What is the best payment plan for buying a vehicle?
I recently started my first job after college/ (Polytechnic? translated from the Swedish word "Yrkeshögskola"). I have worked as a system developer since August where I had my praxis twice before finishing school. I have a 6 month probation and since my boss has been very happy with the work I've done, I will most likely be extended to an indefinite period.
I am thinking of buying my dream car in June of next year. I earn an alright monthly salary and it will increase if I get extended, as will my savings.
I'm saving approximately 12.000 SEK each month (gifts and other income not included). I have a fully paid off car that I will be able to sell for 110.000-130.000 SEK.
I figure that my savings will be around ~200.000 - 230.000 SEK after I have sold my car. The car I want to buy costs around 350.000 SEK used.
How could I best set up a payment plan if I buy this car? Should I try and pay off as much as possible at purchase and set up the rest as a monthly payment for 24/ 36 months = 6500 SEK/ 4165 SEK monthly? This would be the amount if I set up a pay off of 150.000 SEK.
Or would it be better to setup the car for pay off monthly with a 20% payment on purchase? 300.000 SEK on a 36 month set up will be rougly 8300 SEK/ month.
Note
This plan will not be executed unless I get extended.
I live in Sweden which is why I use the SEK currency. 100.000 SEK = ~ €9600.
I have no current debt
EDIT
To make things more clear. The car I'm referring to is a BMW E92 M3. This car has already started climbing in price's in Sweden, when looking at the newest, low-mileage models. Because it is considered a collectible future car I am not sure waiting another year would make it more of a bargain for me.
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Welcome new user.
You are taking money, and burning it in a pile.
Never spend more than about 45.000 SEK on a car.
Your current car is way too expensive. Sell it and buy a 45.000 SEK car.
The idea of buying a new car is so totally bizarre ..... just forget it. Get a piece of paper and write down how much you'll throw away on (merely) insurance, as one problem.
It's not in the bounds of reason.
If you are profoundly rich, sure, get a brand new car each year. ("New" cars are a joke after about 12-18 months ... they are then exactly the same in every way as a normal 50.000SEK car.) For any other than the profoundly rich, a "brand new car" is so far from the bounds of realty it can't be discussed seriously.
That being said, we now know OP is talking about
jalopnik.com/now-is-your-chance-to-buy-a-v8-bmw-m3-before-prices-go-1825350566
I mean, everyone should own a few V8s. :)
It is possible (possible) that depreciation will be a bit lower than on an everyday vehicle.
Never loan money to buy anything "consumable" (as opposed to investments, but that is mostly a house or a flat) that isn't a disaster. Emergency dental care is ok to loan money to. Or if your freezer or refrigerator breaks down. Maybe a funeral that requires a trip abroad or so. Everything else, save before you buy. No exceptions.
The less you borrow, the less you'll pay in interest. Say you can get a car loan with 5 % effective annual rate (effektiv ränta in Swedish):
If you pay 200 000 SEK up front and borrow 150 000 SEK for 36 months, you'll pay 4 496 SEK per month. In the end, you'll have paid 11 843 SEK in interest.
If you pay only 70 000 SEK (20 %) up front and borrow 280 000 SEK for 36 months, you'll pay 8 392 SEK per month. In the end, you'll have paid 22 107 SEK in interest.
All in all, it depends on how much debt you're comfortable with taking on and how much cash you want to have in the bank to feel safe. This depends on your own situation in many aspects, and I nor anyone else can make the decision for you, but financially it makes sense to pay as much as possible up front to avoid unnecessary interest costs.
You want to minimize what you pay on interest. That means having as large a down payment as possible, and the shortest repayment term you can manage. If you have any choice that give you different interest rates, figure that in. Like in the US, shorter term loans usually have a lower interest rate than longer-term loans.
Of course the easiest way to reduce the amount of interest is to buy a cheaper car. Buying a brand new car when you've been working less than a year is, in my humble opinion, a big mistake. My first car cost 0 (=~ 6300 SEK) (Okay, that was 40 years ago and there's been a lot of inflation since then.) I didn't buy a new car until I was in my 30s, and that was a cheap one.
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