Pay by cash or car loan?

Benzy on 08/02/2015 - 19:44
Last edited 08/02/2015 - 23:23

Hi All

Bought new Hyundai Santa Fe MY15 Diesel in $47000.

I have $47000 in my offset account which is offsetting my home loan (I have taken home loan around $350000 at 5.05% interest and paying only interest so I can save up for deposit to buy investment house or start a business).

If I take the car loan, the loan interest will be in between 7.5% to 10%.

I am thinking to take $47,000 out of my offset account and pay to car dealer instead of taking car loan as car loan (7.5% to 10%)is at higher interest rate than home loan (5.05%).

Is my thinking is right? or is there any other way I can pay which will save me more money in long term?

Note: I am going to keep this car for long term (at least 7 years).

Financial

Comments

  • npc on 08/02/2015 - 19:46
    +3

    Your thinking is right. Also there are cheaper home loans at the moment.

  • ozhunter on 08/02/2015 - 19:49
    +2

    Paying cash would save you money, but if 47k is all you have in your offset, maybe you should get a loan for half of the car. It's always good to have cash aside for emergencies.

  • raymond y on 08/02/2015 - 20:22
    +1

    Depends on how you do it. If you make the same repayment to your home loan as you would a car loan (ie prepare to pay back that 47k in 5 years rather than the full home loan term) then you will come out on top. Otherwise your monthly repayment is smaller because the 47k is spread for the 20 years your home loan is which will probably end up costing you more in interest. Also, car dealer interest rate should be had for 6-8%.

    • Benzy on 08/02/2015 - 23:21

      I have interest only home loan so I pay only interest. I left all my savings in offset account. Is it still better to take car loan or pay cash?

  • imissbeans on 08/02/2015 - 20:28
    +2

    Have you watched The Gambler with Mark Wahlberg?? This is relevant in my opinion.

    This is from the movie and hopefully answers your question:

    https://m.youtube.com/watch?v=xdfeXqHFmPI

    Edit: this is not spam and had a point!!!! Must watch the movie to fully understand.

  • pao2x on 08/02/2015 - 22:35

    Take out a personal loan. Can be as low as 5%

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