to whoever will pay the most and get the money back.

Use a 0% CC or cheap personal loan for some of the £9k if needed.

Absolutely agree with the above, it will give you years more service, you will own it outright. I’m currently running a 14 year old Volvo estate, bought 4 year sales ago and its cost me very little to run, it’s still going strong. In your position if employment isn’t fully secure then opting for another PCP may not be the wisest move.

Dot2dot2

Thanks again for the help. On the basis of talking through the advice here we’re going to buy the car and put some of the balloon payment on a 0% credit card so as not to drain our savings completely. We can then pay that off whilst reducing our monthly payments a lot and not wasting any money on interest.

Flight3287462

Dot2dot2 said:

Thanks again for the help. On the basis of talking through the advice here we’re going to buy the car and put some of the balloon payment on a 0% credit card so as not to drain our savings completely. We can then pay that off whilst reducing our monthly payments a lot and not wasting any money on interest.

Best way to go, and try and put a bit aside each month to replenish your savings.  My MIL Tiguan is at 100k miles and has generally been fault free, find a good independent VW garage to look after it.