Buying cars... cash or finance?

woof woof

woof woof

I like a nice Chianti
Suspended / Banned
Messages
43,206
Name
Alan
Edit My Images
No
Being an old fashioned sort I've always paid cash for cars and that seemed to work fine years ago but even though I haven't bought a car for years when buying the last couple paying by cash raised an eyebrow and comments from the salesman and I'm told that most people pay weekly/monthly.

Just looking at the interest rates I'm getting on savings, they're so low I can't see any real advantage hanging on to money and paying monthly or weekly rather than just paying the full price day 1.

So, can anyone give clear and simple advice for someone who normally avoids credit. What's best? Is there any real advantage or disadvantage in paying cash v finance and if buying on finance what happens if you want to sell the car or write it off?
 
I've often been told that you can get a better deal paying on finance; often with extras like service package, etc chucked in.

Personally I've done both in the past but paid for my last couple in cash.

You can take out "gap insurance" which covers any potential difference between the outstanding finance amount and the insurance valuation of the car (in the event of a write off); personally I paid a big enough deposit that I don't think it would have been an issue for my last car anyway.
 
I believe that the dealership and salesman earn better commission if they sell finance and the other insurances as well as just the car. One salesman a couple of cars ago told me this; he said it meant they could offer a bit more margins back to the customer. So he said take the finance then pay it off a week later, you'll save money.
 
Depends on the car and the deal. I used to always buy cars outright but with the prices of anything decent being about double what they used to be I normally use finance and trade in and sometimes savings on top if the monthly payment is more than I want. Dealer APRs also vary massively too.

Most people do buy on finance now so if there are incentives you can take the finance and then settle it early anyway. For anything nearly new and prone to change in value GAP insurance is essential. Second hand prices are so volatile and new cars often randomly tank in value depending on what the manufacturer is doing on new ones so you can end up quite a way away from what you paid for a car.
 
Thanks.

I remember the salesmen saying they preferred finance.

I've never written off a car or had any serious accident but I just wondered what would happen.
 
Salespeople (in my day) would get more commission on normal finance, the 0% options though normally cost the dealer money.

Getting my Kia, it was worth 2.5k in discount going on PCP, IIRC interest on that was about the same so no real penalty.
 
If you have the cash then obviously that's going to be cheaper than finance, unless it's 0%.

However having the vehicle on finance means you have protection under Section 75 so if the vehicle packs up and the dealership has vanished over night you can still claim against the finance company. Of course, there would be nothing stopping you from buying the vehicle with your credit card and then paying that off before any interest is added.

The benefit of finance for the salesman is commission.
 
ecoleman said:
If you have the cash then obviously that's going to be cheaper than finance, unless it's 0%.

However having the vehicle on finance means you have protection under Section 75 so if the vehicle packs up and the dealership has vanished over night you can still claim against the finance company. Of course, there would be nothing stopping you from buying the vehicle with your credit card and then paying that off before any interest is added.

The benefit of finance for the salesman is commission.
Click to expand...
That's a good point, if buying a lemon that could be a help.

I've only really had one problem with a dealer when buying a new car and it was with a Merc dealer. I'd ordered an SLK with leather seats and what came was an SLK with a leather interior and cloth seats. The salesman quoted weeks to get the leather seats so I went straight to the manager and bit his head off and the car had leather seats within two days.

Cash v credit is going to have to be something I think about carefully.
 
For Section 75 protection the car needs to cost less than £30k, but you only need to pay part of it on a credit card for the protection to apply. You could in theory buy a £25k car and pay a £1 deposit on a credit card, and then you're protected for the whole value of the car. If the dealer goes bust or doesn't play fair then you can claim the full £25k back from the card provider.
 
Carl Hall said:
For Section 75 protection the car needs to cost less than £30k, but you only need to pay part of it on a credit card for the protection to apply. You could in theory buy a £25k car and pay a £1 deposit on a credit card, and then you're protected for the whole value of the car. If the dealer goes bust or doesn't play fair then you can claim the full £25k back from the card provider.
Click to expand...

I don't know how much I'll spend yet. I've been thinking about a LR or Jag 4x4 so a new one would be over £30K but if I buy used maybe not.

