Car Finance Opinions: Savings/Loan

SimonTemplar

I'd like to get some opinions on a particular choice I have.

I'll need to buy my first car during the summer. I'm realistic in what I want to get - I'm not after a 172 Merc but I'm also avoiding anything older than a 3/4 years. A 2015/2016 hatchback is perfect for me (Golf, Fiesta etc). I've been rather qualitative in my decision making and selecting models that match my criteria.

From a financial viewpoint, I can see two options:

Option A:
Use 50% of my savings + loan for the rest.
Monthly repayments of the loan would be about 7% of my net salary after rent. The amount I currently save per month fluctuates but at an absolute minimum it is 40% of net after rent.

Option B:
Avoid loan but almost decimate my savings.


On one hand, option B avoids the cost of credit over the long term. However, until last year, I had no savings at all due to poor financial planning on my part. Last year I got a job that pays considerably more than I used to get, and that's helped me finally put some money aside. I really dislike the thought of my savings gone again, even if is for a car.

I've never had a loan before hence my preference for keeping the loan at only 50% of the car cost, rather than a full 100% loan, just in case my financial situation changes for whatever reason during the term. Therefore, I'm leaning towards option A which seams to be the best of both worlds.

However, I'd like some opinions on this. Money management isn't my strong suit and perhaps I'm missing something obvious.

Thanks in advance.

Sam Kade

Why don't you want to buy a car older than 3/4 years? Plenty reliable older cars that won't decimate your savings without the need for a loan.

NIMAN

Where would you be getting the loan from?

Have a look around all the dealers, many do decent APR deals at different times of the year. Often much cheaper than banks.

CSSE09

Do you have a full license and if you do how many years no claims/named driver?