Finance or Outright payment?

Herzlos

If the car is financed then the finance company is the owner and will have more sway with the dealer than you will if something goes wrong. 

But if the car is a 25 plate it'll still be under warranty anyway so it's not as critical a point. I'd just do what works out cheapest. 

On the mortgage front, you're just trading off against having lower deposit or an ongoing monthly. I *think* the monthly committment will hurt your affordability worse than the reduced deposit, but given you're talking about moving into a new house very soon can you get away with delaying the car until afterwards? Or even go for a 2020 Clio for under £10k, pay in cash and keep the difference towards the deposit?

Herzlos

flaneurs_lobster said:

ButterCheese said:

We've just done this, we had the money in savings but wanted to keep it there as it earns us a good 4%.  So we applied for four 0% interest credit cards, bought the car with those, and will pay them off monthly as much as we can out of our normal income.  If we fail to do that then we can dip into savings.  It might only save us £40 a month but we might as well borrow for free (even if only 28 months)

No experience, but wisdom here is that it's hard to find a car seller who'll take 1 CC for payment, let alone 4... And shouldn't applying for 4 CCs simultaneously raise credit check alarms? How much was the car?

It'd work if it was 0% money transfers, and then paid to the dealer from debit.  But I do wonder about the affordability concerns with applying to so many cards simultaneously as they'll all be unaware of each other. 

flaneurs_lobster

Herzlos said:

It'd work if it was 0% money transfers, and then paid to the dealer from debit.  But I do wonder about the affordability concerns with applying to so many cards simultaneously as they'll all be unaware of each other. 

Good point about money transfer then pay dealer cash.

I think the CC companies (and any other lender) have access to application data for prospective debtors in more-or-less real time (not the lag that you see on the reports that they supply to individual punters). They'd likely spot applications made in close succession.

unfocus

MyRealNameToo said:

At £17k you could just pay the deposit on a credit card and you would get the exact same S75 protection as if you had paid by finance. 

Its theoretically possible that the value of a vehicle tanks so much that you are better off paying for a PCP and surrendering the vehicle rather than paying the balloon all the time leaving your money in your savings account partially offsetting the interest payments but its fairly unlikely unless you are getting a very low APR on the loan or a very high interest on your savings. In most cases you are likely to be worse off.

Are they offering any incentives for taking out finance? Sometimes you can double dip by getting some benefits for buying via finance then cancel the finance and pay off the debt whilst still retaining the free servicing or £2k deposit contribution or whatever the incentive was. 

Thanks for the tip - I had not appreciated that paying by credit card would offer that protection and so will check if I they will accept a chunk on CC. I've asked and they aren't offering any incentives, saying the car is already a great price - lol.

unfocus

MyRealNameToo said:

born_again said:

Take the finance, pay it off within 14 days.

Pay it off or cancel it and pay it off? If the former you'll get the 2 months interest for early settlement penalty to pay normally. 

Do you mean if I pay the entire loan off, I would only pay 2 months' interest? Obviously I'll check with the finance provider. 

unfocus

Arunmor said:

The biggest argument is what is your interest rate on the loan versus what you would receive in a savings account.

Second hand cars tend to have expensive loan rates vs new cars.  How old is the car and have you priced up a new one (if car is relatively new).

If the car is an EV?  Used EVs are taking a pounding on residuals, which might be a benefit personally I wouldn't have one too many risks.

Useful advice - thanks! A brand new version is £20k (compared to £17k for this 'nearly new' with 10k miles on the clock). Using the same deposit amount for the PCP enquiry form on both shows the monthly payment would be £12 more for the brand new then about £800 more on the optional final payment after four years. Total amount payable is about £2.5k more for the brand new. It's not EV so that wouldn't help my decision-making. 

MyRealNameToo

unfocus said:

MyRealNameToo said:

At £17k you could just pay the deposit on a credit card and you would get the exact same S75 protection as if you had paid by finance. 

Its theoretically possible that the value of a vehicle tanks so much that you are better off paying for a PCP and surrendering the vehicle rather than paying the balloon all the time leaving your money in your savings account partially offsetting the interest payments but its fairly unlikely unless you are getting a very low APR on the loan or a very high interest on your savings. In most cases you are likely to be worse off.

Are they offering any incentives for taking out finance? Sometimes you can double dip by getting some benefits for buying via finance then cancel the finance and pay off the debt whilst still retaining the free servicing or £2k deposit contribution or whatever the incentive was. 

Thanks for the tip - I had not appreciated that paying by credit card would offer that protection and so will check if I they will accept a chunk on CC. I've asked and they aren't offering any incentives, saying the car is already a great price - lol.

It can be any amount, normally it's something very token compared to the value of the vehicle. Under S75 the whole transaction is protected as long as at least part of it was paid by credit (and the other conditions apply). 

unfocus said:

MyRealNameToo said:

born_again said:

Take the finance, pay it off within 14 days.

Pay it off or cancel it and pay it off? If the former you'll get the 2 months interest for early settlement penalty to pay normally. 

Do you mean if I pay the entire loan off, I would only pay 2 months' interest? Obviously I'll check with the finance provider. 

