New car loan

Good afternoon,

Me and my other half are looking to buy our first decent car, we’ve been using older cars for a while, and even through they serve there purpose well, this years MOT costs about 40% of both cars value, and generally my feeling is they’ll only get worse or go bang. 

I never really borrowed a large amount, nor am I happy about doing it especially in this turbulent economy. However, I’ve been researching and it seems the sensible calculation for what you can borrow is the 20/4/10 method. Collectively we take home £5122, after all of our rent and Direct debt bills we are left with £3155. We spend roughly £150-200 a month on fuel.

So going of the 20/4/10 calculation the monthly car spend for us is £315 assuming the 10% is after bills? 

£315-£200 in fuel leave us with £115 a month to spend on the loan. 

£115/month really doesn’t get you much. Is this 20/4/10 calculation outdated for the current climate?

I think I want to hear peoples opinions on;

- Is borrowing in this climate wise or should I hold out with the older cars for now?
- Do you base the ‘no more than 10% monthly spend’ before or after bills?
- We’re looking to buy a house in a year or two and need to improve our credit rating, is it better to finance against the car or bank loan? (I like the option to pay off earlier with the bank loan)

many thanks. 
 

 


Comments

  • RobM99
    RobM99 Posts: 2,514 Forumite
    First Anniversary First Post Photogenic Name Dropper
    Petrol , electric or hybrid is one question.

    Fuel costs to consider - I have a Honda Civic (1.334 litre petrol) and  I get 40+ mpg, mainly shortish trips, I can get 50+ on a long run. Are eletric cars a good idea at the moment? Not sure.

    Do you need load-carrying?  No point getting a 7 seater if just two of you.

    Car dealer finance - does the dealer collect commission for this? Bank loan would be my first port of call.

    But I could be talking total twaddle!
    Now not a gainfully employed bassist.
  • RobM99 said:
    Petrol , electric or hybrid is one question.

    Fuel costs to consider - I have a Honda Civic (1.334 litre petrol) and  I get 40+ mpg, mainly shortish trips, I can get 50+ on a long run. Are eletric cars a good idea at the moment? Not sure.

    Do you need load-carrying?  No point getting a 7 seater if just two of you.

    Car dealer finance - does the dealer collect commission for this? Bank loan would be my first port of call.

    But I could be talking total twaddle!
    It’s me, my other half and a 15 month old baby. Ideally we have another saloon, I heavily against SUVs really pointless for most people.
  • RobM99
    RobM99 Posts: 2,514 Forumite
    First Anniversary First Post Photogenic Name Dropper
    Trim level. Would a basic car do or do you want all the tech (reversing camera, SatNav and so on)?

    Saloon or hatchback? We're getting down to details now. How about image - is a "fashionable" car important? 
    Now not a gainfully employed bassist.
  • RobM99 said:
    Trim level. Would a basic car do or do you want all the tech (reversing camera, SatNav and so on)?

    Saloon or hatchback? We're getting down to details now. How about image - is a "fashionable" car important? 
    Air Con and a heated seats are a must, I personally would be happy with an old Defender 110. 😅
  • RobM99
    RobM99 Posts: 2,514 Forumite
    First Anniversary First Post Photogenic Name Dropper
    Honda Civic! with "magic seats" (their words, not mine). I think the local football club has several 'old defenders'!
    Now not a gainfully employed bassist.
  • sourcrates
    sourcrates Posts: 28,810 Ambassador
    First Anniversary Name Dropper First Post Photogenic
    edited 29 October 2022 at 5:24PM
    RobM99 said:
    Trim level. Would a basic car do or do you want all the tech (reversing camera, SatNav and so on)?

    Saloon or hatchback? We're getting down to details now. How about image - is a "fashionable" car important? 
    Air Con and a heated seats are a must, I personally would be happy with an old Defender 110. 😅
    There`s not a lot of difference between most modern production cars, they all look the same, bend in the wind, are all stupidly expensive, ridiculously complex, and most have toys in abundance.

    They have massive screens prominent on the dashboard, with an electronic voice telling you where to go all the time, if you order one now, you may get it in two years' time, as all the computer chips are made in the Ukraine, and Putin won`t let them leave.

    Give me a 30-year-old Land rover any day of the week
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  • DrEskimo
    DrEskimo Posts: 2,343 Forumite
    First Anniversary Name Dropper First Post
    Good afternoon,

    Me and my other half are looking to buy our first decent car, we’ve been using older cars for a while, and even through they serve there purpose well, this years MOT costs about 40% of both cars value, and generally my feeling is they’ll only get worse or go bang. 

    I never really borrowed a large amount, nor am I happy about doing it especially in this turbulent economy. However, I’ve been researching and it seems the sensible calculation for what you can borrow is the 20/4/10 method. Collectively we take home £5122, after all of our rent and Direct debt bills we are left with £3155. We spend roughly £150-200 a month on fuel.

    So going of the 20/4/10 calculation the monthly car spend for us is £315 assuming the 10% is after bills? 

    £315-£200 in fuel leave us with £115 a month to spend on the loan. 

    £115/month really doesn’t get you much. Is this 20/4/10 calculation outdated for the current climate?

    I think I want to hear peoples opinions on;

    - Is borrowing in this climate wise or should I hold out with the older cars for now?
    - Do you base the ‘no more than 10% monthly spend’ before or after bills?
    - We’re looking to buy a house in a year or two and need to improve our credit rating, is it better to finance against the car or bank loan? (I like the option to pay off earlier with the bank loan)

    many thanks. 
     

     


    Don’t rush into buying a car on some fear it may go. Save up and run the car and then buy if you need to. 

    There’s also no reason to change to buying a much more expensive car with debt. I don’t adhere to any 10% rules, I have only one personal rule. I don’t borrow money to buy cars (or any consumer products). It’s just paying more to line the pockets of multi billion finance companies for no reason. I work hard enough for my money…

    the idea of getting into debt over a car to improve a made up number pretending to represent your credit worthiness is also not wise. Get credit cards and use them for everyday spending and pay them off in full each month. No need to pay to borrow money.

    It certainly won’t help having debt in your mortgage application!
  • Herzlos
    Herzlos Posts: 14,679 Forumite
    First Anniversary Name Dropper First Post
    That's pretty sensible advice. The current used car market is still very overpriced and new stock is taking ages to turn up.

    You've just done MOT's so you've got another year with the current cars, so I'd put your £315/month into savings for when one of the cars does fail or becomes uneconomical. Hopefully by then the market will be a bit better.

    For what it's worth, with younger kids then sliding doors are an absolute game changer. So I'd be looking at something like a Ford C-Max. If you're having more kids then definitely look at people carriers, they are pretty unfashionable but the practicality is undeniable. We've got a Citroen Berlingo; it's the ugliest car we've ever owned but for all the kids crap and the driving position and million cubby holes it's amazing.
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