Advice on paying for a car

dellas1979

Hello,
I have a car loan with the credit union for the last 2 years. There is 2.5K outstanding on the loan at a very good rate (6.5%). I pay e20 a week towards the loan and e5 goes to a savings account (e25 in total).

So, I bought a new car (traded my old one in), and the balance is e12,500.

I have 13K in savings for a car. I am confused what to do.

I could pay in cash, and just have the first loan.
Or
I could get another loan for 7K from the credit union (consolidate the first one). The rate has gone up to 10.5% for new loans. And pay 5.5K of my own money (which would leave me still with 7.5K in the bank in case I needed it for anything). The 7K loan would cost me e35 a week over 5 years.

Any advice on what is the best thing to do? Or any other options?

Thanks

chris85

dellas1979 wrote: »

Hello,
I have a car loan with the credit union for the last 2 years. There is 2.5K outstanding on the loan at a very good rate (6.5%). I pay e20 a week towards the loan and e5 goes to a savings account (e25 in total).

So, I bought a new car (traded my old one in), and the balance is e12,500.

I have 13K in savings for a car. I am confused what to do.

I could pay in cash, and just have the first loan.
Or
I could get another loan for 7K from the credit union (consolidate the first one). The rate has gone up to 10.5% for new loans. And pay 5.5K of my own money (which would leave me still with 7.5K in the bank in case I needed it for anything). The 7K loan would cost me e35 a week over 5 years.

Any advice on what is the best thing to do? Or any other options?

Thanks

If possible just pay in cash for the new car and this way you will not be paying interest on any loans and this is financially better. However I can understand you may not want to get rid of all your savings on a car but financially its better.

Also your figures are a little off. If you get €7k from the CU for the car you will have to actually get a loan for €9.5k (to include the clearance of other loan with them) and then you would have to put €5.5k of your own money.

Thats also a high interest rate. I have the same rate on my credit card. :eek:

Keep the €2.5k at the better rate with the CU. use €10k of your own money and get a separate loan elsewhere at a better rate if possible.

dellas1979

thanks chris.

You were spot on there. Should be 9.5K for the overall loan (if I was borrowing 7k for the car).

So you think buying cash and keeping the 2.5K loan would be the way to go?

Would mean in 2/2.5 years I would own the car then I guess.

chris85

dellas1979 wrote: »

thanks chris.

You were spot on there. Should be 9.5K for the overall loan (if I was borrowing 7k for the car).

So you think buying cash and keeping the 2.5K loan would be the way to go?

Would mean in 2/2.5 years I would own the car then I guess.

If you can afford to use the savings to pay for it then i would. It makes the most financial sense.

The €2.5k at the lower interest rate is worth holding onto as big jump to the rate they are now at. If you get another loan from CU they will insist you consolidate and clear the €2.5k and thus will lose the rate.

dellas1979

Cheers for the advice.

Yeah I was saving for the last couple of years (since I bought the last car).

I just thought it might make sense to leave a little in the bank from the amount Ive saved for the car, in case of something.