Financing a car

MargeS

I was just wondering how people are in general paying for cars, used or new.

I'm looking to change my car asap, but the banks aren't giving loans, you need to have large savings in the CU to get a decent loan and I've never really liked the idea of a finance deal.

Just curious to know how are people doing it?

Arciphel

What's your credit history with the bank?

kirving

The banks will give you a loan, if they think you can pay it back! New, I'd say a lot of people take the finance option from the dealer.

Nickindublin

MargeS wrote: »

I was just wondering how people are in general paying for cars, used or new.

I'm looking to change my car asap, but the banks aren't giving loans, you need to have large savings in the CU to get a decent loan and I've never really liked the idea of a finance deal.

Just curious to know how are people doing it?

Just bought a new car. Used Audi finance. 5.9% banks looking for 9%+ for car loans. You are better using likes of Volkswagen bank etc

MargeS

Arciphel wrote: »

What's your credit history with the bank?

I have a very good credit history. Paid back my last two loans without issue and my mortgage is well manageable.

Any savings I have, if I put into the CU will be locked down for the duration of the loan.

mitosis

I pay cash. I only buy what I can afford.

ninty9er

Banks are lending. Have you applied?

biko

mitosis wrote: »

I pay cash. I only buy what I can afford.

Me too. I might not drive a fancy 131 car but I can use the money I saved on coke and hookers.

AltAccount

mitosis wrote: »

I pay cash. I only buy what I can afford.

That's not going to work out well if you ever want to purchase a home...

mitosis

biko wrote: »

Me too. I might not drive a fancy 131 car but I can use the money I saved on coke and hookers.

Yeah, 10 year old motor for me!

kirving

mitosis wrote: »

I pay cash. I only buy what I can afford.

Having to take a loan out doens't mean you can't afford it, it jsut means you don't have the money up front.

mitosis

Kevin Irving wrote: »

Having to take a loan out doens't mean you can't afford it, it jsut means you don't have the money up front.

It is exactly what it means. Borrowing is done in the faith that you will be able to afford it in 48 months time, or whatever.

smcgiff

mitosis wrote: »

I pay cash. I only buy what I can afford.

Some people can afford loans.

AltAccount

mitosis wrote: »

It is exactly what it means.

No it's not.

I could have €20k cash in the bank or under my mattress, and decide to take out a €20k car loan, because I want to have the cash available for emergencies or opportunities and can afford the couple of hundred quid a month it'll take to service the loan.

Do you think every large company in the world owns everything they use?
Nope, they lease a lot of stuff (including buildings etc.) because they'd rather keep their cash for other uses.

Do you, the genius with the €5k car that was bought for cash, know more about cash flow than the finance directors of these multinational, highly profitable companies?

Nah, you don't. Don't talk rubbish.

Guy:Incognito

mitosis wrote: »

I pay cash. I only buy what I can afford.

If the two of us decided we'd like to buy cars for €5k. Right now neither of us has any money. We both work similar jobs so have similar income. You decide to save €40 a week for 3 years, then buy the car cash. I get a loan and buy it now, paying €40 a week for the 3 years. Were you more able to afford it than me?

mickdw

Why is there always someone who argues all loans are the devils work?
Nothing at all wrong with car finance. Many people are quite happy to spend 2 to 300 per month on a car. With a good finance rate it can be a better idea than spending your own cash. Certainly in these times, spending your last 20k savings on a car would be lunacy even if in a well paid job but financing a 20k car might be reasonable enough.

MargeS

This was not a "for or against loans" question.

I don't want to dip into my savings - simple as that. I haven't applied for a loan since 2004 so I feel a bit behind in the way the banking world operates at the minute. I see the banks don't offer loans on line so figured it was a general policy now.
Though if they are offering rates of >9% and the CU is <7%.......mmm...

smcgiff

MargeS wrote: »

Though if they are offering rates of >9% and the CU is <7%.......mmm...

Whatever the CU % rate, don't forget the forgone benefit of having the CU savings (as required) in a better performing savings plan (less dirt).

Cheapest loan option would most likely be a car loan. The bank use the car as security. But... you don't own the car until final payment. Which can be a good thing under HP rules.

bazz26

Arciphel wrote: »

What's your credit history with the bank?

People with long clean credit histories are being turned down for loans these days. Banks have gone from reckless lending to being overly cautious.

SJT1

Dude, ignore some of these idiots. How long those it take to save 10k, how fast do cars depreciate, borrow somebody elses money for the car, don't burn your own. A lot of the manufacturers have their own banks these days with good rates, use them and stay away from AIB and Bank of Ireland cause those ****ers rates are still to high.

