Buying a new car: Emergency Fund, Car Loan or 0% Credit Card

robaber

Hi

A couple of years ago, we realised that our car would likely need changing in the coming few years. 

We opened a separate bank account for a "Car Fund" and put money in monthly. We currently have £7,000. 

Our car how now given up and needs replacing. 

Looking at how expensive the second hand car market is £7,000 isn't going to be enough. We will likely need £14,000-18,000. 

We can contribute our £7,000.

For the rest, we could use:
Our emergency fund (around £30,000)
A car loan.
A 0% 24 month credit card. 

Emergency fund would be simplest, avoid paying interest and we can slowly build back up over the next few years. 

Any views or something I am missing?

Isthisforreal99

robaber said:

Hi

A couple of years ago, we realised that our car would likely need changing in the coming few years. 

We opened a separate bank account for a "Car Fund" and put money in monthly. We currently have £7,000. 

Our car how now given up and needs replacing. 

Looking at how expensive the second hand car market is £7,000 isn't going to be enough. We will likely need £14,000-18,000. 

We can contribute our £7,000.

For the rest, we could use:
Our emergency fund (around £30,000)
A car loan.
A 0% 24 month credit card. 

Emergency fund would be simplest, avoid paying interest and we can slowly build back up over the next few years. 

Any views or something I am missing?

Unless you find a dealer willing to take the full amount (which is uncommon) then the credit card option is probably a non-starter unless you get a money transfer card.

If you have the cash, then why pay interest.

daveyjp

If you need a car and your current one has failed that to me sounds like an emergency, so use your own cash.

Pay yourself back at the same level as a bank loan would cost you.

DrEskimo

£30k is certainly a very healthy emergency fund (typically recommendation is between 3-6months of expenses, so either it's much higher or you have some high living expenses!), so withdrawing ~£10k to add to your car fund would be very sensible here.

You can stick some of it on a 0% CC, I typically do this with the upfront deposit of like £500.

Goudy

Use your Car Fund and add to that with some of your Emergency Fund.

Then repay the Emergency fund and start building another Car Fund.

If any emergency crops up in between when your emergency fund is low, use credit only if you Emergency Fund isn't enough.

If you have a 0% spend credit card, stick all the sundries from changing your car on that, things like the insurance, RFL etc.

Bigphil1474

Agree with others. Anything other than using your emergency fund is bonkers really - unless you are getting better interest on your savings than you could get a loan at, which is highly unlikely. As Davey says, pay back into your emergency fund as if you'd borrowed the money from the bank. 

Arunmor

Pay with your emergency fund and replenish that at roughly the amount the loan would have cost per month and you will be better off in significantly less time than paying  the loan for 3-4 years.

Brie

I'd be maxing what can be put on the 0% card (assuming it's for purchases, you don't use it for anything else and you have it already) and the balance from your car fund and then your emergency fund.  Set up the CC direct debit to be paid at a set amount to pay it back over the 24 months to avoid any fuss with interest.  Any excess money can be paid to repay the emergency fund.  

Mildly_Miffed

robaber said:

Looking at how expensive the second hand car market is £7,000 isn't going to be enough. We will likely need £14,000-18,000. 

If you can afford that much, great.

But saying that you can't buy a perfectly good reliable car for that is simply not true. There are many EXCELLENT cars out there that will last for years with routine maintenance for the £7k you've saved up, or even far less.

Borrowing money instead of using your savings is also a really daft idea.

robaber

Mildly_Miffed said:

robaber said:

Looking at how expensive the second hand car market is £7,000 isn't going to be enough. We will likely need £14,000-18,000. 

If you can afford that much, great.

But saying that you can't buy a perfectly good reliable car for that is simply not true. There are many EXCELLENT cars out there that will last for years with routine maintenance for the £7k you've saved up, or even far less.

Borrowing money instead of using your savings is also a really daft idea.

I'm open to ideas, if you have any suggestions 🙂. 

knightstyle

We did a credit card loan, slightly higher interest to send the money straight to our bank account, it was 3.9% for a 24 month loan.