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I'm looking for a new car. In the past I've always paid outright for cars - I've either bought a < £1k car or saved some money up for the purpose. And I know that it's always going to be cheaper to buy the thing cash than to pay interest.
Nevertheless, the cars I fancy are a big chunk of the cash I've got in the bank. I'm slightly loathe to spend that amount as whilst I've no immediate plans to buy a house, that could change, and I'd have much less spare for a decent deposit. And I'd be rather gutted if I was getting absolutely stung on a mortgage rate because I've got a nice(ish) car on the drive.
Now - what's it likely to cost me if I go down the finance route? Can you get a better price on the car by taking the dealer's finance? Or could I purchase it on a 0% card and then drip the cash in against it (or will the dealer whack a % on for CC?)? Or do I just bite the bullet and stick some cash in a regular saver every month until I'm back on the level?
FWIW, I'd be talking about 2 year loan if I went down that route.
And yes, I am aware that buying a cheaper car is an option, having had cheap cars for the last 10 years!
Well, you're always gonna pay more in interest on a loan than you'll earn with the money sitting in a bank. To me it sounds like you can lend yourself the money at a very low rate, which has to be a no brainer! 🙂
You might get a better deal on finance. If you do, take it but check how quickly you are allowed to pay it off without any charges, if you catch my drift...?! 😉
Do the deal with the finance option at silly percentage, as the garage will budget kickback from that - then drive a hard bargain on the car, they should move more because they're getting the finance deal money.
just make sure you've checked the repayment terms carefully, so there's no penalty for early settlement - and then settle the bill with money from the savings, or a much lower %age loan from the bank.
simples
Edit - aha - pretty much as PP has just said 😀
Cheers, I see you've both done this before 😆
From the other angle - if I happened on a decent 0% credit card deal, am I likely to be hit by dealer charges for using a card?
The price you agree to pay for a car with a dealer needs to be independent of the means of financing the car or at least that is the law.
Dealer finance at 0% or their own interest rates on a new car are generally competitive. In my most recent experience I was shocked at just how uncompetitive dealer finance was on a s/h car. On a small polo it would have cost me an extra £1000 over 3 years.
I would always take independent finance as that means you can do pretty much whatever you want to do with the car as the finance is not tied to the car, but there are benefits in HP if you have more than I believe 50% equity in the vehicle.
So long as the interest it not too high then I am the sort of person who takes the loan, accepts that is the cost of owning the car, and keep my savings in the bank. Not sure I would be sufficiently disciplined to save the money religiously after blowing it on a new motor.
But each to their own ...
@tron- yes generally if you pay by credit card you get charged 3%