I used to buy new cars but I was impressed with the savings when I bought a used Jag S 4ltr. I didn't know if I'd be happy with it long term as I normally go for two seaters so thought I'd buy a lightly used one so I didn't lose too much in depreciation if I didn't like it and I ended up really liking a car I saved a lot on over the new price. So, that thought has stayed with me and a lightly used 3 year old car is something I'd now think about.
 
woof woof said:
Being an old fashioned sort I've always paid cash for cars and that seemed to work fine years ago but even though I haven't bought a car for years when buying the last couple paying by cash raised an eyebrow and comments from the salesman and I'm told that most people pay weekly/monthly.

Just looking at the interest rates I'm getting on savings, they're so low I can't see any real advantage hanging on to money and paying monthly or weekly rather than just paying the full price day 1.

So, can anyone give clear and simple advice for someone who normally avoids credit. What's best? Is there any real advantage or disadvantage in paying cash v finance and if buying on finance what happens if you want to sell the car or write it off?
Click to expand...

Depends where your savings are, a low rate bank loan can be considerably less than the returns on a stocks and shares ISA, especially at the moment. If you have good credit then you should be able to get a bank loan at a much lower rate than car finance and leaves you more liquidity for anything unexpected (both with the car or in general).

I've experienced some smaller dealerships trying to avoid taking credit card payments at all. Maybe due to the fees, or maybe to give you less options if things go south? The usual trick is to say the card machines are down and insist on a bank transfer or such.

I've also noticed more places farming out warranties so that the dealership doesn't have the hassle or unknown liability of dealing with repairs in-house. It's quite a clever business model for them really, but not so good for the customer, especially if there's maximum claim limits etc. The warranty company will also want to use the cheapest part possible and pay lower rates to the garage. Main dealer approved used warranties tend to be in-house though in my experience.
 
gman said:
Depends where your savings are, a low rate bank loan can be considerably less than the returns on a stocks and shares ISA, especially at the moment. If you have good credit then you should be able to get a bank loan at a much lower rate than car finance and leaves you more liquidity for anything unexpected (both with the car or in general).

I've experienced some smaller dealerships trying to avoid taking credit card payments at all. Maybe due to the fees, or maybe to give you less options if things go south? The usual trick is to say the card machines are down and insist on a bank transfer or such.

I've also noticed more places farming out warranties so that the dealership doesn't have the hassle or unknown liability of dealing with repairs in-house. It's quite a clever business model for them really, but not so good for the customer, especially if there's maximum claim limits etc. The warranty company will also want to use the cheapest part possible and pay lower rates to the garage. Main dealer approved used warranties tend to be in-house though in my experience.
Click to expand...
I tried to use a credit card when I bought a car because the card has a cashback scheme.
Straight refusal and that was at a main dealer, ended up transferring some cash from a savings account and using my debit card.
 
I just have savings accounts and cash ISA's these days.

When I first left paid employment 11 years ago the interest more than covered my living expenses and my net worth went up year after year but things turned and these days with puny interest rates it's nowhere near and my net worth now goes down each year. In May I started getting a company pension and will if I live long enough get a state one too so I'm just going to give it a few months to see how my new company pension affects things and then I'll decide if I want a new car or not. I do have enough savings and the company pension too and we have no children so I suppose looking at how my net worth holds up is pretty academic really as no one lives forever but breaking even or not spending too much more than I get in would be nice just for my conscience if I'm going to spend £20/30k+ on a car :D
 
You need to compare the overall deal not just lost interest on savings v interest on savings. Cash may get you a larger discount but you may not get free servicing etc. Also consider if you want HP or PCP or personal lease. Do you need a new car rather than a used one?
 
0% & low interest rates tend to be offered on PCP deals for new cars, used car finance seldom so. In April I bought a 'used' BMW(I checked the indicators were in full working order), 8 months old with <1400 miles on the clock. I paid a £1000 deposit on my credit card and the balance in cash(bank transfer). I had no part exchange, I was offered finance by the dealer at 8-9% APR, I could have got 2.8% APR with Sainsburys Bank. I will lose <1% on the savings I withdrew.......

The Main Dealer salesman was reluctant to budge on the windscreen price but I eventually managed to get a bit off by standing firm. The salesman said they priced their cars keenly by comparing their prices with other Internet sellers.

All told I saved £12k against a new one, which would need to be a factory order with 3-4 months lead time as there was nothing in the pipeline close to my preferred specification.

One really good feature on my car is the 'head up display' or HUD. It shows the current speed limit, actual road speed, and any satnav directions..... it's brilliant!
 
