My New Car Finance Idea!

[C.A.R.]

Just wanted to see if anyone could pick a hole in my 'plan' for a finance arrangement so I can get a new car.

New car will cost around £3500-4000, but I can only really save up £1,000 prior to Christmas and moving into our new place etc.

So...

I have recently cleared my credit card and they've given me a 'cash advance' offer thing.

I can transfer up to £3,750 straight into my current account interest-free until June next year, albeit with a 1.9% fee. If I transferred £3500 for example this fee would be £66.50

I can then pay off whatever I get for my car when I sell it. Worst-case scenario £850 (worth more guys!!) which would leave £2,716.50 to pay off of the card. Paying it off asap would equate to £339.60 per month.

However even if I couldn't clear this amount in time I can transfer the amount to another interest-free credit card (typically 2.9% fee) so it wouldn't be the end of the world.

To put this into perspective if I went to my bank to get a bank loan for £3,750 the total repayable to them would be £4,316. That makes the total cost of that credit £566!!

MBNA offer a similar 'cash advance' card which is interest free for 31 months or 2 and a half years. The same loan over this period would cost £950 in interest compared to a £66.50 fee.

Seems insane, so I'm trying to work out if I've made a major boo-boo.

I've done my research over on MoneySavingExpert and can't see any flaws...

[THE_Liam]

I can. Taking on extra depreciation, credit fees and interest when you could just keep what you've got or buy a good car for a grand?

[Ruan]

You're bang on the money, can do that no problem... However, they're banking on you forgetting to move it all round and charging you through the nose for the privilege.

Essentially if you're absolutely proactive and ontop of it, that's the way to do it, I know someone decided to buy a £12k car on credit cards, but with shopping round for the cheapest 0% balance transfers, he's now better off leaving it on credit cards paying the minimum amount and just moving it round - he's got the money to pay off tomorrow, but what's the point if it's cheaper to leave it on the card!

Remember though you can get some stonking personal loans if you shop around, they're around the same as Mortgages which is just insane! A personal loan at the same interest rates as a Mortgage - WTF!!!

[Anton]

I too toyed with this idea, so many companies offering insane deals. If i was looking at cars in the price range you are then i would have definitely done it on a card. However mine was a fair bit more.
The best rate on a personal loan i could get was about 7%. BMW's own finance is actually 12%, f*ck that! In the end Volvo managed to get me 5.5%. Pretty happy with that tbf.

If you need a new car, think you can 100% afford to pay it back in time and are going to be on the ball about it then i say go for it.

[Toms306]

I can. Taking on extra depreciation, credit fees and interest when you could just keep what you've got or buy a good car for a grand?

Like what? You can't get a decent, efficient*, family car for a grand these days, and a 15 year old HDi isn't ideal for everyone.

*Efficient for most people, not your idea of 30mpg being efficient.


On topic though, none of the credit or finance stuff makes sense to me lol, but you seem to have done your homework, Chris, and if moneysavingexpert think its a good idea I don't see that a car forum for old, sub £1000 cars are gonna be much more help.

[Niall]

Wont work.
So many credit card providers offer interest free transfers for XXX months but have you ever tried getting one when you are transferring an entire balance from one card to another? Good luck getting approved for that. They will offer you the card but without the interest free period and charge you a ludicrous interest on it.
Your cheapest way to do this is go to the bank, get a loan on the £2716 over 1 year-18 months, put the rest on your credit card and like you say, pay it right off when you sell the 306.

[cully]

run two credit cards

I run two cards one i never use and one that gets used all the time and paid off monthly

my Germany trip was financed by the card that dosn't get used so I could track what where and how much, then when we were back I balance transferred the full amount onto the card I use daily for 13months interest free.

with the two cards you can efectivly keep tranfering money back and forth to get the 0%
and they offer you cracking deals to do it too

[THE_Liam]

I can. Taking on extra depreciation, credit fees and interest when you could just keep what you've got or buy a good car for a grand?

Like what? You can't get a decent, efficient*, family car for a grand these days, and a 15 year old HDi isn't ideal for everyone.

*Efficient for most people, not your idea of 30mpg being efficient.