VW Bank 5.9% fixed rate for the duration of your loan, now whats wrong with that! If you actually work out how much you pay on interest on 10k and break it down weekly or monthly its nothing at all. Ignore those fools who say if you have to take a loan you can't afford it. Dude probably typed that in his big house with his big mortgage!

fasttalkerchat

AltAccount wrote: »

No it's not.

I could have €20k cash in the bank or under my mattress, and decide to take out a €20k car loan, because I want to have the cash available for emergencies or opportunities and can afford the couple of hundred quid a month it'll take to service the loan.

Do you think every large company in the world owns everything they use?
Nope, they lease a lot of stuff (including buildings etc.) because they'd rather keep their cash for other uses.

Do you, the genius with the €5k car that was bought for cash, know more about cash flow than the finance directors of these multinational, highly profitable companies?

Nah, you don't. Don't talk rubbish.

That's totally different. The example you used is where a loan is a cheap way to maintain liquidity. Also because it will generate a return you are offsetting repayments to a time when you will be richer.
In the case of a car, the average person will be poorer because they are down the depreciation of the car.

I'm not saying borrowing money for a car is a bad idea, just a dangerous one because you are guaranteed to be in negative equity.

blingrhino

If I was to trade up from an a 11 reg to a 12 or 13 reg can I switch the finance on the 11 car to the new car if I was to pay the difference in cash to change .?

Eg 11 car worth 30k finance 10k

New car worth 40k still only the finance of 10k

mickdw

blingrhino wrote: »

If I was to trade up from an a 11 reg to a 12 or 13 reg can I switch the finance on the 11 car to the new car if I was to pay the difference in cash to change .?

Eg 11 car worth 30k finance 10k

New car worth 40k still only the finance of 10k

I dont see why not. The finance co. Will basically clear the debt on the old car and put the required amount against the new one.
Changing such a new car is going to hit you in the pocket but thats off topic.

magic_murph

Do audi offer finance for used cars or is it only available for new machines?

biko

They do yeah, check with your local stealer.

Yakuza

The last time I borrowed for a car was 2002 after my first kid was born (sold a Celica, bought a sensible Golf), I got a personal loan for pretty much the full amount. I'd never do that again, mind. Since then, it has been all via savings (including the SSIA). I did enquire in 2010 about borrowing a 8k to save having to tap into a particular savings account but anything over a few grand was done via Hire Purchase, which I've no interest in. Not owning the car until you pay off the last payment?? Sod that for a game of soldiers. Most car finance deals seem to be of this variety, I wouldn't touch it with a bargepole.

monkeypants

MargeS wrote: »

banks aren't giving loans

I got a loan from them two weeks ago. In fact there was a delay due to a backlog. Applied online and it was over a week before I received a call. Another couple of days passed while it was sent to the underwriter. Once I received the paperwork, signed it and returned it, the money appeared in my account the day after.

The illusion of being rich was fleeting, but nice while it lasted.

Jimdagym

On the subject of finance, Skoda had an ad in the Sindo saying 0% interest untill 28th feb. Dont see that too often these days.

SJT1

magic_murph wrote: »

Do audi offer finance for used cars or is it only available for new machines?

They did have a fixed rate APR 5.9% for used cars, you'll have to phone an Audi dealer and see if they still have it

magic_murph

Cheers SJT - 5.9 definitely beats the 11+% AIB are offering.
Only thing is though with Audi is it only a hire purchase offer ?

Idbatterim

what amount are you looking to borrow op? the rates are extortionate with the banks at the moment. If buying new or used from a dealer, you should be able to get far better rates...

djimi

Have credit unions not changed the criteria they use when evaluating a loan application? I got a loan for my car from my local CU having never had any savings with them (I had an account with them for a few years but there was never anything in it). At the time they told me they changed the way they operate loans now to the same criteria as a bank uses; basically they will lend to you if you can provide evidence that you are capable of paying it back.

magic_murph

Looking to borrow between 16k-25k - depending on what car I decide on.

Don't have a CU account although I should really look into that.

If the only deal with Audi is Hire purchase I would prefer to pay the extra interest attached to a personal loan.
If audi allow for a more straight forward loan agreement that may be the way forward.

SJT1

magic_murph wrote: »

Looking to borrow between 16k-25k - depending on what car I decide on.

Don't have a CU account although I should really look into that.

If the only deal with Audi is Hire purchase I would prefer to pay the extra interest attached to a personal loan.
If audi allow for a more straight forward loan agreement that may be the way forward.

You can only get hire purchase off Audi Finance, all car loans these days are on hire purchase, only alternative is take out a personal loan but you will be much more for that.

magic_murph

Had a feeling Audi only offer Hire Purchase, kinda makes sence that they would.

I guess you just have to bite the bullet and pay the interest or hold fire for a few months, save with a view of reducing the amount of finance required.

