Advice on car loan

PishPosh

Hello,

I have a car in mind in which I will need to borrow £15,000 with the rest of the money coming from my deposit - £12,000. The car is a September 2023 plate with Manufacture Warranty until September 2026 and has 6,400 miles on it.  This is from an Approved Dealership and the car has a reputation of good reliability. 

I am waiting for August 1st to see what impact that has on interest rates when they are reviewed before going ahead with the loan. Hopefully rates are lowered. 

I searched online today to see what’s out there. Banks such as Nationwide, Santander, etc. offering £15,000 over 48 months around the £375 per month. 

I wanted to ask which type of loan is better, secured or unsecured in this scenario? 

The customer representative from Nationwide mentioned if I pay using my Nationwide Debit Card I will get some sort of protection, is this the best way to make payment or if I do a bank transfer it’s the same?

Also, is there anything else I should know about car loans? Sorry I am new to this. 

I should also say I am currently leasing and it is coming to an end. So with the car loan at £15,000 it will not financial impact me, it’s more or less the same but in the end the car is mine. 

Thank you. 

Mark_d

You get chargeback protection if you pay by card.  In this scenario I wouldn't consider this a valuable benefit.

Secured loans typically have a lower interest rate than unsecured, because the lender is taking less of a risk.  If you have a mortgage, maybe you can take some additional borrowing on it?

Another option to explore is 0% balance transfer deals on credit cards.  You could potentially transfer the £15k to your current account to make the car purchase, and then make the repayments to the credit card.  You'll likely need to do balance transfers again in future because no banks offer 4 years 0% balance transfers.

CliveOfIndia

A secured loan will usually give a lower rate of interest, simply because it's secured against an asset.  If you fail to keep up repayments then the lender just seizes the goods.  A mortgage is simply a loan secured against your house, most car finance packages are in effect a loan secured against the car.  if you don't keep up the repayments then the house or car is repossessed by the lender as a means of recovering at least some of the money you owe them.

A straightforward personal loan is, by its very nature, unsecured.

Mark_d said:

If you have a mortgage, maybe you can take some additional borrowing on it?

I'm afraid I have to say this is terrible advice.  Even if the mortgage lender would give a further advance for a car (highly unlikely), it's a massive risk.  If you can't meet the increased repayments for whatever reason, you risk having your house repossessed - all for the sake of what is, after all, simply a shiny toy.

Mark_d said:

Another option to explore is 0% balance transfer deals on credit cards.  You could potentially transfer the £15k to your current account to make the car purchase, and then make the repayments to the credit card.

You mean a Money Transfer, not Balance Transfer.  Yes, it's a possibility, but it again introduces an element of risk.  If you can't clear the whole balance by the time the promotional rate expires, you could find yourself lumbered with massive interest payments if you're unable to transfer the remaining balance to another card.

OP, the simplest option is likely to be an ordinary personal loan.  Having said that, it's worth checking to see if the dealer offers any finance packages.  If they do, you may potentially be able to get a decent deal - (a) because it's likely to be a secured loan, so cheaper, and (b) the dealer will sometimes make a commission on the finance, so they may knock a bit off the car for you.  But do make sure you read the small print of any agreement very carefully, and understand exactly what you're signing up for.

PishPosh said:

I have a car in mind in which I will need to borrow £15,000 with the rest of the money coming from my deposit - £12,000.

I should also say I am currently leasing and it is coming to an end. So with the car loan at £15,000 it will not financial impact me, it’s more or less the same but in the end the car is mine. 

Just one observation.  If you buy a £12,000 car for cash (which would get you a very decent used car, even with the current inflated prices), that's £375 a month in your pocket, since you wouldn't be paying a loan.  Over 48 months that would build up a very nice little nest-egg to either save for a rainy day, splash out on a luxury holiday, do home improvements, buy another car, whatever floats your boat.

Obviously it's not my place to tell you what you should do with your money - if you can afford it and you want a new car then go for it.  Just thought I'd raise it as food for thought.

PishPosh

CliveOfIndia said:

A secured loan will usually give a lower rate of interest, simply because it's secured against an asset.  If you fail to keep up repayments then the lender just seizes the goods.  A mortgage is simply a loan secured against your house, most car finance packages are in effect a loan secured against the car.  if you don't keep up the repayments then the house or car is repossessed by the lender as a means of recovering at least some of the money you owe them.

A straightforward personal loan is, by its very nature, unsecured.

Mark_d said:

If you have a mortgage, maybe you can take some additional borrowing on it?

I'm afraid I have to say this is terrible advice.  Even if the mortgage lender would give a further advance for a car (highly unlikely), it's a massive risk.  If you can't meet the increased repayments for whatever reason, you risk having your house repossessed - all for the sake of what is, after all, simply a shiny toy.

Mark_d said:

Another option to explore is 0% balance transfer deals on credit cards.  You could potentially transfer the £15k to your current account to make the car purchase, and then make the repayments to the credit card.

You mean a Money Transfer, not Balance Transfer.  Yes, it's a possibility, but it again introduces an element of risk.  If you can't clear the whole balance by the time the promotional rate expires, you could find yourself lumbered with massive interest payments if you're unable to transfer the remaining balance to another card.

OP, the simplest option is likely to be an ordinary personal loan.  Having said that, it's worth checking to see if the dealer offers any finance packages.  If they do, you may potentially be able to get a decent deal - (a) because it's likely to be a secured loan, so cheaper, and (b) the dealer will sometimes make a commission on the finance, so they may knock a bit off the car for you.  But do make sure you read the small print of any agreement very carefully, and understand exactly what you're signing up for.

PishPosh said:

I have a car in mind in which I will need to borrow £15,000 with the rest of the money coming from my deposit - £12,000.

I should also say I am currently leasing and it is coming to an end. So with the car loan at £15,000 it will not financial impact me, it’s more or less the same but in the end the car is mine. 

Just one observation.  If you buy a £12,000 car for cash (which would get you a very decent used car, even with the current inflated prices), that's £375 a month in your pocket, since you wouldn't be paying a loan.  Over 48 months that would build up a very nice little nest-egg to either save for a rainy day, splash out on a luxury holiday, do home improvements, buy another car, whatever floats your boat.

Obviously it's not my place to tell you what you should do with your money - if you can afford it and you want a new car then go for it.  Just thought I'd raise it as food for thought.

Thank you, Clive. I totally get what you are saying in regards to buying a car with the cash I already have. I have looked and I know this sounds like a first world problem but I genuinely can’t find a car for that price that I personally like. A car that I know I love getting inside and driving. I love cars and there is one in particular I have in mind. I can still save every month even with the car loan, although not as much without but still a decent amount. 

Thanks for your tip on the loan. Yeah I won’t go down the route of mortgage or money transfer. Looks like a simple bank loan would do in my case.