Buying a new car - pay in full from savings or 50% loan?

radiibenos

My wife and I are considering buying a car for £8000. We have £18,000 in savings and we generally save £500 per month. My view is pay in full from savings since it's less than 50% of our total savings and we'll save the money back in 16 months. My wife, however, thinks it's a better idea to take a £4000 loan out to keep more money in the savings and pay it off over 2 years. What are everyone's thoughts?
Obviously, to me, why take on debt and pay interest when you don't have to? 

NB: or savings count is easy access and had an interest rate of 3.75% if that makes any difference. 

jay1804

If you loan rate is less than 3.75% (or actually 5.2% as that's the highest easy access saver atm) then you should pay cash, as it will cost you less. 

Another option would be a 0% Credit card, you could possibly pay no interest and also get S75 protection.

Desmond_Hume

I’d think it’s unlikely a dealer is going to accept 8 large on a CC. 

fatbelly

Some dealers do accept credit cards. It's worth checking.

I think it's unlikely though. I'm in a similar situation. Just paid £5000 by bank transfer

A few years ago when I needed cash but savings were tied up I did get a Virgin Money Transfer card, put 8k into my bank account and paid it off at 0% over 12 months. I think there was a 4% fee. Not sure if I would get the same deal now

retiredbanker1

If you get a Money Transfer card it might work (NB No S75 cover if you use this method).
Get a MT card transfer the funds to your bank account and pay the garage from there.

MEM62

radiibenos said:

My wife, however, thinks it's a better idea to take a £4000 loan out to keep more money in the savings and pay it off over 2 years. 

Why would you borrow money when you have the cash to pay for the car outright?  Sorry, but your wife's approach makes no sense.  Never borrow unless you have no other option.  

Nasqueron

MEM62 said:

radiibenos said:

My wife, however, thinks it's a better idea to take a £4000 loan out to keep more money in the savings and pay it off over 2 years. 

Why would you borrow money when you have the cash to pay for the car outright?  Sorry, but your wife's approach makes no sense.  Never borrow unless you have no other option.  

The only way to make it work is if loan rate is less than savings but otherwise I agree, OP wife is talking financial nonsense - why on earth would you pay interest on debt just to have savings sat in a bank earning less interest? The whole point is surely to cover things like this!