Best way to finance potential car purchase

baser999

Unless Khan listens to public opinion, he’ll be pushing ahead with ULEZ expansion in August and we’ll be forced to sell our much-loved but non-compliant Land Rover. If we p/ex, I’m looking at perhaps putting in another £16-17k which I have in various savings (earning say 3.5%) that I can easily access. But is this the best option?

I’m retired and our only income is state and private pensions which do presently cover our living expenses.

Bigphil1474

Only you can say what the best option is - depends on how you use your car, and what you need/want. For me:-

Option 1 - don't have a car and utilise public transport/taxi's/hire car when needed. Might be cheaper.
Option 2 - buy a car on cheapest finance or use savings - if you end up paying 5% for a loan, that's more expensive than keeping your savings and only getting 3.5%, although you have that money as a back up. Could you afford a loan with a fixed income?
Option 3 - get a car on lease/PCP etc. usually more expensive than buying a car, but often lower ongoing costs. If you own a car you have to think about repairs/servicing etc. Again, another monthly outgoing

Obviously, you could buy a cheaper car rather than putting all your savings into it - that would be my suggestion. Find a car that meets your needs, part ex or sell your old car, spend some of your savings on it. That way, should circumstances change you still have some back up money, you can always sell the car if needed, and you won't be lumbered with a monthly payment you might not be able to afford.

DrEskimo

baser999 said:

Unless Khan listens to public opinion, he’ll be pushing ahead with ULEZ expansion in August and we’ll be forced to sell our much-loved but non-compliant Land Rover. If we p/ex, I’m looking at perhaps putting in another £16-17k which I have in various savings (earning say 3.5%) that I can easily access. But is this the best option?

I’m retired and our only income is state and private pensions which do presently cover our living expenses.

EU4 petrol cars are compliant, which makes basically any petrol car made over the last 16yrs compliant.

There is no need to spend large sums of money and using all your savings or getting into debt, but of course if you want to, that is a different matter.

I personally avoid any form of consumer debt as it simply adds costs, but they can be used to your advantage where you take out a finance deal to get the perks, then settle soon after to avoid the costs. In either case, I would suggest using savings ultimately.

Ectophile

Here's a thought for you.  The daily ULEZ charge is £12.50.  If you use the car 300 days a year, then £17k would last you about 4.5 years.

Grumpy_chap

Usually borrowing is going to cost more than using savings because borrow interest rates are higher than savings interest rates (especially after tax is considered).  The exception would be if the finance is linked to the product and gains you some incentive - in which case, take the finance, secure the incentive and then clear the finance early so avoiding interest costs.

If you use savings, treat that as a loan from yourself and pay the amount that would have been the loan payments into the savings.

jimjames

DrEskimo said:

baser999 said:

Unless Khan listens to public opinion, he’ll be pushing ahead with ULEZ expansion in August and we’ll be forced to sell our much-loved but non-compliant Land Rover. If we p/ex, I’m looking at perhaps putting in another £16-17k which I have in various savings (earning say 3.5%) that I can easily access. But is this the best option?

I’m retired and our only income is state and private pensions which do presently cover our living expenses.

EU4 petrol cars are compliant, which makes basically any petrol car made over the last 16yrs compliant.

Even some Euro3 petrol cars are compliant so it can stretch the date back to around 1997 for some cars. TFL are very evasive on their website but the criteria for ULEZ is actually the NOx emission levels not the requirement to meet the full Euro4 spec. The key number is NOx emissions under 0.08g/km.

https://youtu.be/bmkNpuMPPmw

Grumpy_chap

jimjames said:

Even some Euro3 petrol cars are compliant so it can stretch the date back to around 1997 for some cars. TFL are very evasive on their website but the criteria for ULEZ is actually the NOx emission levels not the requirement to meet the full Euro4 spec. The key number is NOx emissions under 0.08g/km.

Thank you @jimjames - that is extremely interesting as the TFL site does really imply it is EURO4 compliance that is the criteria.
I will now go to look for the NOx rating for my car.
It's interesting that NOx is considered so important in this context, yet is not even one of the pollutants measured at the MOT...

EDIT:  I just checked the V5 for my car and NOx is not even a populated data field therein.

EDIT 2:  I have sent an e-mail to Ford Customer Services.  In the video, a 1998 Porsche was compliant, so the 1997 Fiesta might well be also.  Fingers crossed.

fred990

Have you considered or thought about the PCP option? 

Using actual money is always the very worst way, you need to understand the opportunity cost (loss) and the fact that PCP works out cheaper. 

The dealer pays you money back from the price they advertise....if you don't like the deal simply cancel within a week or so and pay the balance...it's even cheaper. 

baser999

fred990 said:

Have you considered or thought about the PCP option? 

Using actual money is always the very worst way, you need to understand the opportunity cost (loss) and the fact that PCP works out cheaper. 

The dealer pays you money back from the price they advertise....if you don't like the deal simply cancel within a week or so and pay the balance...it's even cheaper. 

Sorry Fred, but don’t understand how this works - the dealer paying me money back? 🤔 

Grumpy_chap

baser999 said:

Sorry Fred, but don’t understand how this works - the dealer paying me money back? 🤔 

I think Fred is most likely referring to the incentives that can sometimes be available when buying a (brand new) car and taking finance.  These incentives are usually funded by the manufacturer and not available to the Dealer unless the customer has taken the associated finance package.  The incentive can take the form of a cash discount (money back) or be more nuanced (free services etc).

The most MSE-way to secure these incentives is to buy the car on the finance and then clear the balance straight away (using the bank balance funds you have available), thus securing the value of the incentive but not incurring the costs of the interest over the term.

The case changes slightly when the finance deal is "interest-free" as you might as well then pay back more slowly.  In the case of the PCP, you need to take care that the funds are available to clear the final payment (balloon) at the end of the term.  The benefit to the Dealer and manufacturer are that the customer i soften then encouraged back into another new car with another series of monthly payments at the end of the term rather than paying the money to keep the car they already have.

jimjames

Grumpy_chap said:

jimjames said:

Even some Euro3 petrol cars are compliant so it can stretch the date back to around 1997 for some cars. TFL are very evasive on their website but the criteria for ULEZ is actually the NOx emission levels not the requirement to meet the full Euro4 spec. The key number is NOx emissions under 0.08g/km.

EDIT 2:  I have sent an e-mail to Ford Customer Services.  In the video, a 1998 Porsche was compliant, so the 1997 Fiesta might well be also.  Fingers crossed.

Fingers crossed but be aware that even TFL contact centre staff don't know the rules. I've had it confirmed that the NOx level is the important one regardless of whether the car is officially Euro4 or not but over half of the replies to my application to TFL for exemption are complete nonsense and are not even looking at the info supplied.