I need to buy a new car, as my current one is inefficient and a false economy repairing it.

Dilemma is I have a deposit of 4k and I would need to borrow a further 8k from the bank or put it on HP. The interest rates at the bank are currently 9.9% APR (fixed) and the car financing company is 6% Flat (roughly 12% APR).

My question is, are personal bank loans seen as worse than HP? ie on your credit rating? I’ve a good credit score currently.

This would be the first car I’ve ever financed and I wondered the pitfalls of each options!?

Thoughts please…

Buy a car for 4k.

For 4k I could buy a really nice car…

I need to buy a new car, as my current one is inefficient and a false economy repairing it.

A new car will depreciate plus you’ve finance costs. A £12k car will probably end up costing you £16k, and be worth £6k after 3 years.

So thats over £3k pa just on depreciation/finance – is this cheaper than the extra fuel and cost to repair your current one?

Buy a car for 4k.

Yes

I cant agree more with the other posts, buy a car for 4k

Buy a car for £2k and buy another bike!

HP – they own the car until its paid and if your circumstances change then you need to pay off the loan before you can get rid of the car

Bank Loan – you own the car, if you do it as a personal loan. If you then want to sell it, change it or whatever, you decide what to do with the loan

Cant see why either would affect you credit rating unless you seriously default.

Or buy a car for £4k 🙂

Edit – like the buy another bike option

I’d say go with the bank loan. I bank with Lloyds and got a preferential rate ie much lower than the high street rate because I had banked with them for years.

Also what was handy with Lloyds was that I could pay it off whenever I liked and not pay any penalty charges like you probably would with HP.

Both the same on your credit scoring.

If you want to spend more on a car then why not, a 12k car is going to be nicer than any £4k car, and much more practical and useful than another bike !

” a 12k car is going to be nicer than any £4k car, and much more practical and useful than another bike !”

I completely dissagree….

Don’t bother with a car and buy a £4k carbon cock extension of a bike 🙂

Last time I bought at a dealers it was with Black Horse. Was impressed with the way it all worked, so when I bought another privately I approached them again & got much better deal than my bank.
But, if you can afford it buy a £12k car, but not new, get a year old car.

There is no difference between HP and personal loans with regards to your credit rating. HP gives you more legal protection than a personal loan as it is a a regulated purchase (a bit like credit card purchases). Ask the Business manager at the dealership to match the bank quote, they will be able to subsidise below their base rate to match the payment but take into account any arrangement fees for HP. Settling an HP agreement early is also better than with personal loans as most of the cheap rates will charge three months interest to pay off before the end. Of course, you could buy a four grand car, but as you’re an adult, you will have doubtless weighed up the pro’s and cons and will be able to make up your own mind. 🙂

1st- Dont buy an old diesel. ime – 4k for the car will mean you have to cover a single repair bill of 4k. If the car is out of warranty buy a petrol.
2nd – We’re all diffenent. Dont borrow unless you really really have to.
3rd – dealers and banks are in competition. Play them off against each other.

Why does every car thread, in fact most purchase threads end up with every man and his dog telling the OP to spend less money?

What is wrong with you people?

I spent £65 in an indian restaurant last night and it was worth every penny. I’m glad I didn’t ask on here first, as I’d probably have been talked into buying some lentils from Lidl instead.

HP – they own the car until its paid and if your circumstances change then you need to pay off the loan before you can get rid of the car

Isn’t there something in HP or use to be once you’ve paid 50% you can tell them to you no longer want it. It effects your credit but if you having problems it gets rid of that one.

Yeah here.

http://www.lacors.gov.uk/lacors/ContentDetails.aspx?id=1054

a curry is a commodity like a bike that depreciates, so if you have the cash to spend on it then splurge away.

whatever car the OP goes for it will depreciate, so, unlike a property, because it is bound to end up being worth less than its asking price it is probably not best to borrow money with an interest rate to fund it.

