Best way to finance the balance on a new car purchase?

[oobster]

Folks - looking for your thoughts on how best to proceed with the following:

Mrs has just signed up for a brand-new car (a 1.6 Powershift Ford Fiesta Titanium) and it won't arrive at the dealers until the start/middle of June. She is trading in her current car (a 1.4 Auto Ford Fiesta Titanium) and the balance left to pay will be in the region of £9K.

We are looking at ways of avoiding taking this out of our savings, Mrs works for a high street bank so could get SLIGHTLY better APR on a loan than a normal punter would but we've been considering applying for a 12/15/18 month 0% credit card nearer the time the vehicle is due, chucking the £9K on that and paying as much of it off as we can before the 0% period ends.

Makes sense or is there a better way?

[GoneAnon]

The dealer will probably make a charge for credit card payments, so you would need to add that to your cost of borrowing.

Car makers often do subsidised finance on their new cars so I'd certainly have a look at what's on offer from the dealer.

[anonymous-user]

The interest on a 9 grand personal loan spread over a few years would be what? £500? Hardly crippling. Personally wouldn't bother with the hassle of dealer finance/credit card applications for this kind of thing.

[LouD86]

From my experience, anything over £1k on a credit card imposes a 2% charge. See what you can get from the bank

[rossub]

You might not get as much as a £9k limit on the card. Last one I applied for to do the same kind of thing gave me £5500.

[rossub]

RaymondVanDerDon said:

The interest on a 9 grand personal loan spread over a few years would be what? £500? Hardly crippling. Personally wouldn't bother with the hassle of dealer finance/credit card applications for this kind of thing.

It'll be more than £500. I can't see why anyone with a bit of sense wouldn't try and do it by the cheapest possible method. 0% purchase and balance transfer credit cards are definitely that.

The real interest rate you pay using them is actually less than 0%, due to inflation. In theory the real amount you pay back is less than you borrowed, if you were to get a pay rise that matches inflation

[CYMR0]

rossub said:

It'll be more than £500. I can't see why anyone with a bit of sense wouldn't try and do it by the cheapest possible method. 0% purchase and balance transfer credit cards are definitely that.

The real interest rate you pay using them is actually less than 0%, due to inflation. In theory the real amount you pay back is less than you borrowed, if you were to get a pay rise that matches inflation

There is the small matter of a £250 deposit allowance on Ford finance though.

So, if you can get £9k over a 2-year balance transfer, you would pay £360 typical fees + £250 extra to the dealer = £610.

Ford Acquire, at 6.4% APR, would charge £556.48 in interest.

Ford Options would charge a lower APR but because of the higher average outstanding balance, significantly more interest.

Edited by CYMR0 on Saturday 6th April 17:30

[anonymous-user]

is it too late - if she has signed - to explore what options the dealer can offer

as already pointed out, there are often manufacturer subsidies and similar that make such offers competitive

[Fox-]

oobster said:

We are looking at ways of avoiding taking this out of our savings

Why? Your savings are probably earning less than inflation right now. Borrowing money when you have savings which are devaluing in real-terms seems like the least optimum solution.

[CYMR0]

Fox- said:

oobster said:

We are looking at ways of avoiding taking this out of our savings

Why? Your savings are probably earning less than inflation right now. Borrowing money when you have savings which are devaluing in real-terms seems like the least optimum solution.

The thing is that loans can also reduce people's marginal tendency to spend.

So if you reduce your outgoings by £250 per month, of which £25 is interest, and spend an extra £50 per month on worthless tat as a result, you're better off with the loan.

[Fox-]

CYMR0 said:

The thing is that loans can also reduce people's marginal tendency to spend.

So if you reduce your outgoings by £250 per month, of which £25 is interest, and spend an extra £50 per month on worthless tat as a result, you're better off with the loan.

For the purposes of this discussion I decided to assume the OP didn't have the willpower of a dried fruit though

[Dracoro]

RaymondVanDerDon said:

The interest on a 9 grand personal loan spread over a few years would be what? £500? Hardly crippling. Personally wouldn't bother with the hassle of dealer finance/credit card applications for this kind of thing.

It'd be about £1k to £2k on a £9k loan over 4 years.

[Garvin]

Fox- said:

oobster said:

We are looking at ways of avoiding taking this out of our savings

Why? Your savings are probably earning less than inflation right now. Borrowing money when you have savings which are devaluing in real-terms seems like the least optimum solution.

^^^^ This. Give yourself an interest free loan and pay it back into your savings in line with any loan you would have taken out.

[oobster]

Thanks folks. Appreciate your input.

Might apply for a credit card nearer the time the car is due, with as long a 0% on purchases period as possible. We won't get a £9K limit, so assuming the dealer won't apply a CC surcharge we'll put the maximum amount possible on the CC and take the rest out of our savings.

Then pay the CC back + put money back into our savings account as & when possible over the next couple of years.

[Fox-]

oobster said:

so assuming the dealer won't apply a CC surcharge

Bad assumption - they will.

[happychap]

If you have a mortgage and some equity in the house, apply to your provider for the £9000 on the mortgage for a period of 36 months.