Am I dreaming? [Finance Q]

[Nick S]

600 is a f**cking massive commitment, while it may seem easy now 3 years of it is an awful long time.  Especially on a massively depreciating asset that with such a small deposit will take nearly 2 years before you have equity in it so there is no getting out.

Most I have paid is 450 when I was living  with my parents it wasnt even a weeks wages but after 2 of the 3 years i truly resented both the payment and the car, I had to sell it and pay some to clear the finance in the end.

Promised I'd never spend over 20k on a motor again broke that since though 

I'm considering getting out of home ownership as well.  I dont want the commitment of staying put anymore without penalties of mortgages companies and the pain of agents fees and surveys solicitors etc.

[ub7rm]

I'm being presumptious here but I'm guessing you're quite young and living at home?  A lot can change in 3 years and you wouldn't want to have any future decisions constrained because you bought the car now.  As said in a year or so's time the novelty of the car will have passed but the £600 a month will still be there.  You could be married with children in three years time! 

Life doesn't always go as planned and its best to leave yourself some wiggle room for the unexpected.  Expecially when you're young. 

Of course, if you can afford the car and leave enough wiggle cash then fill your boots. 

[ub7rm]

You can still get 90% LTV mortgages but it's obviously advantageous in terms of interest rates to get a lower LTV. We moved house recently and actually took out a personal loan so we could achieve more equity in the house and get a better interest rate on the mortgage. The repayment on the loan, plus the mortgage payment is cheaper than the higher LTV mortgage, plus we very quickly get more equity in the property.

So I'd borrow the money for the deposit.

Did the bank ask where the deposit money came from?  Do they just take a blind eye to this?

[andrewparker]

You're not supposed to do it, and yes, the mortgage company does ask how you are funding your deposit. In reality I don't think they're bothered in the slightest. We simply stated that our deposit was from savings. As far as I know they have no means to check this information anyway.

It's a terrible time to sell a house at the moment. We took marginally less than we bought it for 3 years ago but sold it very quickly, and were also lucky to not get in a chain situation. Our buyers were cash buyers, and the house we bought had no upper chain. The upside to it is we now have a house that we bought for £250K that would have sold for £50K - £75 more two or three years ago.

[GTIjames]

taking out a loan to help you qualify for an even bigger debt is not the best practice, especially as the interest rates are considerably higher than the current mortgage rates.

in regards to the car finance, if you are living at home still and considering this then would say your mad

[andrewparker]

taking out a loan to help you qualify for an even bigger debt is not the best practice, especially as the interest rates are considerably higher than the current mortgage rates.

That depends really. We compared a 90% LTV mortgage against an 85% LTV mortgage. The 85% mortgage had a far better interest rate, so much so that the difference in the monthly payment was far greater than the repayment on a personal loan over a 2 year period. As far as we're concerned we quickly get 5% equity into the house, something that would have been difficult sticking with the higher LTV mortgage. Also, remember that the difference in the interest rate might be 3%, but on a mortgage that's 3% over a hugely longer term. I'd agree that it's not strictly a good idea (although it was in our case), but there are some absolute bargains to be had at the moment.

[markc]

Dont do it, .........keep the ED30 and save your cash mate.  

[stealthwolf]

Thanks for the advice. It can be easy to become too shortsighted with such things and I needed the perspective hence the request for advice.

I moved back home merely out of convenience - it's better to live at home, walk to work and save rather than live alone, pay rent/bills and commute to work every day. Consequently, only about 1/4 of my monthly income is spent, the rest goes into savings.

I've had more of a think about it today and am now leaning towards keeping the ED30. I'm in a contract for another two years and will have to look for work then, so things might become a bit tight.

This place is awesome!

[chungster]

stealth...think the numbers are a bit mad.

you dont have much "equity" in the ED30 at all...£2k based on those numbers. so You're borrowing £33k for that new car!

You borrow £22k from new car dealer....if they give u £13k for the ED. But the £11k is still outstanding for the ED which you'll have to settle in some way or build it into the new deal (they wont take the ED off you if the loan is secured on the car....but if its personal unsecured loan then ok)

But its all down to your own personal view of what u want and how to enjoy life. If its a new car, then so be it.

Happy decision making  

PS: re the finance deal itself...£2k interest over 3 years on £20k loan is ok I suppose...around 6.5% APR. Current Personal loan rates are 8% i think (not checked for a while)  Still what a margin they're getting when Base rate is 0.5%!!!



 

[Nick S]

If you want the car though Id seriously consider the pcp option with the minimum deposit minimum term and max final payment.  They take the risk on the depreciation.  If you are anything like me you'll be bored of it by 12-18 months and looking for the next one anyway.  Plus it fits in with your contract

[stealthwolf]

The dealer said they would take the ED30 and settle the finance on it and offer me £13k for it. Yeah I know it's only £2k equity. As above, needed to bounce ideas. Not bored of the ED30. Yet. My ed30 is on PDP since I didn't know whether I'd keep it or get rid at the time.

[chungster]

they WHAT!

sounds like its gonna end up like the Twingo/GTI owner debacle.

They will take the ED for £13k (and settle finance for you in process...which is £11k)

and THEN sell you a £36k if you take out a £22k loan payable over 3 years...with no final payment?

Err....where do i sign? 

But as long as you know you've only got £2k equity then that's good, cos i think the dealer has messed up his calcs..essentially settling your finance on the ED and not building it into the new finance deal. 

[stealthwolf]

That's why I was confused too. I actually asked them who settles the finance. They buy the ED30 for £13k and settle the finance. I asked them twice (deliberately messing up the words) - twice they verified it.

[GTIjames]

pcp plans and other finance options are great if you have the cash in the bank to buy outright in the first place, and like to change regularly as there is no need to raid the savings,  but if your using it to buy a car way above your means then they are dangerous and what appears to be a great deal comes back to bite you in the long run

out of interest stealth how much have you been paying monthly for your ed30 and for how long?

[stealthwolf]

£300pcm for total of 36 months