Car Finance Help

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685 posts

Ultimate Geek

#1249679 2-Mar-2015 17:37

Wade: MTF seem quite good, no penalties for early repayment either

I've used these guys before too. I was able to pay off my car in a lump sum halfway through with no penalties.

Either way whoever you finance through, paying off a car loan usually means you'll be paying almost twice as much as the sticker price in the end.

Tell your friend to work more hours and save ;o)

Banks only lend to those that don't need money.

If your friend looks like he really needs money, then he's likely to find it much more difficult to get a loan and the higher the interest rate will be for the risk.

I've financed through the bank as an unsecured loan (so I could sell the car whenever) and I've financed through UDC and MTF. MTF were by far the easiest to deal with both buying and upgrading during the length of the loan and repaying early.

Cheers.
Gavin.

JimmyH

2886 posts

Uber Geek

#1249730 2-Mar-2015 19:40

In order of likely cheapness and what is likely to be the best deal:

1. Put it on the mortgage - if he has a house with headroom on the finance
2. Personal loan from the bank - if he can get one
3. Finance company - shopping around for the best deal
4. Finance from the dealer

But honestly, unless he desperately needs the car, I would say none of the above. Too many people get into difficulty financing consumer goods that they can't afford. For an item like a car that just depreciates like crazy, on top of likely exorbitant finance costs, some of the best advice you can give someone that is that if they can't pay cash then they can't afford to buy it. Finance costs mean that whatever he pays up front for the car will likely double when the finance costs over its life are considered.

That's how I work for everything (except my house, which was a capital item, with mortgage cost largely offset by rent savings). Sure, I had to wait a few years longer than my friends before I traded my rusty old bomb for a better car, and had a nice TV, but I have saved literally tens of thousands on finance costs as a result. Which means that I can now contemplate buying nicer stuff, with the money I would have otherwise given to finance companies.

If he must have a car, and with a young family I understand this, then consider cheaper. $10-15K will get something perfectly decent for a family and, when it's being paid for with expensive borrowed money, that's worth considering.

driller2000

935 posts

Ultimate Geek

ID Verified

#1249832 2-Mar-2015 21:20

trig42:
Has your friend got a mortgage? Can he put it on the house (if he lives in Auckland, the value of his house will have increased a bucket load in the last couple of years).

yeah not the best idea imo as he will ultimately end up paying a truckload for the car over the life of the mortgage even at 5-6% - long after he no longer has the car

save and get something cheaper for cash? i know it's very easy for me to say when i don't know his specific circumstances...

and there is no such thing as true 0% finance (in nz at least) - the cost of credit will built in somewhere

Aredwood

3885 posts

Uber Geek

#1249897 2-Mar-2015 22:23

Agree with JimmyH, Why does he need a 20K car? Especially as a brand new Fiat Panda costs 15K + on road costs.

Also with the car finance, You typically have to pay for full cover car insurance, Mechanical insurance, and loan repayment insurance upfront. Which is often capitalised onto the loan. Further increasing the interest. He also needs to get a quote for servicing his chosen car. As If you miss any of the required servicing then the warranty is void. Also find out how much it cost for a set of new tyres. And also to have new brake discs and pads installed. As those things won't be covered by the mechanical warranty.

sep11guy

660 posts

Ultimate Geek
Inactive user

#1249898 2-Mar-2015 22:24

I agree, paying for finance is not the best way to go about it.

So I have adviced him to apply for the 2nd banks credit card, and see what they can come up with.

If they cannot match the value, then he can either

1) lower his expecations and buy a cheaper car , use it for a few years and buy a good one later.

2) run with what he has, and then save enough money so that he can pay upfront in a years time. and by the time, he will save even more , cuz the vehcile would have depreciated more ( or he can buy a better frills car for the same $$ )

NZSpides

155 posts

Master Geek

#1249914 2-Mar-2015 22:38

Use the money he does have now to buy a cheaper car and use that while saving for the one he really wants.

I know several people that did exactly what it looks like your friend is doing and they thoroughly regretted it.

You'll save money in the process and learn good lessons in the process.

teamyoyo

58 posts

Master Geek

#1249948 2-Mar-2015 23:36

I recently brought a new car and after a lot of research I found a bank loan was the best way to go - for me at least. The car loan companies seem to have better interest than the banks but they often have high application fees and charge for early repayments. I went to my bank and said "This is what the finance companies can do. Can you do better?" Walked out with a similar interest rate to the finance companies, no setup fee and no repayment fees. My $7000 loan was set up to be paid off within a year and there was only going to be about $250 in interest before I started aggressively paying it off. In the end I'll probably only spend $150 more than if I brought the car with cash.

Tell your friend to go talk to the bank. They'd much rather get your money than have have you give it to someone else. That said you won't get that kind of money for anything less that %12 interest unless it goes on a mortgage. More likely it'll be in the %15-18 range. Does your friend really need a $20K car? There are a lot of good cars for cheaper and spending a few thousand less can save a lot of money later.

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BTR

1527 posts

Uber Geek

#1250099 3-Mar-2015 10:50

Last loan I had a few years ago with Kiwibank was 11% and no penalties for early repayment.

sep11guy

660 posts

Ultimate Geek
Inactive user

#1250101 3-Mar-2015 10:52

Thanks for your replies guys, you have been of great help !

Just for a moment, ( and slightly off topic ) looking at a different perspective and trying to understand how do others view this.

