Car loan or savings?

muckwarrior

Thinking about buying a car and have just about enough money in my account to pay for it, but everyone keeps telling me that I should get a loan instead. What are the pros & cons of each?

ntlbell

Well the interest you'll be paying on the loan will be a lot more than you gain on your savings.

The car will cost you a few grand more.

You'll tend to oue more on the car than it's worth etc etc.

muckwarrior

That's exactly what I was thinking. just thought there might have been an advantage to getting a loan that I was missing.

PCPhoto

the only advantage is that you will have some money in your account to pay for any problems that arise:

ie. engine faults.

ntlbell

PCPhoto wrote: »

the only advantage is that you will have some money in your account to pay for any problems that arise:

ie. engine faults.

he can save all the interest payments up for repairs

drunkmonkey

You'll still have cash in your account if you get the loan, I nearly always finance rather than tie up my cash in a car. Probably makes no sense but at least when I have cash I can make more cash, can't do that if all my moneys gone on a car.

ntlbell

drunkmonkey wrote: »

You'll still have cash in your account if you get the loan, I nearly always finance rather than tie up my cash in a car. Probably makes no sense but at least when I have cash I can make more cash, can't do that if all my moneys gone on a car.

if you can make a constant 10%+ on your cash, it shouldn't take you long to save up for a car.

Toots

A happy medium would be to apply for a loan for half of the purchase price, that way all your cash won't be tied up in the car, and you'll have a contingency fund there if you need anything done to the car, and also for taxing it etc.

I know the loan will end up costing you slightly more in the long run, but it's better to take one out at the outset and know where you stand, rather than run into a problem with the car a few months down the line and have no option other than to try for a loan to fund repairs. That's just what I'd do, it might not be the best option for everyone.

leeroybrown

As Toots* says, you don't have to exclusively do one or the other. Decide how much of your savings you'd like to keep available and get a loan for the rest. You should be able to get a shorter smaller loan saving yourself a load of interest.