Unfortunately my patience isn't great - I want a nice shiny car now. Well in a few weeks.

Some great looking machines on cargiant. If work were to monitor my work V perving at cars ratio they wouldn't be happy.

Taylor365

I've borrowed previously for cars but probably will never again. No problem with paying them off but after a year or 3 when your still paying off the loan and are pretty fed up with your car its not the best situation :pac:

Also lest we forget why we're in this economic mess in the first place. Just because you can afford the loan now doesn't mean you can 5 years down the line. Goodbye car

djimi

Taylor365 wrote: »

I've borrowed previously for cars but probably will never again. No problem with paying them off but after a year or 3 when your still paying off the loan and are pretty fed up with your car its not the best situation :pac:

Also lest we forget why we're in this economic mess in the first place. Just because you can afford the loan now doesn't mean you can 5 years down the line. Goodbye car

You can sell the car you know and use the money to pay off the outstanding loan! Ive always taken out loans to buy cars (under €8k admittedly) and I dont think I have too often been in a situation where the car is worth less than I owe. If I fancy a change, sell the car and pay off the loan, or top up the loan to replace.

magic_murph

Thats the approach I was going to take.
Get a loan - 20k for example.
Make the monthly repayments.
If after a year to so the car just isn't what I need or I am bored of it then sell it and if required get a top up loan or put cash towards new wheels.
after 12 months of regular repayments there shouldn't be a problem getting a top up of 3-4k.

Granted the above is a perfect world scenario but think once you have a car in decent nik you should be able to dramatically reduce the loan amount should you fall on hard times.

Burning Eclipse

I bought a car recently - 8 years old, not a large amount of money by this thread's standards. I used savings I had in the credit union, but when I called to book the cash I was offered a loan at 5.5%, so that's certainly a competitive rate if you are against dipping into savings.

I can see the pros and cons to both sides of the argument. For me, using some savings was the right thing to do.

mickdw

I just read on todays indo that 25% of all new vw sold this year are on a balloon deal while a staggering 79% of audis are.
The audi figure is quite mad. Its suggests it is sales masterstroke for audi but also points to a number of people buying more expensive than they can afford. Dont get me wrong, there is nothing wrong with balloon payment but I dont believe that it is the right deal for 79% of new audi buyers.
If one can afford the payment with minimum deposit, well then its probably sustainable as you would only have minimum deposit built up in car for next car in 3 years. If as I fear people are trading reasonably valuable cars that they actually own to take our a balloon deal with an artificially low monthly payment, well then its a terrible deal.

Eireplates

mickdw wrote: »

I just read on todays indo that 25% of all new vw sold this year are on a balloon deal while a staggering 79% of audis are.
The audi figure is quite mad. Its suggests it is sales masterstroke for audi but also points to a number of people buying more expensive than they can afford. Dont get me wrong, there is nothing wrong with balloon payment but I dont believe that it is the right deal for 79% of new audi buyers.
If one can afford the payment with minimum deposit, well then its probably sustainable as you would only have minimum deposit built up in car for next car in 3 years. If as I fear people are trading reasonably valuable cars that they actually own to take our a balloon deal with an artificially low monthly payment, well then its a terrible deal.

I heard the same from an Audi salesman last week. He told me that in another year or two they don't expect to sell a new Audi the old way.

With these PCP deals you get to drive a nice new shiny Audi for 3 years after putting down a substantial deposit and 36 monthly payments. After 3 years of paying for the car you have nothing to show for the money spent as you were renting it in reality. Then you either put down another deposit and 3 more years of payments or refinance the 3 year old car or hand it back...

mickdw

Eireplates wrote: »

I heard the same from an Audi salesman last week. He told me that in another year or two they don't expect to sell a new Audi the old way.

With these PCP deals you get to drive a nice new shiny Audi for 3 years after putting down a substantial deposit and 36 monthly payments. After 3 years of paying for the car you have nothing to show for the money spent as you were renting it in reality. Then you either put down another deposit and 3 more years of payments or refinance the 3 year old car or hand it back...

There will be some level of deposit in the car as it is hoped it will be worth marginally nore than the balloon amount at 3 years. Still on an a6 for example, id say the value retained above amount owed would be 3k max leading to a difficult purchase on the next car.

copacetic

mickdw wrote: »

I just read on todays indo that 25% of all new vw sold this year are on a balloon deal while a staggering 79% of audis are.
The audi figure is quite mad. Its suggests it is sales masterstroke for audi but also points to a number of people buying more expensive than they can afford. Dont get me wrong, there is nothing wrong with balloon payment but I dont believe that it is the right deal for 79% of new audi buyers.
If one can afford the payment with minimum deposit, well then its probably sustainable as you would only have minimum deposit built up in car for next car in 3 years. If as I fear people are trading reasonably valuable cars that they actually own to take our a balloon deal with an artificially low monthly payment, well then its a terrible deal.

