Loan or cash?

Olawat

I’m considering buying a car, not necessarily brand new.
it’s the first time I’ve had to do this on my own and my question is would it be better to take either the car finance offered, take out a personal loan, use a credit card or pay cash? I can afford to pay off a loan quickly if needed.
Is it safer to have a type of loan in case there are problems with the car rather than paying for it outright?
Please be kind with your answers.
Thank you.

webmasterpolo

Mostly depends on the rate of interest you pay. A 0% dealer finance deal is great, usually requires a big deposit and are very rare these days. Most car finance is over 10% which is very expensive though. Personal loans much cheaper.

Best route I use if you can big enough credit limits is 0% credit cards. If you can get a good limit to cover it on 1 or 2 cards ask the dealer if they will accept credit cards, some do, some don't due to the processing fees.

If they do accept great, get a purchase 0% card then 0% balance transfer it when it runs out. Pay it off over years only paying the small 2-3% transfer fee every 3 years. effectively about 1% a year interest, while the cash is in the bank/invested earning more.

If they don't accept, use money transfer cards. They transfer the credit limit into your bank account so you can pay on debit card, although I would always pay at the least the deposit on credit card for the S75 protection if car under 30k. Then continue with 0% balance transfers again.

I've done this for years on my last 4 cars.

mebu60

We've just bought a new car. Paid the deposit by credit card then paid cash plus trade in. If you take out a loan and there are problems with the car you still have to service the loan. Personally I'd avoid paying interest to someone else unless there was some massive incentive to do so.

fatbelly

If you're buying new then some of the finance deals can be worth taking advantage of.

IIt's a bit out of date but some examples here

https://www.honestjohn.co.uk/deals/

If you can use a credit card for a part payment, that is worth doing.

Other than that it's just a question of keeping the interest as low as possible

Brie

In the past I've paid the whole thing by credit card and then done a balance transfer to a 0% card. Obviously only possible if you have a sufficient credit limit.

At the very minimum pay the deposit by credit card to get the protection that offers.

MEM62

Never borrow money if you do not have to - particularly when buying an asset with a value that drops like a stone. It's just plain silly.

CliveOfIndia

If the dealer offers some incentive to take out their finance, then make use of it and repay the finance after a month - you'll pay a small amount of interest. But watch for any early settlement fees - if any are imposed, you'd need to work out whether the incentive outweighs the fees.

Aside from that, it would seem daft to me to pay interest if you don't have to. Pay a small deposit by credit card so that you get S75 cover (as long as the car is less than £30,000), then the balance by "cash". Most dealers will accept a small deposit on credit card, but won't accept the full amount due to the fees they get charged by the card company.