306 HDI
Vectra diesel
Mondeo diesel
Focus diesel
406 HDI

Not being funny but these will all serve the purpose perfectly well. CAR has said a few times that he wants to save for a house deposit, why spend all that on a depreciating asset? My opinion, flame away people.

[1616six]

Liam you've got to realise people want economy but they also want something a little more modern too, all those cars you've suggested are gonna be circa 10yrs old and been round the clock, I totally see your opinion on newer cars but it doesn't mean everyone else is necessarily wrong/stupid.

There's a reason a huge percentage of the country have nearly new cars. It's not an. 'Image' or that they have to have the latest car out. Personally it's because I cover 25k a year, want something ultra economical & reliable, I wouldn't dream of owning a 15yr old car now, I'm happy to pay for the priveledge of creature comforts.

Gets boring every time someone asks about a new car, I could put money on reading this thread & seeing a post from you stating its stupid buying a nearly new car & that OP should buy another old banger.

CAR, we've had many a discussion re this, it's down to you, in my opinion borrowing 6.5k and paying less than 8% for the priveledge of driving a nearly new car was well worth it. Others would rather have an old car & spend each month on maintaining it.

[Toms306]

I won't get into the debate about it Liam, that's not what this threads for, but as above really, Jordan's saved me writing that out lol.

[Kezzieboy]

Maybe I've just got lucky, but in my experience this 'old cars are unreliable' thing is a fallacy.

My HDi has served me flawlessly for 5 years, the only non-service item I've had to replace so far is the bottom pulley. I haven't even had to replace any suspension bushes. It cost me £1700 when I bought it at just under 10 years old, with 75k on the clock.

My brothers Laguna has just died. He paid £300 for it (so a little over scrap value), and he has abused that thing for over 5 years and only had to replace tyres, bulbs and wiper blades.

My little sisters Micra cost about £400, needed £100 worth of welding, and has been running for nearly 2 years without a glitch.

My dad's E46 330d cost him £5k, and has cost him over £2k in repairs in the 5 years he's owned it, a pair of rear tyres alone is over £200. Go figure.

[Niall]

Maybe I've just got lucky, but in my experience this 'old cars are unreliable' thing is a fallacy.

Correct. Providing a car has been looked after correctly they are no more unreliable than a brand new car. In fact, I've had more break downs in brand new cars than i have my old shit box peugeots lol.

That said, i can see why some want new cars. Unfortunately around here its mostly a status thing with mums in their range rovers and X5s but if i was doing the job i do but didn't have a company car, i would be leasing a brand new car every 3 years purely because doing 40k a year, i get through a set of tyres about every 9 months (not cheap, have to buy premiums), a service every 6-8 months plus repairs, it would be economical for me to do so. If it was just a commuting car doing 10-20 miles a day, id be rolling around replacing superchargers monthly :p

[THE_Liam]

I've always had old cars, and I've never really had an unreliable one until that crappy Skoda. New cars have more to go wrong, can't be fixed DIY in most cases and cost the earth in parts and labour.

I get what people say about economy, but is the extra 5mpg an E90 does over a 406HDI worth an extra 10 grand or whatever? People say they can't afford a deposit for a house but yet they drive brand new cars, I hear it every day, and its madness.

And no offence JJ but it got annoying when you suggested a Vectra for everyone, or suggested someone put themselves in 10 grand of debt for 5mpg. People have different opinions, and I'll give mine. If yours differs, that's fine, I don't care. I love being debt free with 40k owing on a 140k house, and I could afford that because what most people spend on a new car when they get their first proper job, I bought a house.

Anyway, I've said my piece.

[C.A.R.]

It's not a status thing at all!

We've recently succumbed to the idea that buying a house simply isn't realistic on a single wage & one person on part-time, certainly not around here. I have a family to think about and renting is basically the only option, which will be easier since my recent payrise anyway.

The thought process behind the car is that I need something reliable but slightly bigger for the next 2-3 years. The HDi has been flawless, I've kept it over 2 years and it's only ever let me down once and that was a worn-out aux belt - the car still got me home without it!

But time moves on and collectively I've owned a 306 of some sort for probably 5 years! It's time for something more modern.

I'm looking at Civic 2.2 CDTi's and after a recent test drive I'm pretty hooked. I did want an e46 but they go for silly money for what they are.

