Best way to finance a £25k car?

[Beknown]

Now normally I’d just buy a car outright but I have other plans for the cash, hence why I know nothing about car finance...only that I want to own the car at the end of the term and I don't want a ballon payment of more than 8k.

At the moment I think my options are: dealer finance, third party finance or a bank loan (let’s keep this simple and ignore equity in my house).

Now a bank loan would allow me to buy privately which is what I traditionally like doing, but are the interest rates completive with car dealers? I guess there would be no ballon payment so my monthly payments will be higher compared to dealer finance, but that's not really a bad thing.

Also what sort of deposit is usually needed? I’d guess around 10% but third party finance web sites claim to not need a deposit, which seems a little strange?

Lastly, does anyone know what sort of percentage of my salary a finance company will allow me to spend a car?

[Hitch78]

Go and talk to some dealers and a couple of banks. You'll have to do that eventually anyway.

[The Moose]

Surely equity in the house is going to be the cheapest way to borrow the cash?

[GroundEffect]

Dealer finance, on a used car, is typically shocking.

Your best bet is house equity or bank loan.

[Dave Hedgehog]

GroundEffect said:

Dealer finance, on a used car, is typically shocking.

Your best bet is house equity or bank loan.

it varies a lot you have to shop around

bread and butter models often come with great finance deals and packages, sometimes 0%

interesting cars will generally have you paying top whack

with personal loans it seams better atm to get multiple loans in 10-15k range to get the best rate

[GroundEffect]

Dave Hedgehog said:

GroundEffect said:

Dealer finance, on a used car, is typically shocking.

Your best bet is house equity or bank loan.

it varies a lot you have to shop around

bread and butter models often come with great finance deals and packages, sometimes 0%

interesting cars will generally have you paying top whack

with personal loans it seams better atm to get multiple loans in 10-15k range to get the best rate

I only looked at fairly premium models for dealer finance but you're probably correct about the run of the mill stuff.

I was offered 17% from BMW. fk off.

[bilsland]

The Moose said:

Surely equity in the house is going to be the cheapest way to borrow the cash?

Well not definitely as you need to take ino account many variables, not least the time value of money of you then pay the lon back over 50 years. But can be a good option.

Broadly, bank loan rates are widely publicised and easy to research. You can do a quick straw poll on price comparison websites.

Dealers might actually do you a deal on the car price if you take their inance deal as their incentives can sonetimes incorporate selling a finance package to a punter.

Best thing to do is see what you can get from a bank, see what you can get from a dealer and then compare actual cash paid in total on an excel spreadsheet that spreads payments month by month. I believe tgat any person offeringyou a finance package is supposed to break down actual cash payments.

Whatcar.com has some good advice on the types of car finance iirc

[TROOPER88]

Buy a car that you can afford to buy with cash; whether that be a £500 or a £5000 car surely you would like to own it outright from the word go.

[Conian]

TROOPER88 said:

Buy a car that you can afford to buy with cash; whether that be a £500 or a £5000 car surely you would like to own it outright from the word go.

This.

Buy a 5k car now thats worth 5k now
Buying a 25k now using loans is the same as paying 31k for the same car in 5 years time

[Beknown]

Conian said:

This.

Buy a 5k car now thats worth 5k now
Buying a 25k now using loans is the same as paying 31k for the same car in 5 years time

No, I could pay cash, but my captial is better invested. Finance is fine thanks.

[TROOPER88]

Beknown said:

No, I could pay cash, but my captial is better invested. Finance is fine thanks.

Invest your capital wherever you like.
Why not buy a reliable car for whatever cash you have left?

As I said if you only have £1000 left buy a car out of it.

[Butter Face]

Conian said:

TROOPER88 said:

Buy a car that you can afford to buy with cash; whether that be a £500 or a £5000 car surely you would like to own it outright from the word go.

This.

Buy a 5k car now thats worth 5k now
Buying a 25k now using loans is the same as paying 31k for the same car in 5 years time

Buying a car thats worth 5k now is the same as buying on thats worth 2k in 5 years time (maybe), you're still pissing away your money.

Let him buy what he wants FFS.

OP, is it new/used? Obviously a dealer will give you their figures and it depends on what they're offering. If it's a PCP (With a balloon) that you're after then dealer will be the way forward.