What do you think one should spend on a car , given one has same circumstance - one couple (2 ppl) with one kid, 2yrs old , but with varying household income :

1 ) 1 earner at 55k

2) both earning at about 80k together

3) both earning 120k together.

3) single parent earning 95k ( just a diff scenario , to see how it differs from top )

nzkiwiman

2585 posts

Uber Geek

Subscriber

#1250151 3-Mar-2015 11:43

I've been looking for a new car, and decided after looking at the options that saving until I had more cash was the option I was going for.
While I earn enough to be comfortable, adding in a weekly/monthly payment on monthly pay made it just a touch uncomfortable to me

lxsw20

3552 posts

Uber Geek

Subscriber

#1250159 3-Mar-2015 11:51

What you spend on a car at the end of the day is up to you. If it's a tool then spend what you need to safely and reliably get you from A to B. If it's an emotional decision and for most people it probably it is then buy what you want that isn't going to cripple you.

jonathan18

7413 posts

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#1250160 3-Mar-2015 11:51

sep11guy: Thanks for your replies guys, you have been of great help !

Just for a moment, ( and slightly off topic ) looking at a different perspective and trying to understand how do others view this.

What do you think one should spend on a car , given one has same circumstance - one couple (2 ppl) with one kid, 2yrs old , but with varying household income :

1 ) 1 earner at 55k

2) both earning at about 80k together

3) both earning 120k together.

3) single parent earning 95k ( just a diff scenario , to see how it differs from top )

Not to reply with specific answers to those scenarios, but just to offer a different perspective on the matter of how much is appropriate to spend on a car: we ended up spending considerably more than initially planned on a 'new' (well, nine months old) car last year, with the prime reason being we decided the saftey-oriented features of a current model/top spec car were worth the greater cost (and indeed debt) given we have two young children. We decided the extra cost was worth it if it could play a role in reducing the likeihood of an accident or reducing the impact should an accident occur.

I even remember the 'eureka' moment that lead to this thinking: I was watching a Fifth Gear episode where one of the hosts visted an ENCAP testing facility. Looking at the impact that recent changes in car design and saftety features could make to the damage suffered by a car in an accident made a significant impression on me; even small stuff like anti-whiplash seats. I believed at the time I bought the car an addtional $10-20k of debt was worth it to ensure the most safe version of the car I was looking at; and I haven't regretted that decision since...

... And that car was financed primarily on the mortgage, not something I too would normally recommend or think of doing, but given our then car was a black hole sucking the money from our wallet (due to the frequent repairs it required) and that this would likely continue into the future, we decided it was better to put that same money into helping pay for a car which would cost less to maintain (helped by getting a car with two years of free servicing remaining). If we'd waited the years to save to buy that car outright, heaven knows how much that would have cost us in repairs and frustration/time wasted. Of course, the intent is to pay that additional loan off as quickly as possible...

dickytim

2514 posts

Uber Geek
Inactive user

#1250188 3-Mar-2015 12:22

itxtme:
johnr:
sep11guy: yeah 17.95% is way way to high.

The friend already has a CC with more than 20k allowed, but he has to pay back in about 50-55 days.

He wants something like 0 - very low interest to be spread over a year or so , so looking for options in the market.

Transferred balance to other company bank is best option so far, but ofcourse its at the wish of the new company - if they will give it that is.

If they already have a credit card with that limit then it's a no brainer how to get 0% interest

:)

Buy car on current credit card -> Apply for new credit card (0%) with 20K to transfer -> New bank says no thanks -> Pay back within 60 days or be stung

Change to a low interest credit card around 12.5% probably ASB as they don't charge higher interest for cash advances, only a $2 fee, apply to Westpac for a 0% transfer and hope. Worst case you are paying 12.5% best case you are paying 0%

I did something similar and Westpac and I had an agreement that when they paid out ASB the credit card would be closed off as they didn't want me to have $20,000 worth of unsecured debt! To be honest neither did I.

Also remember that most dealers will not allow 100% to be paid by credit card so that will need to be part of that negotiation.

You could also ring up Westpac and tell them of your plan and see if they want to help you out! You wouldn't be breaking any rules so it could be worth a go.

alasta

6705 posts

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#1250402 3-Mar-2015 16:34

sep11guy: Just for a moment, ( and slightly off topic ) looking at a different perspective and trying to understand how do others view this.

What do you think one should spend on a car , given one has same circumstance - one couple (2 ppl) with one kid, 2yrs old , but with varying household income :

I can't really comment on the specific scenarios you've listed because there are so many different parameters that determine what someone can afford, but I personally believe that the lowest total cost of ownership would be something like a low mileage second hand (~30,000km) Suzuki Swift. If you can afford something better then great, but if you can't afford a vehicle with the lowest possible TCO then walk or take the bus - I do it every day and it hasn't killed me.

jonathan18

7413 posts

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#1250508 3-Mar-2015 19:31

alasta:
sep11guy: Just for a moment, ( and slightly off topic ) looking at a different perspective and trying to understand how do others view this.

What do you think one should spend on a car , given one has same circumstance - one couple (2 ppl) with one kid, 2yrs old , but with varying household income :

I can't really comment on the specific scenarios you've listed because there are so many different parameters that determine what someone can afford, but I personally believe that the lowest total cost of ownership would be something like a low mileage second hand (~30,000km) Suzuki Swift. If you can afford something better then great, but if you can't afford a vehicle with the lowest possible TCO then walk or take the bus - I do it every day and it hasn't killed me.

A Suzuki Swift with kids? As the only vehicle? Not the best option just from a practical viewpoint...

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