[Tom85]

I've recently done the same thing with a Barclaycard interest free before next May. The advantage over loan is you an pay off as much as you like without penalties. as long as you keep within the terms, meet the minimum payments and clear before the promotion ends it's a cheap flexible way of borrowing in my option. I looked into loans and found you only got good rates if you borrowed 7k plus.

[C.A.R.]

Exactly, £7.5k upwards is where the sub-10% loans seem to start.

I did have this brainwave of buying a bigger car for the Mrs so I could have a sporty 2-seater but then I took a reality pill and decided it probably wasn't wise!

[cpikey316_]

Honda 2.2 CDTi, I recently bought an accord and its really nice engine, im enjoying driving and it did a 140 mile return trip to Wales flawlessly and returned 52mpg on the trip counter (that did include about 60 miles of pottering around town too)

Im looking forward to seeing how economical it is when I get commuting to work.

[lewisdmz]

Have you seen the Nationwide select credit card?

http://www.nationwide.co.uk/products/cre...d-benefits

Interest free for 15 months, would you be able to pay it all off in that period and not have to worry about balance transfers? Depending on your circumstances they should be able to do you at least £4,000 limit on that.

[306carter]

Save Save Save

No need for credit then

Best advice I was ever given

[THE_Liam]

Save Save Save

No need for credit then

Best advice I was ever given

This, definitely.

[Kezzieboy]

Yeah I have been taught from a young age you simply don't spend money you don't have. The only debt I'm willing to take on is a mortgage, and my student loans.

[Poodle]

All very admirable sentiments, which I happen to agree with, but you try and get a good mortgage without a proper credit history, the missus has just had to get a credit card out for that very reason. That said, there's a time and a place for credit - ie as few times and places as possible lol. In seriousness it's got us out of more than one hole in years gone by, but you absolutely must keep on top of it.

Back to the op: personally I think you're daft for getting credit out for a status symbol, but that's your decision. There's nothing wrong with your plan though, as long as you keep on top of managing the credit you'll barely pay anything on it in terms of fees and interest.

[Seb_Ryan]

All very admirable sentiments, which I happen to agree with, but you try and get a good mortgage without a proper credit history, the missus has just had to get a credit card out for that very reason. That said, there's a time and a place for credit - ie as few times and places as possible lol. In seriousness it's got us out of more than one hole in years gone by, but you absolutely must keep on top of it.

Back to the op: personally I think you're daft for getting credit out for a status symbol, but that's your decision. There's nothing wrong with your plan though, as long as you keep on top of managing the credit you'll barely pay anything on it in terms of fees and interest.

I managed to get a mortage with no credit history lol, no credit cards etc etc

[cpikey316_]

All very admirable sentiments, which I happen to agree with, but you try and get a good mortgage without a proper credit history, the missus has just had to get a credit card out for that very reason. That said, there's a time and a place for credit - ie as few times and places as possible lol. In seriousness it's got us out of more than one hole in years gone by, but you absolutely must keep on top of it.

Have a santander CC for this very reason, cashback on shopping and petrol, and its paid off in full every month.

£3-4 a month is better than a kick in the teeth, and my credit rating gets better and better.

[Kezzieboy]

Oh yeah, nowt wrong with have a CC you pay off by direct debit every month, but it doesn't really count if it's 0% interest, plus cashback, and it gets paid off automatically before any interest is added

[C.A.R.]

I agree about the debt thing - the sole reason we are currently living with my parents is so that we can pay off the £4k of debt we had (which wasn't interest-free!). However since doing that I have been given a payrise and the Mrs and I are keen to move back out asap. A new family car would be nice, but I was looking at various ways of funding it and this seems the cheapest.

I have a good credit history, despite not paying it off at the end of every month (which would be great!) but the fact that I have borrowed in the past and repaid eventually has given me a good credit rating, so I can easily borrow the amount shown above.

It's got to be better than a bank loan or car finance though. The garage I looked at the other day offered finance, if I put down a grand (car was overpriced, say it was £4k) and financed the remaining £3k through them they would "only" be £113/month. Bur for 36 months. Wait a minute...36 x 113 = £4068!! That's some expensive credit right there.

Amazing the amount of people who use it though, looking only at the monthly repayment and not the 'bigger picture'. I wonder what the percentage of people driving about are actually in negative equity against their car without even knowing it...