I would say that borrowing 25k from the bank wouldn't be the best course of action.

Most finance companies don't even look at afforability, just your credit rating. Deposit can be as much or as little as you like, but the more you put in the more favourably they will look at your application

[Beknown]

Butter Face said:

Buying a car thats worth 5k now is the same as buying on thats worth 2k in 5 years time (maybe), you're still pissing away your money.

Let him buy what he wants FFS.

OP, is it new/used? Obviously a dealer will give you their figures and it depends on what they're offering. If it's a PCP (With a balloon) that you're after then dealer will be the way forward.

I would say that borrowing 25k from the bank wouldn't be the best course of action.

Most finance companies don't even look at afforability, just your credit rating. Deposit can be as much or as little as you like, but the more you put in the more favourably they will look at your application

Thanks.

I'm still debating what car to buy, but I can tell you it'll be second hand, rare and awful on petrol (E92 M3 or similar).

[Butter Face]

Beknown said:

Butter Face said:

Buying a car thats worth 5k now is the same as buying on thats worth 2k in 5 years time (maybe), you're still pissing away your money.

Let him buy what he wants FFS.

OP, is it new/used? Obviously a dealer will give you their figures and it depends on what they're offering. If it's a PCP (With a balloon) that you're after then dealer will be the way forward.

I would say that borrowing 25k from the bank wouldn't be the best course of action.

Most finance companies don't even look at afforability, just your credit rating. Deposit can be as much or as little as you like, but the more you put in the more favourably they will look at your application

Thanks.

I'm still debating what car to buy, but I can tell you it'll be second hand, rare and awful on petrol (E92 M3 or similar).

Sounds like a good way to blow your cash mate

If you haven't got the cash, go to a dealer and see what they have to offer. You need to work out how much exactly you are going to pay back, not just be fuddled by APR's etc.

Sit down and work out what it is going to cost you, whether you can make additional payments (with no penalties) to clear it quicker.

Try the dealer, then get a quote from another finance company. One company that do finance for our garage can do 3% Flat on a PCP on a car upto 24 months old which is ridiculously good at the moment, not huge fees either.

Work it out, take your time and get the best possible deal you can (and this is from a Salesman)

[xRIEx]

Personally I would have thought a bank loan (ignoring property equity) - Sainsbury's and Tesco are advertising APRs of about 6.1% for £7.5-15K. I would say bank loans are at least competitive with, or vastly better than, finance companies, plus the car is a lot easier to sell if you want rid before the term is up.

I've been put off finance companies when I saw Black Horse Motorcycle Finance seemingly proud of a 28% APR (OK, talking about a lower amount than £25K, but still).

And in terms of cash vs finance, (obviously not knowing your situation) are you sure the cash is better used elsewhere? Is it going to give >7-15% return per year? Because if so, can I have in on that?

Edited by xRIEx on Saturday 21st April 20:40

[750turbo]

This could be interesting...

[Butter Face]

xRIEx said:

Personally I would have thought a bank loan (ignoring property equity) - Sainsbury's and Tesco are advertising APRs of about 6.1% for £7.5-15K.

I've been put off finance companies when I saw Black Horse Motorcycle Finance seemingly proud of a 28% APR (OK, talking about a lower amount than £25K, but still).

Bank loans do give you some preferable rates but there are (IMO) some downsides

Borrowing £25k unsecured means you would be very unlikely to be touched by any lender again whilst you have that loan, meaning if you needed to borrow £10k for some ridiculous reason it just wouldn't happen. With it secured on a car, you'll still be able to be borrow other money.

You're protected by the Consumer Credit Act, meaning that you have the rules of halves/thirds on yor side.

You won't get any kind of balloon/PCP agreement from a bank.

You can normally make extra payments with car finance with no penalties.

[Contigo]

PCP all the way if you want to keep monthlies low.

5K down as cash deposit, borrow 20K over 48 months and it will be roughly 360 a month leaving around an 8K baloon at the end.

[Needa308GT4]

save up until you can afford it.

[Contigo]

Needa308GT4 said:

save up until you can afford it.

Why? I don't see the point, I have always had savings in the bank and would I spend them all on the car? Not a chance, I'd take a personal loan for a large percentage or PCP and pay it off as I earn leaving the money in the bank.