New car and new kitchen

w00519773

I want to buy a new kitchen and new car this year.  I have the money in a stocks and shares ISA to buy both.  I can also use 0% finance on both apparently.

I am debating whether to cash in on my stocks and shares ISA.  I have discovered that the value of the funds I invest in all peaked to an all time high on Friday.  I am debating whether to use the 0% finance and leave the stocks and shares isa as it is or cash in on the isa on Monday and avoid the 0% finance.

I realise this is a crystal ball type question, however I would be grateful to hear thoughts (obviously not taken as advice).

Stubod

..they may go even higher...how will you feel then??

What are your reasons for having the ISA's in the first place??

..and when you cash them in you can't replace them, (other than with your usual ongoing annual alllowance).

Brie

Had the same dilemma in January when we got a new kitchen.  I took the 0% finance for 4 years as I could leave everything else in place gaining value as the monthly payments over a few years isn't a strain.  But I'm also not worried about losing a job or anything as I'm already mostly retired.  So it will depend on your particularly financial situation and attitude to risk.

And yes, if you do cash them in, never, ever check the price again just in case you need to kick yourself.  

Albermarle

Alternatively you could convert the S&S ISA to a Cash ISA where you can at least get 4% to 5% interest and take the 0% finance deal. 

Altior

These are not related contingencies. 0% finance is a literal no brainer as the cost of paying it back in real terms will be lower than the original cost of the purchases. Whether to realise investment gains or not is really independent of that choice, and is what it known as timing the market (of course it would be different if the investing purpose was to fund said purchases). Perhaps you want to try and time the market, but that should not inform the decision to put the realised capital into discretionary spending. 

Beddie

A hardcore money saver would say "I'm perfectly happy with my current car and kitchen, so I'll leave the money in the ISA and eschew the finance deal." 

w00519773

Altior said:

These are not related contingencies. 0% finance is a literal no brainer as the cost of paying it back in real terms will be lower than the original cost of the purchases. Whether to realise investment gains or not is really independent of that choice, and is what it known as timing the market (of course it would be different if the investing purpose was to fund said purchases). Perhaps you want to try and time the market, but that should not inform the decision to put the realised capital into discretionary spending. 

Fair point - I hadn't considered the time value of money.  It does seem to be literally a no brainer.  Apparently there are no early repayment charges as well.  There is literally no cost whatsoever.  Have I understood this correctly?

w00519773

Albermarle said:

Alternatively you could convert the S&S ISA to a Cash ISA where you can at least get 4% to 5% interest and take the 0% finance deal. 

Thanks.  My one year fixed cash ISA matures next month so I think I will convert part of the stocks and shares ISA.

w00519773

Brie said:

Had the same dilemma in January when we got a new kitchen.  I took the 0% finance for 4 years as I could leave everything else in place gaining value as the monthly payments over a few years isn't a strain.  But I'm also not worried about losing a job or anything as I'm already mostly retired.  So it will depend on your particularly financial situation and attitude to risk.

And yes, if you do cash them in, never, ever check the price again just in case you need to kick yourself.  

I guess the same can be said the other way - if the price went down then  I would kick myself if I didn't cash in.

Albermarle

w00519773 said:

Brie said:

Had the same dilemma in January when we got a new kitchen.  I took the 0% finance for 4 years as I could leave everything else in place gaining value as the monthly payments over a few years isn't a strain.  But I'm also not worried about losing a job or anything as I'm already mostly retired.  So it will depend on your particularly financial situation and attitude to risk.

And yes, if you do cash them in, never, ever check the price again just in case you need to kick yourself.  

I guess the same can be said the other way - if the price went down then  I would kick myself if I didn't cash in.

Always the same dilemma.
However most of us rely on that fact that over any given period it is more likely to go up than down. Hence why in the long term the trend has always been up, and hopefully always will be !

Altior

w00519773 said:

Altior said:

These are not related contingencies. 0% finance is a literal no brainer as the cost of paying it back in real terms will be lower than the original cost of the purchases. Whether to realise investment gains or not is really independent of that choice, and is what it known as timing the market (of course it would be different if the investing purpose was to fund said purchases). Perhaps you want to try and time the market, but that should not inform the decision to put the realised capital into discretionary spending. 

Fair point - I hadn't considered the time value of money.  It does seem to be literally a no brainer.  Apparently there are no early repayment charges as well.  There is literally no cost whatsoever.  Have I understood this correctly?

Effectively the cost of 0% financing is built into the purchase price. So I suppose, like most things in life it's not actually free in the truest sense. However there's nothing you can do about that as a consumer. There is also the theoretical risk of running into problems with the repayments in the future, generating penalties etc. So it wouldn't be for people who are poor at managing their finances.