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Is car finance a good idea?

Discussion in 'Motors' started by Tdh1987, 31 Jul 2006.

  1. Tdh1987

    Wise Guy

    Joined: 20 Oct 2002

    Posts: 1,535

    Location: Selby

    Is car finance a good idea?

    I’m in the market for a new car. My current car needs a new clutch and new drive shafts. I need to travel 60 miles to work everyday, I need a reliable car. So I think it’s time for it to go.

    I’ve got a £1000 banked but pondered on the thought of financing a car instead.

    I’ve looked around a few garaged and some of the boast a guaranteed finance scheme, so is this all circumstanced accepted?

    I’m 19, studying a part time degree, while also working at Halfords, earning me approximately £600 a month. More like £900 a month now that I’m working full time during the summer break.

    I live at home with my parents and my only outgoings are my contract phone and £80 a month rent.

    Student finance direct are kindly providing me with a loan for £3515, but in 3 equal instalments, one in September, one in January and the final one in April.

    I think I could easily afford to finance a car, I only plan to spend up to £2,500.

    What’s your opinion on car finance for someone in my position?

    Thanks

    Tom
     
  2. PeterNem

    Sgarrista

    Joined: 15 Feb 2003

    Posts: 8,322

    Location: NJ/NY, USA

    If you only plan to spend that much and already have £1k, apply fo a credit card with interest free purchases or one with interest free ballance transfers (and buy it on another card then transfer it over).

    You can then clear this as and when you have enough money from your student loan payments rather than having to pay back your loan at a fixed amount each month.
     
  3. SgtTupac

    PermaBanned

    Joined: 3 Oct 2004

    Posts: 2,859

    Location: UK

    How do you think most people afford their cars? :)
     
  4. Nozzer

    Banned

    Joined: 17 Oct 2002

    Posts: 9,495

    Location: Sunny South-East

    Cash talks [​IMG]
     
  5. NickXX

    Soldato

    Joined: 19 May 2005

    Posts: 7,037

    If you can afford the repayments and get a loan with a sensible interest rate then I'd go for it.

    Borrowing £1,500 isn't much at all if you're earning £600 a month with few outgoings. To be honest, you could probably just use a low interest overdraft to finance that amount, might be easier as getting a low interest loan whilst working only part time might be tricky.

    Even juggling the £1,500 on interest free credit cards might be the best bet - as you could easily have that paid off within 6 months.
     
  6. SgtTupac

    PermaBanned

    Joined: 3 Oct 2004

    Posts: 2,859

    Location: UK

    True, ive paid for all my cars cash etc. However, most people cant afford £5k on a car. So most of them have them on finance. :)
     
  7. Scrutinize

    Sgarrista

    Joined: 4 Apr 2003

    Posts: 7,656

    In your circumstances the best option would be to get a credit card or two, that way you can buy it on this and pay off as little or as much each month. I.e. you could pay it off in a few months or pay minimum payment over something like 10 years.

    This will probably work out a better rate than finance on this amount. Will give you more flexibility as well to look at other dealers who dont do the finance.
     
  8. GT3

    Sgarrista

    Joined: 18 Oct 2002

    Posts: 9,205

    Location: Chesterfield

    Isn't your car that quite tidy '99 1.8 306? If so get a pair of driveshafts for about £140 reconditioned, clutch for about £60 and book a couple of days off work and DIY. Not that hard :) £200 is cheaper than a few grand on a new car...
     
  9. Tdh1987

    Wise Guy

    Joined: 20 Oct 2002

    Posts: 1,535

    Location: Selby

    Yup I used to have a 1.8 306, but had an accident in that. Now I'm driving a 106.

    I did try for a credit card last year, but I got declined, whether thats because of my lack of credit history or my young age, I don't know.

    So my next question what is a good rate to pay for car finance, I'm not an expert on the subject.

    I'm going to view a few cars today. A '99 2.0 306 XSI(phase 3), a '00 Saxo VTR, a '00 306 L HDI and a '99 Saxo VTR and if I get time a '01 1.8 Xsara VTR(mk1).

    I can't think of another car I'd like to buy, possibly a Focus?
     
  10. Pug

    Soldato

    Joined: 20 Oct 2002

    Posts: 5,184

    Location: Over there...