I bought my bike through finance because it was 0% interest. I paid 6k cash for my car because I could afford it and cannot afford to pay a bank interest for something that is essentially a throwaway luxury. If I had 35k cash spare i’d buy an audi, unfortunately I had 6k cash spare so I got a vauxhall.

So, for curry and cars and bikes I’d say spend the cash you have, because in the long run they will all end up worthless….

Loan rates & APRs are pretty miss-leading – you need to compare the monthly repayments and arrangement fees to see which one is really better value.

Last time I financed a car, I added it to my mortgage, then paid into an offset savings account to pay it back, which was cheaper than any loan / HP rate I could get.

Why does every car thread, in fact most purchase threads end up with every man and his dog telling the OP to spend less money?

That’d be because every man and his dog thinks the OP should spend less money. TBH I’d have thought you’d have realised that.

I didn’t tell them to spend less. Just that for 4k I could get something really nice…

But he wants to spend £12k on a car. Is that so hard for people to get their heads round?

If he’d said he wanted to spend £4k, then there would have been a rash of people telling him to spend £2k.

I want to spend 18k on a car…

Re the spend 4k. I suppose it’s because quite a few people on here are pragmatic and believe that affording the payments isn’t the same as affording the thing, despite what the financiers would have us believe.

Ok Ok- £2,5k on the car and £1.5k on the bike- happy now 😀

are personal bank loans seen as worse than HP? ie on your credit rating? I’ve a good credit score currently.

Correct me if I’m wrong, but using credit is a way of increasing your credit rating, not reducing it, no? You’re considered more of a risk if you’ve never had credit than if you’ve had loans and cards coming out of your ears but paid them all off in a timely manner.

(standard disclaimer)

I would never get a loan for anything other than a house if I could help it.

Car thread so need a Skoda mention – I’ve just order a car from Skoda, noticed they have some pretty cheap loans….

can someone correct me if im wrong.

Say you see a new car costing 10k, it depreciates 30% as soon as you drive it off the car park. So your left 3k down if you sell it a week later.

If there is 10% interest on the loan you take you effectively pay 11K – so your 4k down.

Is it at all possible to get a car that depreciates slower than the interest mounts????? If not then surely your just better off buying a cheap car you can afford?

Generally best not to borrow as lender must make a profit out of you. If the benefit of the purchase outweighs he cost of that purchase then worth doing – this also applies to the opportunity cost of using your own cash.

mudshark – cheers, just had a long natter with my dad about this, cash seems like the most economic option if you can afford it at the time…

My question is, are personal bank loans seen as worse than HP? ie on your credit rating?

Loans are good on your credit rating, not bad.

I would not mind borrowing money for a decent car. Affording the loan repayments is still affording the car imo.

Yes you pay more ultimately, but who cares? It’s about money in each month vs money out.

However, don’t buy new. That is just silly.

You could get somethign moderately nice for 4k, but somethign really nice for 12k. I don’t see a problem.

Re bank vs HP, when I was looking bank rates were stilly and car HP rates were vastly cheaper.

The guy told me that you can cancel the HP agreement at any time and return the car without giving them any money. They don’t advertise this fact obviously. It is a hire agreement not a loan.

I didn’t check up on this mind.

Finance companies offer car dealerships very fat commissions to sign customers up on HP and personal loans so you can often get a much better deal, because they can afford to discount more.

If you get a personal loan instead of HP you should be able to make overpayments, capital repayments or at least increase your monthly repayment. This can have a huge effect on reducing the length of the loan and therefore the interest you pay.

I used Nationwide recently for a personal loan and they were the best about (in Nov). Can overpay etc..

And yes I bought a car with it, it’s the first newish/nice car the missus and I have ever owned so I don’t regret the fact we borrowed against a depreciating asset. One of life’s little luxuries.

It cost substantially less than 12k though!

I think the question here is what does subby want the car to be able to do?

Post a list of requirements and you’ll get LOADS of opinion on decent cars ranging from the £4k you have up to the £12k you want to spend.

Try Zopa.

Just taken a loan out with them to buy a new car; really great experience.