Re Gap insurance https://www.moneysavingexpert.com/insurance/gap-insurance/

..and Which? https://www.which.co.uk/money/insurance/car-insurance/gap-insurance-explained-aspmb4u9mhvz

You can buy this insurance on the open market for about £120 -£150 against the £300 plus charged by the dealer.When we bought our car they wanted £340 and I checked at home and could get it for £130...reputable companies of course.

Very important T&C.

It will only pay out if your car is stolen or a total write-off, as judged by the insurance company.
 
lindsay56 said:
I believe that the dealership and salesman earn better commission if they sell finance and the other insurances as well as just the car. One salesman a couple of cars ago told me this; he said it meant they could offer a bit more margins back to the customer. So he said take the finance then pay it off a week later, you'll save money.
Click to expand...

This is the 'cheapest way' assuming you have the money available from savings.

Your current problem, may well be the shortage of vehicles, there are very few new vehicles available at the moment, which is leading to strong secondhand prices, so the nearly new market is making much stronger prices than it was 12 months ago.

That said if you find a new vehicle in stock - rather than an order - then there may well be deals to be done.

One thing to bear in mind, finance incentives (and better intererst rates) tend to be available on new vehicles rather than used ones.

There are deals to be done though, we recently bought a new Volvo XC60 (similar vehicle to your choices), by taking a vehicle already in the UK stock pool, a dealer discount, the finance incentive and the Volvo loyalty incentive (I'm a serial Volvo purchaser), we got just under 25% off the sticker price (obviously we have some interest to pay during the finance deal, but it certainly softens the blow). And we got a very decent trade in value (they offered us the same price for the trade in car as they had 2 years earlier!!)
 
I was planning on changing my car in 2020 but with all the restrictions it was pointless, I've now decided to keep saving and run the Civic for a few more years. I will be in a position to pay cash but if the interest rates stay low I'd consider a short 3 year loan of around 10k to keep a significant sum still in the savings account plus at some point soon I can see my daughter needing help with a house deposit.

I've also noticed second hand prices have gone up considerably so until they settle I'm keeping my powder dry.
 
Last edited:
Brentor said:
You need to compare the overall deal not just lost interest on savings v interest on savings. Cash may get you a larger discount but you may not get free servicing etc. Also consider if you want HP or PCP or personal lease. Do you need a new car rather than a used one?
Click to expand...

I haven't made my mind up yet. A new one might be nice but the savings on buying a 1-3 year old car are often tempting.
 
One thing putting me off spending a lot is that the future isn't certain. It's not impossible that some future government could place ever more draconian measures and taxes on petrol and diesel cars. And not that I want to take this thread off point, I do think that the push into electric could be a disaster.

But on the other hand... these might be the last days of internal combustion engines and the last chance to enjoy them.
 
Last edited:
woof woof said:
One thing putting me off spending a lot is that the future isn't certain. It's not impossible that some future government could place ever more draconian measures and taxes on petrol and diesel cars. And not that I want to take this thread off point, I do think that the push into electric could be a disaster.

But on the other hand... these might be the last days of internal combustion engines and the last chance to enjoy them.
Click to expand...
Correct me if I am wrong but I think I saw an advert on TV the other day where Tesco is installing free to use charging points.
I think BP are also involved with manufacturing charging stations as well.
I've been thinking about loss of revenue with tax on petrol / diesel and lower road tax with electric cars so no doubt the government will find another way to shaft us.
 
The supermarket points (and some car park ones) that offer free charging aren't fast chargers but can be faster than home chargers. They seem to be paid for by manufacturers who presumably foot at least some of the 'leccy bill. Supermarkets tend to have 3 hour parking limits.

All my vehicles are bought outright rather than using any finance deals.
 
woof woof said:
One thing putting me off spending a lot is that the future isn't certain. It's not impossible that some future government could place ever more draconian measures and taxes on petrol and diesel cars. And not that I want to take this thread off point, I do think that the push into electric could be a disaster.

But on the other hand... these might be the last days of internal combustion engines and the last chance to enjoy them.
Click to expand...
An EV would be a good option for me as my work commute is small and a range of around 200 miles would last about 3 weeks. I have a MX5 as a second car so longer journeys are far easier and more fun.
 
woof woof said:
One thing putting me off spending a lot is that the future isn't certain. It's not impossible that some future government could place ever more draconian measures and taxes on petrol and diesel cars. And not that I want to take this thread off point, I do think that the push into electric could be a disaster.

