Bank loan to buy a car, is it a good idea?

[Pig benis]

Hi folks,

I have already asked the bank of mum and dad, but they said they want to have a talk about lending me the money to buy a car. In a way I don't want to borrow the money from my parents, as I would like to do this on my own.

Now, I am expecting a lot of people to say "save up, you will have more satisfaction that way". I agree with that, but I have a job that I really like and a decent wage to go with it and next to nothing in terms of outgoings. Plus, I am fed up of driving cars which you have to change up, once the valves are dancing on the bonnet. After a few years of driving, this has lost its appeal. I have done my maths, which included the actual running cost of the car and I can easily afford it.

So, is this a common way to buying a car? I see it as a lower risk than taking out car finance. As you aren't tied into a contract with a finance company. So, if I fancy a change, I can just sell the car and clear the loan off.

The loan amount would be £4,000 and I have £2,000 saved up already, so I don't have to borrow such a large amount.

Edited by Pig benis on Sunday 4th December 14:24

[andy-xr]

Total loan amount would be what, £4900 after interest etc? Or are you thinking of paying it off within a year or two?

I can't tell you it's a bad idea really as I've done it before and paid it off without any problems

[davepoth]

You can buy an awful lot of car for £2000 if you know what you're looking for. Finance is a fool's game.

[Pig benis]

andy-xr said:

Total loan amount would be what, £4900 after interest etc? Or are you thinking of paying it off within a year or two?

I can't tell you it's a bad idea really as I've done it before and paid it off without any problems

The loan would be spread over 24 months and from memory, I think the amount repayable was £4800. I would want to pay it off as soon as possible. So it would be aim to clear the loan in the shortest amount of time possible.

[U T]

Never borrow money to buy a depreciating asset.

[AndyBrew]

Go for it if it makes you happy!

[Unlight]

Firstly - don't listen to the majority of people who will reply to this thread condemning you for even having the cheek to think about borrowing money to buy a car.

The vast majority of cars you see on the road today will be financed in one form or the other, be it leased or a bank loan. Thats just the way it is.

As long as you have a stable income and can comfortably meet the repayments, if you're sure thats what you want to do then there is no reason not to go for it. Spending 6k on a car will give you far more options that spending 2k.

[Unlight]

Forgot to add, although I wouldn't normally recommend borrowing more than you want, you may find you get a far better deal APR wise if you go for 5k instead of 4k.

Edited by Unlight on Sunday 4th December 14:34

[dibblecorse]

what unlight said above. there are some truly sanctimonious people on ph at times, if you can afford it, do it, just do your sums and dont stress yourself.

[IrrElephant]

Unlight said:

Firstly - don't listen to the majority of people who will reply to this thread condemning you for even having the cheek to think about borrowing money to buy a car.

The vast majority of cars you see on the road today will be financed in one form or the other, be it leased or a bank loan. Thats just the way it is.

As long as you have a stable income and can comfortably meet the repayments, if you're sure thats what you want to do then there is no reason not to go for it. Spending 6k on a car will give you far more options that spending 2k.

This.

4k is not a huge amount of money to borrow.

[Dave Hedgehog]

dibblecorse said:

what unlight said above. there are some truly sanctimonious people on ph at times, if you can afford it, do it, just do your sums and dont stress yourself.

just make sure you can afford it and get the best deal you can (lowest apr)

your a long time dead and you cant take it with you

[AndyT77]

How long did it take you to save the £2k? Could you make an sacrifices to in order to save up another £4k in as short a space of time as possible?

Only you can decide, but the best way is to save.

[hogg]

you might want to tell us what car it is, so we can do the man maths

[U T]

Unlight said:

Firstly - don't listen to the majority of people who will reply to this thread condemning you for even having the cheek to think about borrowing money to buy a car.

The vast majority of cars you see on the road today will be financed in one form or the other, be it leased or a bank loan. Thats just the way it is.

I never condemned him. I just advised him against it.

True, the vast majority of cars are financed. Because millions of people would rather load themselves with debt rather than lose credibility with friends and neighbours by driving a car they can actually afford to buy.

My advice would be not to buy into that nonsense, and as I said, never borrow money to buy a depreciating asset.

[otolith]

U T said:

Never borrow money to buy a depreciating asset.

Quite right, spend your savings on one instead, that's perfectly sensible.

There is something to be said for arranging matters so that the car will always be worth more than the outstanding loan, though.

[Unlight]

U T said:

I never condemned him. I just advised him against it.

True, the vast majority of cars are financed. Because millions of people would rather load themselves with debt rather than lose credibility with friends and neighbours by driving a car they can actually afford to buy.

My advice would be not to buy into that nonsense, and as I said, never borrow money to buy a depreciating asset.

He is hardly borrowing a massive sum which will cripple him financially though? Your advice, whilst preferable of course simply doesn't work for the vast majority of people in the real world. Far better to go this route and spend around £200 a month on a bank loan for a couple of years rather than a new supermini on a PCP with nothing to show for it at the end?

[U T]

otolith said:

U T said:

Never borrow money to buy a depreciating asset.

Quite right, spend your savings on one instead, that's perfectly sensible.

Glad you agree. Buying a depreciating asset with your own money means your only loss is depreciation. Buying it with borrowed money costs you more depreciation (because you buy a more expensive car) plus interest.

Not very complicated economic theory.

The best way is to get someone to buy a car for you. Like a banker, who loans you money to buy a depreciating asset, but gets his money back, plus your money in interest, and then uses you money to buy his own car for cash. The only downside to that is that when bankers swan around The City in Astons and Porsches, everyone sneers at them and says "bloody bankers, getting rich of the back of the people!"

[Astra Dan]

You can get a E39 (I think) W reg BMW 328 for around 2k. Won't that do? Or is that too much.
Fancy one myself for that money.

[otolith]

The cost of finance is the same whether the car depreciates or not. The cost of depreciation is the same whether the car is financed or not. The only relevance of one to the other is the desire to be able to sell the car and clear the debt if necessary.

[Blue Oval84]

Just do it, I used a bank loan to pay for half of my Z4, the cost of the interest over 5 years isn't huge and was far outweighed by the benefit of getting into a car that was reliable and fun NOW rather than in 5 years time