buying a car, use savings or get loan

I

Ihana

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I have recently agreed to buy a car for 23,000. Its a six year old low mileage Audi q5. We needed to upgrade from old car due to requiring more seats.

We are planning to fund purchase of car by selling old one for around 5000 and use savings for the rest. We have about 100k saved. We have shares too but obviously now is not a good time to sell them.

However the thing is we are planning to apply for a mortgage at end of year. House value is approx 260k husbands salary is 40k. Mine is same as husbands but as I'm newly self employed I doubt it will be considered. Hence I think we will qualify for 140,000. Maybe 160,000 with exemption.

So the question is should we keep the savings and finance the car instead? No other loans or debts at present and our rent is low.
 
The amount you will qualify for will be reduced by the car loan repayment, you need to factor that in before deciding. One way will reduce your deposit, the other will reduce your borrowing capacity.
 
Ihana said:
We have shares too but obviously now is not a good time to sell them.
Click to expand...

Let's deal with this statement first.

Why is now not a good time to sell them?

I am a big advocate of stock market investment but anyone who is considering buying a house in the next year or so should not have shares. We are facing into a period of uncertainty. At the end of the year, your shares might be worth more than they are now, but they could also be worth an awful lot less.

You didn't say how much shares you have, but if the purchase of the house is dependent upon the current value of the shares, then you should sell them now. If the purchase of the house is dependent upon the shares going up in value then you should hold onto them. If the value of the shares is not material - then you should sell them and put them towards the cost of the car.

If you borrow €19k to buy a car while you own shares, you are effectively borrowing to invest in shares.
 
How about the following. Buy the car now for cash.

When you are ready to buy a house see how much they will lend you. If you can't get the full amount, could you then refinance your car?

Brendan
 
The shares aren't massive amounts and I always viewed them as my own long term nest egg. Of course if we have to we will sell them but id prefer not to. I don't see the point in selling them now and adding to an already significant pot of cash.

I like the idea of financing if necessary. Id prefer to avoid paying interest if possible.
 
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