A quick query about a loan

LzzyIsGod

Some serious food for thought to consider - thank you for the replies. I will have a relook at what the returns have been (statements came through in march). I had always known this was going to be a long haul job to dig out this hole and was working towards a target of 4 years (I've paid 4k off currently).

The car is a requirement for my job and mine is getting quite old now so I was trying to plan ahead for the inevitable day its beyond repair - i know 2nd hand cars are not cheap anymore and leasing is unlikely to work in my favour due to my mileage. 

Exodi

LzzyIsGod said:

Some serious food for thought to consider - thank you for the replies. I will have a relook at what the returns have been (statements came through in march). I had always known this was going to be a long haul job to dig out this hole and was working towards a target of 4 years (I've paid 4k off currently).

The car is a requirement for my job and mine is getting quite old now so I was trying to plan ahead for the inevitable day its beyond repair - i know 2nd hand cars are not cheap anymore and leasing is unlikely to work in my favour due to my mileage. 

It's hard to say without understanding what your current car is and what you want your future car to be, but yes if you're driving round in an old banger that needs a push to start then it makes sense to plan around its replacement. Peoples perception of when a car needs replacing is of course subjective.

However you have £17.5k in a fund and £1.7k in savings. You already predicted that people will ask why you don't use some of the money towards the debt to which you counter with the car, which implies you'd intend to spend the majority of the money on it. I hope that's not the case, but that's how it reads.

If your car did need replacing, there's no reason you couldn't spend £5k on a new car, and settle 80%+ of the loan.

I really don't think it's sensible to invest/save while paying 12.3% in interest. Most on this forum would bite your arm off to achieve anywhere near that that as a guaranteed rate of return (which is effectively what you you have available to you by paying the loan off).

Another way to think about it (commonly used thought experiment for investors biased by inertia) - if you had  £17.5k in your bank right now, what would you do? Would you look to invest it or put it to a new car and/or to pay off some of your debts? The answer should tell you what you need to know.

LzzyIsGod

I am more than happy to confirm I absolutely no intention of spending it all on a car (I know some people get very excited about cars but I am most definitely not one of them!). I had thought 5k for a replacement but was a bit shocked at car prices when I looked recently fornplanning purposes. Perceptions of old certainly do differ - currently mine is in double figures and has over 110k on the clock but I'm hopeful i should get another year or so out of it.

This has been a really helpful thread - it's certainly kicked me into trying to understand the OEIC and flexible savings plan that I have.  The savings plan ends in 7 years time so I've asked them to send through the info on what it means if I leave it alone til 2032 (vs taking it out now as suggested above) To my ignorant eye they seemed to perform quite well last year (I'm not sure I've got the percentages right though as they seem too high) but between them made just over 2k. 

I shall revisit my SOA/spending in the mean time. 

Thank you