    When i bought the celica Toyota were quite happy to give me a finance rate of 4%, which is pretty cheap tbh, and even tho i had the cash i decided to invest that in shares etc and make money on having the finance...

    doubt all places will be as cheap tho - a good personal loan rate - as a guide - is 5.9%
     
  11. stoofa

    Capodecina

    Joined: 4 Mar 2003

    Posts: 12,133

    Location: Chatteris

    Find out what your best rate of interest would be from a bank and then make sure car finance won't cost you any more.
    Most people can get loans these days from many banks at around the 6.9% APR level.
    Peugeot initially wanted to charge me somewhere in the region of 9% APR and even when I said I could get a bank loan for less they initially dropped only as far as 8%.

    A "I'm really going to have to think about this" later and I managed to wangle if I remember correctly somewhere in the region of 4% APR - they are still making something but to me that amount is acceptable in so far as to get that low you usually have to have a much more hefty deposit than I had.
     
  12. Noxis

    Banned

    Joined: 26 Jul 2003

    Posts: 6,348

    Location: Surrey

    i'd avoid finance secured against the car, check out www.gemoney.co.uk I got a 5.7% APR loan agreed inside a few hours from them. If things go wrong you just sell the car and pay off the loan. Rather than handing the car back and having nothing to show.
     
  13. Trojan

    Soldato

    Joined: 19 Sep 2003

    Posts: 5,319

    Location: Adelaide, Australia

    Car finance is, in my opinion, a bad idea. You don't own the car until the agreement is up, and you can run into issues if you want to sell it before then.

    A bank loan however, is fine. You own the car from day 1 and can sell the car at any stage without any issues, should you so wish. Just make sure you get a decent rate, and can definately afford the monthly repayments.
     
  14. Oakesy2001uk

    Mobster

    Joined: 7 Sep 2005

    Posts: 3,312

    this in my limited experience is by far the best option, much more flexible and in most cases much cheaper.
     
  15. Scania

    Capodecina

    Joined: 25 Nov 2004

    Posts: 24,674

    Location: On the road....

    £10k loan or, £5k cash was my choice when buying my car, I could easily have bought a late late model e38 for £10k + big debt, I'm very glad I did'nt.
     
  16. Tdh1987

    Wise Guy

    Joined: 20 Oct 2002

    Posts: 1,535

    Location: Selby

    I went to look at the cars mentioned earlier in the thread. The 306 was stunning, I took it for a spin and instantly fell in love. Not wanting to make my mind up straight away, I left to view some other cars.

    I went to look at a Xsara VTR and a Xsara VTS. Both were facelift model, which in my opinion look far worse than the older models. The VTR was awful, the VTS was nice, but not nearly as nice as the 306 and insurance will be cheaper on the 306.

    I filled out a finance form for the 306 XSI (borrowing £2,300 over 24 months) They later contacted me and said that i needed a Guarantor, which shouldn't be a big problem for me. I asked what the repayments would be, but he couldn't tell me until I had passed a credit check. Fair enough I thought, I asked for an approximate figure to which he replied "about £30 a week). Thats £3120 altogether. To me that sounds a lot, anyone agree?

    Thanks for you help guys. I think I'm gonna pop into my bank and see what they can offer.
     
  17. Fishman

    Wise Guy

    Joined: 19 Oct 2002

    Posts: 1,035

    Location: Welwyn Garden City

    If your only after a small amount, you are living at home and have a regular income it might be worth asking the parents ! I borrowed 6k off my dad for first car, tax, insurance etc. had it paid back in 5 months or so

    edit: corrected the awful spelling
     
  18. Maz

    Soldato

    Joined: 18 Oct 2002

    Posts: 7,387

    Location: Newcastle.


    Holy Smokes its a rate of 18% flat DONT take they're finance/
     
  19. Scrutinize

    Sgarrista

    Joined: 4 Apr 2003

    Posts: 7,656

    Yep, don't do it. Get a credit card or wait tbh, that is a high rate of interest with what will be little flexibility.
     
  20. ElRazur

    Capodecina

    Joined: 15 Mar 2005

    Posts: 10,439

    Location: I am everywhere...

    Cash, Western union, Credit tranfers, bankers draft, ......The list goes on. :D