2 months is the most they can charge for early settlement, they can obviously choose to charge less. You'd pay the interest due to date until the day its repaid plus the 2 months penalty interest if you take the early settlement route.

There is also the option of cancelling the loan during the cooling off period during which only the interest for the days of credit are chargeable and not early repayment charge. 

Goudy

If it's normal personal credit and not any business arrangement, the finance company are bound by the Consumer Credit Act.

This means there is a set amount of interest chargeable on early loan settlements.
The amount depends on the size of the settlement, but generally if it's in the thousands it's 56 days interest on the outstanding capital. 

If you have made any monthly payments already that include interest, that doesn't count towards that 56 days, it's just what they add to the outstanding capital owed at that time.

The finance company will almost certain hint or state the adjusted settlement calculation includes a "interest rebate". This "rebate" is the difference between what you would have paid with all the interest if you carried on paying the monthlies until the end of the contract and the actual settlement figure with the 56 days interest.

You can help reduce this 56 days, sort of.
Though it's 56 days, the quote must be valid for a set period of 28 days, so you can still "borrow" the outstanding amount for another 28 days by delaying the payment. (better to make it 27 days to make sure the payment clears on time).

If it's a large amount, you can leave it in an interest paying account for that time before settling, that way you will effectively reduce the impact of that 56 days cost slightly with the interest on those funds used to setttle.



As far as benefits of taking car finance, things like deposit contributions and free servicing etc and paying it off, there are two trains of thought on this which you don't want to confuse.

Settling and Cancelling. 
They are often used by people to mean the same thing but are in fact very different.

The first has been detailed above. You take the finance and the freebies, let the contract start then settling with the 56 days interest.
You have initially taken the finance so can enjoy the benefits no problem.

Cancelling is agreeing to the finance but before it starts you have a legal right to cancel it within 14 days.
You have still agreed to buy the car so they will still want payment, just by another means.

Now where the two might differ is in these freebies and contributions.
By rights, the dealer can invoice you the full amount or remove the free servicing as you have cancelled and not taken the finance.

I'm not saying this will happen, plenty have cancelled their finance and kept the benefits, but there are others that haven't as finance companies and dealers have wised up over the years.

Cancelling is probably a better strategy for used or in stock cars you can take home within those 14 days.
You agree to buy the car on finance with benefits on day One. Pick up and drive home on say day Three or Four, then cancel the finance once you are home.

If say you agree to the finance and have to wait 2 months for the car but cancel the finance agreement within 14 days, they could invoice you the full retail amount when it comes to payment and picking it up. It has been known to happen.

Goudy

Herzlos said:

flaneurs_lobster said:

ButterCheese said:

We've just done this, we had the money in savings but wanted to keep it there as it earns us a good 4%.  So we applied for four 0% interest credit cards, bought the car with those, and will pay them off monthly as much as we can out of our normal income.  If we fail to do that then we can dip into savings.  It might only save us £40 a month but we might as well borrow for free (even if only 28 months)

No experience, but wisdom here is that it's hard to find a car seller who'll take 1 CC for payment, let alone 4... And shouldn't applying for 4 CCs simultaneously raise credit check alarms? How much was the car?

It'd work if it was 0% money transfers, and then paid to the dealer from debit.  But I do wonder about the affordability concerns with applying to so many cards simultaneously as they'll all be unaware of each other. 

Yes, you could use a money transfer card to pay for or settle car finance but there aren't many fee free cards.
Most will charge between a 3% and 6% fee and length of offers vary.

Generally I would say use one with the lowest fee first to move the most, even if the length of time isn't long enough to pay it all off.
Then use a balance transfer card later for rest, these are generally cheaper and last longer and there are often more to choose from.

So for example, you spend £10,000 on a money transfer card that lasts 36 months with a 6% fee, that's going to cost you £600.

If you spend £10,000 on a money transfer with a 0% fee that lasts only 18 months, that's going to cost nothing to start with.
In 18 months you might have reduced the £10,000 to £5,000 or so, then moving it to a 3% fee balance transfer at this point will only cost you £150.
Move it to balance transfer card with 0% fee and all of it has cost you nothing.

But the advise to not apply for any form of credit for around 6 months before a mortgage application is very valid.

Mildly_Miffed

First off, you are aware that a <1yo car with 10k on the clock is coming from one source, and one source only... it's an ex-hire car.

That aside, you've still got a LOT of depreciation to burn through on it.

If you're happy with both of those, then surely it makes sense to pay cash, and use the income that would be going on your monthly repayments to top the savings up?

The extra consumer protection is nebulous. There's no extra rights - you just have a secondary source to enforce those rights against. Against that, what's the interest you're paying on the finance, versus what's the interest you're receiving on the savings?

The one time that financing might make more sense is if you're absolutely certain that you won't keep the car beyond the end of the finance period - then you may want to consider a lease or PCP whereby you can simply hand the car back. PCP gives you a potential advantage if the depreciation over the term is less than expected. OTOH, the money you'd be "getting back" is your money you've been overpaying monthly - and you are, of course, paying interest on the entire outstanding balance including the balloon.