...don't forget the tax issue. Let's suppose (for the sake of round figures) that you found me an investment fund which paid 15% guaranteed over three years. That's £3000. But I am a higher rate taxpayer, and the marginal rate of taxation for me in the UK is 40%. That investment fund payout would be subject to said 40% income tax, leaving me £1800 after tax. Now let's suppose I invest that £20,000 - monthly deposits over three years - the average balance on deposit would be £10,000 throughout the three year term. As you say, interest rates suck (they are the lowest they have been in my lifetime in the UK) so I might only get a piddly 3% = £300 each year = £900 over three years = £540 after 40% tax. Doing it your way, the after tax investment payout would be £1800. Doing it my way, it would be £540. BUT... I'd then have the loan arrangement fees and interest. For your method to be worthwhile, those combined charges would have to be less than £1360 (£1800-£540) to make it worthwhile.
Do you know a car dealer who can arrange a three year £20,000 loan whose combined interest and arrangement fee comes to only £1360????
