Cashback now or credit rating for next year?

whitling2k

Now then, just looking for an opinion on the following, specifically potential impacts on car finance/loan.

- We’re about to make a one-off £4K purchase
- I’m contemplating taking two 5% cashback Amex cards - between me and my (financially linked) partner.
- maximising the initial cashback (£200 between us)

- we have the cash available so will be paying it off immediately.

- then using it for weekly shopping until the deal period ends, or we max out the £125 introductory cashback limit on both cards.
- then dumping the cards and closing the account.
- there are no other cashback options for this purchase.

But:
- my credit rating is near perfect
- we’re probably going to be buying a £40k car on 60/40 loan/deposit next year or the year after

It there a risk that the double credit application between us might cause my rating to drop and my offered interest rate to drop and not recover by this time next year?

The cashback would be nice, but I’m worried there is a chance it will come back and bite me.  A small rate increase on a ~£24k loan/finance will cost way more than the £200 cashback if this might be the case.

MattMattMattUK

whitling2k said:

Now then, just looking for an opinion on the following, specifically potential impacts on car finance/loan.

- We’re about to make a one-off £4K purchase
- I’m contemplating taking two 5% cashback Amex cards - between me and my (financially linked) partner.
- maximising the initial cashback (£200 between us)

- we have the cash available so will be paying it off immediately.

- then using it for weekly shopping until the deal period ends, or we max out the £125 introductory cashback limit on both cards.
- then dumping the cards and closing the account.
- there are no other cashback options for this purchase.

That makes sense, but why not keep the cards after and keep benefitting from the (lower) ongoing cashback rate that they offer?

whitling2k said:

But:
- my credit rating is near perfect

It there a risk that the double credit application between us might cause my rating to drop and my offered interest rate to drop and not recover by this time next year?

Your credit rating is a meaningless number only created for marketing purposes, it will drop, that means nothing, no lender ever see it, no lender cares about it, it is pointless.

whitling2k said:

- we’re probably going to be buying a £40k car on 60/40 loan/deposit next year or the year after

I would say that is not very MSE, especially as it is likely to be new, so a huge first year and then ongoing depreciation, why not spend the £16k on a decent second hand car, the chances are you could probably by a 2-3 year old version of a £40k new car for £20k.

whitling2k said:

The cashback would be nice, but I’m worried there is a chance it will come back and bite me.  A small rate increase on a ~£24k loan/finance will cost way more than the £200 cashback if this might be the case.

Not unless there wider issues and the reality is you will never be able to tell, rates published now will be different to published rates next year, you would never be able to tell what rate you would have got with the difference either. If you have paid the £4k off then it will almost certainly make no difference, if you had a credit card debt of £4k at the point of applying for a £24k loan then that may or may not have a minor difference in the interest rate offered, it would depend on the lender, but my opinion would be that would likely not make any difference unless there were other debts or affordability was borderline. 

whitling2k

Nice one, thanks for your thoughts,  all good points.  

Re the new car, we’re buying an EV and want a new battery.  We plan to keep the car for 10+ years.  

After driving a company EV for 4 years, and having hire EVs with a relatively degraded battery, we want to remove that element of risk.

Unless I can be convinced otherwise..

MattMattMattUK

whitling2k said:

Nice one, thanks for your thoughts,  all good points.  

Re the new car, we’re buying an EV and want a new battery.  We plan to keep the car for 10+ years.  

After driving a company EV for 4 years, and having hire EVs with a relatively degraded battery, we want to remove that element of risk.

Unless I can be convinced otherwise..

That always depends on your appetite for risk, but as an example, Tesla Model 3 Long Range, probably the best EV on the market, costs £50k brand new (with none of the extras). They can be picked up 2-3 years old with 15-20k miles for £26-28k (I am carefully monitoring this as I plan on buying one late this year or early next), with effectively zero battery degradation. Older Tesla vehicles (mostly Model S) generally show less than 10% battery range loss at ten years even in cases where they have several hundred thousand miles on the clock, most of them are around 6-8% after years. They come with 8 years, 140k miles warranty on the battery and drivetrain so you would still have 5+ years and 100k+ miles left on the warranty, which is more than many other cars give from new. 

The Nissan Leaf has no battery cooling tech, very limited wear levelling and even 12 year old versions of the 24kWh battery with 150-200k miles on still have 50-60% battery, those are batteries that have been deep cycled pretty much every day of their lives, the 30kWh versions of the same age are generally 60-70% and the oldest of the 40kWh version (2017) are mostly in the 75-85% range. Where users have stuck to the guidelines of sticking between 20% and 80% charge then many of those are over 90%. A friend has a four year old Leaf with 38k on the clock, he still has full battery health 12/12 bars, he sits in the 20-80% range in general, but will on average once a month do a longer journey so fully charge and may go under 20% as well. 

All cars suffer a huge depreciation when bought from brand new and can drop to 50-60% of new value within three years, I have always taken the view that it is far better to let companies (via company car leases) and those who like to waste money take that hit. Personally I would have no issue with buying a proper EV at 2-3 years old and keeping it for ten or more years. As a note though I would only buy a purpose built EV, not one of the models where the batteries and motor has been jammed in in place of fuel tank and engine. 

steven141

Just a heads up on the American Express card, you only get the cashback on the 1 year anniversary and you have to have met all of the account terms and conditions in that period like minimum amount spent on the card etc.

I took advantage of this and my 3 month promotional period has ended but I have over £100 sitting there. I won’t get it until the end of this year.