Will need a new car soon - best way to finance?

AndrewKnight_2

Our two cars are both getting long-in-the-tooth and we need something reliable for travelling between home down South and grandchildren up North ~200 miles each way, once or twice a month. Not looking for advice on the car itself, just giving some context. For a bit more context, we are mid-60s so this might be the last vehicle we get.
What is the current thinking on various ways of financing this? We could do it from savings, a loan, hire purchase, lease, ...
I would very much welcome people's thoughts and experiences.

CliveOfIndia

Are you thinking of brand-new or used?  And from your comment about "the last vehicle you get" I'm assuming you're not planning on changing the car in 3 years?

Years ago I would have said buy it from your savings, no question.  Why pay interest on finance if you don't have to?

But these days you can get some attractive finance offers from dealerships, whereby they make a contribution to the price.  So what some people do is take the dealership finance, grab the dealer's contribution, then repay the whole lot after a month.  You'll pay a little bit of interest and there may well be an early settlement penalty (up to 2 months' worth of interest), but if the dealer contribution is big enough it can end up saving you money overall.

Obviously you need to do the sums to make sure it's financially worthwhile, but it's worth looking into.

The alternative is to buy a decent used car that's only 2 or 3 years old.  That way, someone else has already taken the hit on the biggest chunk of depreciation and you should end up with a very reliable car (sometimes with the balance of the manufacturer's warranty remaining).

But the bottom line, in my view - don't take out finance if you have the savings to pay for it, unless there's a tangible financial benefit for doing so.

dwsjarcmcd

If you're looking at a new car, you may be able to get an interest free option if you put, say 50% down.  I know you don't want advice on the car itself, so this is an example.  We have bought a new Volvo XC40 via Carwow for the discount they could obtain and as part of this, we will pay 50% up-front and the rest is on interest free credit. They even gave us an additional £750 off for doing so and we get to earn interest on the 50% we don't need to pay up-front.  

The price of the new car was slightly less than a year old model, so it was a no brainer for us.  There may be other manufacturers offering interest free deals if you're looking at a new car.

By the way, we changed car because we want to travel about 230 miles a couple of times per month to see our new grandson, who is due at the end of November!

AndrewKnight_2

CliveOfIndia said:

Are you thinking of brand-new or used?  And from your comment about "the last vehicle you get" I'm assuming you're not planning on changing the car in 3 years?

Not yet decided on brand new or used. I know you can get some really good deals on cars up to a year or two old compared to new. If we buy, it may be the last car we get, if we lease it's obviously a different thing.

Stateofart

Bank Loan - you pay it off, it's yours.  Check APR and interest for best rates.

HP - loan from the garage, typically not as cost effective as the above

PCP/lease - it's cheaper per month but effectively you're renting it.  Hand it back when you're done or pay balloon payment (large payment at the end, typically financed to buy it outright).

You could use savings as well to save yourself finance fees on a loan. 

PCP/Lease often have mileage restrictions and will cost more the more miles per month. 

 

Brie

credit card.  not everyone will take one for a full payment but many will take a downpayment which will give you some protection on the purchase. 

But I've also bought cars a number of times through dealers paying on a credit card and then did a balance transfer to another card to get something like 24 months interest free as I didn't have the full whack available at the time of purchase.

Bigwheels1111

First pick the car you want, then get a list of uk brokers and get quotes.
If it’s new your after. Take the quotes to your local dealer and beat them with the quotes.
Most give a discount for financing, take it out and pay it off as soon as it’s been delivered and you get home.
No fess as paid off within the 14 day cooling off period.
My friend was looking for a Toyota Corolla sports estate 2.0 excel. Will do 50 mpg local or on motorways 
Got a Toyota price of £36,875.
He paid £30,395 via a mini cab car supplier. He’s a cab driver. Saved £6480.
Best broker price was over 5k cheaper than Toyota.

Grumpy_chap

AndrewKnight_2 said:

we are mid-60s so this might be the last vehicle we get.

AndrewKnight_2 said:

Not yet decided on brand new or used. I know you can get some really good deals on cars up to a year or two old compared to new. If we buy, it may be the last car we get, if we lease it's obviously a different thing.

Unless you know that there are health issues, it seems rather negative to consider that at only mid-60's years young this is likely to be your last car.  You could commonly expect another 10 years driving and, quite possibly, 20 or more years.

If you find yourself tempted by a deal on a year or two old car, be sure to check the best price you can get for the same car brand new.  Once you have chosen the type of car, check the online broker sites to see the order of magnitude of discounts available on brand new and how that compares with the nearly new options.

AndrewKnight_2

Grumpy_chap said:

AndrewKnight_2 said:

we are mid-60s so this might be the last vehicle we get.

Unless you know that there are health issues, it seems rather negative to consider that at only mid-60's years young this is likely to be your last car.  You could commonly expect another 10 years driving and, quite possibly, 20 or more years.

For more context, our current cars are 13 and 18 years old, so we do tend to keep them a long time.