Car Finance VS ISA

Justin1986

Morning all, I'm looking for a bit of a sense check / advice please.

I've currently got a car with a PCP finance deal, roughly 18 months in, 8.9% APR

I'm also now at the point where my savings (ISA/emergency/S&S) collectively add up to almost exactly the settlement amount for the car.

The payments are manageable but would be nice not having them every month. However I am struggling to convince myself paying the finance off is the right thing to do.

Im aware I'm paying more interest on the finance than I'm earning on the savings.. but the thought of using my entire nest egg (which is increasing in value) to pay off a deprecating asset, which I guess will continue to lose value like most cars, just doesn't quite sit right with me.

Any advice? All podcasts I listen to suggest to reduce debt as fast as possible then continue to save.

born_again

How long is the PCP deal?

Justin1986

https://forums.moneysavingexpert.com/discussion/comment/81966805#Comment_81966805

It was a 4 year deal, so coming up for half way. Balloon payment at the end.

The car value is currently slightly higher than the outstanding balance by about £2-3k

MasterG83

If you clear your PCP finance now then if that leaves you with no emergency fund then its a no from me.

Dont forget that the PCP also gives you a VT clause at 50% of the total amount payable, can you hand back, and fund a cheap runaround? This would be my route.

sourcrates

Yes, the Ramsey approach, PCP is about the worst way possible to buy a car, for the customer anyway, they get a car that depreciates rapidly, that they could never afford to buy normally, and they pay hundreds if not thousands of pounds over the odds for the privilege of been custodian of it for whatever the finance period is.

Total money pit, you would be best advised to clear the debt as soon as you can, then rebuild your savings pot.

In future save for a new car, older cars are just as good if not better that much of the new rubbish out there today.

Justin1986

https://forums.moneysavingexpert.com/discussion/comment/81970235#Comment_81970235

Thanks, that's how I feel about it aswell. A bit uneasy without an emergency fund.

I could sell the car, but dont see the need if im honest. There is always the risk buying something cheaper and older comes with its own problems.

Justin1986

https://forums.moneysavingexpert.com/discussion/comment/81970387#Comment_81970387

Thanks also. I also agree getting it paid is the right thing to do. But feel I should wait until I dont have to completely clear myself out..

Our other car is paid outright which does feel nice