But on the other hand... these might be the last days of internal combustion engines and the last chance to enjoy them.
Click to expand...

Exactly what I did recently. Got rid of the diesel because of all the short journeys I do and I've never really gelled to diesels, although they certainly do have their place for hauling, towing and long distance. Electric would really be the perfect car for me, but at the moment I can't charge at home so no good. I went back to AWD and a decent performance petrol as I figure what with motoring costs being so much these days I may as well properly enjoy it. If I can, I will hang onto this car for as long as possible as it finally ticks all the boxes for me.

What's the top contenders you are looking at?
 
If you can charge at home then electric is a no brainer really. It definitely works better if you have another car for long or unexpected journeys though. I've had a foot in both camps for a few years.

Some of the lost revenue will be filled in by not having so much disease related to air quality issues. I don't see why roads can't be paid for by general taxation either. Everything and everyone uses the roads directly or indirectly so everyone should be paying something.
 
There was a Guy Martin programme on recently (? World's Fastest Electric Car ?) and he quoted a huge number that would be saved by the NHS if vehicle related emissions were taken out of town centres.

Like Suz, we have feet in both camps so the ICE cars don't (other than very rare occasions) get used for town trips, although I do drop Mrs Nod down to town in mine on my way out to golf.
 
woof woof said:
I haven't made my mind up yet. A new one might be nice but the savings on buying a 1-3 year old car are often tempting.
Click to expand...


I'd prefer to buy a quality car that is 2 or 3 years old. The depreciation in those initial years is staggering and you get the interior quality of an expensive car.

www.whatcar.com

Depreciation - what is it, and how do I avoid it?

What is car depreciation and how can you minimise its effects? Our full guide gives you top tips on how not to lose too much money on your car
www.whatcar.com www.whatcar.com


Which ones https://www.autoexpress.co.uk/used-car-awards

A favourite of mine https://www.carsite.co.uk/used-car-price-guide/mercedes-benz/e-class
 
Based on Autotrader quotes, my nearly 4 year old Octavia estate has actually appreciated in value over the last 18m. Pleased I bought it at the end of the PCP rather than trading it in.
 
I won't comment on EV vs ICE, I think everyone already knows my view :ROFLMAO:


On finance, there's often free servicing and other extras thrown in if brought on finance. It's almost like not taking the free money offered! Just pay it off the next month to avoid paying the interests. I think pretty all finance options must include get-out clause to allow you to pay it off within first few months. You can always ask and check the T&C, Salesman only care about signing the finance deal.

I only use it if it gives me benefits and cost saving over paying cash. I say I have X amount available to spend per month in total cost of ownership budget. It can either come out of my savings pot or their finance product. We do the maths together and NEVER accept cheap maths tricks, like "if you contribute a bit more on deposit, your monthly will be lower", I'd then reply "but my overall monthly budget haven't changed after dividing my deposit contributions".

For example,. I go in with £300 total cost of ownership without insurance. The car is advertised as £250 pm and the salesman gets excited. We sit down and I start adding deposit, fuel cost and service charges, etc. It ends up being £350. I'll then ask for a discount, free servicing etc.
For paying cash, car depreciation is calculated as = (price * 0.5 / 36) for first 3 years. Basically car price have a half life of 3 years.

Maths, use it to your advantage!
 
Brentor said:
Based on Autotrader quotes, my nearly 4 year old Octavia estate has actually appreciated in value over the last 18m. Pleased I bought it at the end of the PCP rather than trading it in.
Click to expand...

Used cars have appreciated lately, however, it could also be, in addition because it's up there with Toyota as the most reliable. We have the Octavia..2.0Lt. hatchback... October 2020.
 
hashcake said:
Correct me if I am wrong but I think I saw an advert on TV the other day where Tesco is installing free to use charging points.
I think BP are also involved with manufacturing charging stations as well.
I've been thinking about loss of revenue with tax on petrol / diesel and lower road tax with electric cars so no doubt the government will find another way to shaft us.
Click to expand...
I'm worried about range and charging times for practicality and about the state of technology for the planet. AFAIK there just aren't the materials to manufacture enough batteries to replace the current car stock without raping the planet, if the materials are even available then, and then there's the issue of end of life recycling and disposal. With current technology and practices IMO electric cars stands a good chance of being a complete disaster for the planet. Better battery and recharging technology may well come along but the state of the art right now and for the near future has to be worrying.
 
gman said:
What's the top contenders you are looking at?
Click to expand...