The deal on the A4 SE is what, 0.9% interest? With a cost of credit of something
like 600€ over 3 years. So money wise it's an excellent deal and you would be nuts to finance it any other way if buying new. After 3 years the savings on interest alone would beat most other methods.

Any money that isn't in the car is money had in your pocket over the 3 years. I wouldn't term in a 'baloon' deal when you can hand car back. Based on the a4 figures, you were looking at having 4k or so in the car, so the next 10% if you wanted to do it again.

ankles

These balloon payment structures do effectively mean you are only leasing the car, but why not? In many instances people do not want or need to pay the full price of a car over three or more years to end up owning a still rapidly depreciating asset. Its a bit like building up equity in a life assurance policy, fine if you want to but life assurance is life assurance, not an investment. Same with cars, you're not buying them as an investment, you want to drive a nice car, so why not pay effectively for a few years use of a nice car, at the very attractive rates being offered, and then walk away or get another one at that stage.

mickdw

Yes but I think it works if people can afford the repayments after having just put up the minimum deposit. What Im saying is that Im thinking there are a number of people trading in maybe 15k cars, getting a stupidly low payment for 3 years and then being left with nothing except for maybe 3k. People with alot of cash built up in a car would be better buying outright. Audi will do a low rate finance deal for buying outright aswell but people are jumping at the deal with the offset payment to the end with the option of handing it back.

GusherING

Very interesting thread here for a person who doesn't own a car but is intirgued by all these hire purchase offers and trying to figure out if they are a scam.

It's clear some people thing they're not great if you are trading in a car you already own worth 10-15k, but what if you don't own a car and don't have much do a deposit?

mickdw

GusherING wrote: »

Very interesting thread here for a person who doesn't own a car but is intirgued by all these hire purchase offers and trying to figure out if they are a scam.

It's clear some people thing they're not great if you are trading in a car you already own worth 10-15k, but what if you don't own a car and don't have much do a deposit?

Nothing at all wrong with them in that situation. If you can afford the repayment, its all good seeing that interest rates are excellent now from most manufacturers versus what the banks are offering. If you have roughly 10% of cost of the car as deposit, go to dealer and get some figures. If the figures work for you - go for it but watch out for mileage allowance and be sure it suits your useage.

Eireplates

copacetic wrote: »

The deal on the A4 SE is what, 0.9% interest? With a cost of credit of something
like 600€ over 3 years. So money wise it's an excellent deal and you would be nuts to finance it any other way if buying new. After 3 years the savings on interest alone would beat most other methods.

Any money that isn't in the car is money had in your pocket over the 3 years. I wouldn't term in a 'baloon' deal when you can hand car back. Based on the a4 figures, you were looking at having 4k or so in the car, so the next 10% if you wanted to do it again.

If you look at that particular deal its 12k deposit and 10700 of payments of over 36 months with fees etc. Total cost is 22700.

vs.

If one was to trade in a 3 year old A4 for a new one then cost to change would be in the region of 17000. Even with finance at 6% interest would be 1500. So Total Cost is 18500.

The PCP deal is costing the bones of 4K more but you dont have a lump of cash tied up in a car but you aint going to get anything near the 4K in interest on that lump sum.



Ok when you go to renew the PCP deal in 3 years time you have equity built up so the cost to change will probably be not as much the second time around bringing it closer to the conventional trade in deal scenario.

_Kaiser_

Ok so I have a 06 Passat that I'd be interested in trading for a new(er) Audi A6 for example.

Don't have much of a deposit or I'd just trade it through an independent dealer but could easily manage a few hundred in repayments a month.

What's my best option?

I used some saving and got a credit union loan for the rest. As its borrowed against savings the rate is only 5.5% and I got it approved on the spot. Works better for me as I'm not a good saver but I've no choice but to pay the loan so it means I keep some savings.

Every repayment frees up that amount of savings also so you are not locked out totally from your savings, only what ever is still owed on the loan.

I would definitely be in favour of getting a loan etc to buy a car, life is too short to spend years saving up for something which can be easily bought now for a the small fee of the interest. Much better than burning all your savings in one go also.

skyhighflyer

Something keeps shouting to me that the Credit Union loan is the biggest scam of all (and I say this as a CU depositor). The 'rate' of 5.5% may be decent in isolation but if the entire amount is secured as against an equal amount of savings then it's not really a loan at all. An interest rate is meant to compensate a lender for risk and there's zero risk to the CU of non-payment (at least of the principal). Also do you continue to earn interest on your tied-up savings? If not you're not only paying 5.5% on a loan you didn't need but also forgoeing the 3% you'd get on deposit with a bank.