Either a Jag E Pace or RR Evoque.

As above... I've been a car nut since I was a little boy and the one thing I haven't had is a 4x4. I've mostly been into 2 seat soft tops but have also owned a saloon and a hatch back so a LR type 4x4 is the last box to tick. I have looked at car type 4x4's but a Jag or LR is what's in my mind now.
 
Nod said:
There was a Guy Martin programme on recently (? World's Fastest Electric Car ?) and he quoted a huge number that would be saved by the NHS if vehicle related emissions were taken out of town centres.
Click to expand...

But against that is the damage to the environment and associated health problems which could be caused by massively upping battery production and end of life actions needed to replace the current car stock. And of course there's all that extra electricity that has to come from somewhere,
 
JohnC6 said:
I'd prefer to buy a quality car that is 2 or 3 years old. The depreciation in those initial years is staggering and you get the interior quality of an expensive car.
Click to expand...

This is what people kept telling me through the years and I saw it when I exchanged my bought new Boxster for a 3 year old 4ltr Jag S.

I'll have to make my mind up once I start visiting dealers and seeing what's available at what price.
 
I bought my Audi from a main dealer when it was 12 months old (regret it now but that's another story) and the salesman offered a £500 discount if I went with finance with the option to pay the loan off within 1 month with no fees. I didn't take the offer up preferring to pay cash, but goes to show what must have been in it for him.
 
woof woof said:
Either a Jag E Pace or RR Evoque.

As above... I've been a car nut since I was a little boy and the one thing I haven't had is a 4x4. I've mostly been into 2 seat soft tops but have also owned a saloon and a hatch back so a LR type 4x4 is the last box to tick. I have looked at car type 4x4's but a Jag or LR is what's in my mind now.
Click to expand...

If the E Pace is on the list the electric I Pace is also worth a go in even if you have little intention of getting one.
 
beyond the blue said:
I bought my Audi from a main dealer when it was 12 months old (regret it now but that's another story) and the salesman offered a £500 discount if I went with finance with the option to pay the loan off within 1 month with no fees. I didn't take the offer up preferring to pay cash, but goes to show what must have been in it for him.
Click to expand...
I think you could have pushed for more discount or freebies if you haggled a bit more and bought on their finance.

This is one of the things I hate about the whole dealership experience, you never know if the next guy buying the same car will get a better deal just because he haggled a bit more or taken up offers the salesman offered to him because he jumped through the right hoops. I'd much prefer supermarket listed price approach.
 
srichards said:
If the E Pace is on the list the electric I Pace is also worth a go in even if you have little intention of getting one.
Click to expand...
I don't know about test driving the I Pace. I'm not interested in an electric car for the reasons I stated above so really I'd be wasting my time and the salesmans too. If pushed I might drive one but generally I don't look into cars I'm not at least a bit interested in buying.
 
beyond the blue said:
I bought my Audi from a main dealer when it was 12 months old (regret it now but that's another story) and the salesman offered a £500 discount if I went with finance with the option to pay the loan off within 1 month with no fees. I didn't take the offer up preferring to pay cash, but goes to show what must have been in it for him.
Click to expand...

I've only once looked at an Audi. When I was thinking of changing my Jag S I drove a go fast A3 (S Line I think it was) but the salesman gouged me at both ends as he offered me far less than my Jag should have been worth as a trade in and whacked thousands on the price of the A3. When I got home I improved on the trade in and A3 price saving literally thousands with the first phone call to another dealer but in the end I went another way. I've no idea why he gouged me so badly but obviously he didn't get the sale. At the mo there's no Audi, BMW or Merc that would tempt me.
 
woof woof said:
Either a Jag E Pace or RR Evoque.

As above... I've been a car nut since I was a little boy and the one thing I haven't had is a 4x4. I've mostly been into 2 seat soft tops but have also owned a saloon and a hatch back so a LR type 4x4 is the last box to tick. I have looked at car type 4x4's but a Jag or LR is what's in my mind now.
Click to expand...

Very similar cars, I think they share a lot of underpinnings but the RR edges it for me. The XC40 looks good as well and has a decent AWD system.
 
You must log in or register to reply here.
Back
Top