Finish existing finance agreement or get new car?

[Daventry_Dave]

Hi there,

I've got myself a bit confused so i hope someone can give me some advice!

I currently have a 54 reg Renault Megane which is financed through Black Horse under a 'fixed-sum loan' agreement. I have made 29 out of 60 payments of £227.14. The total amount being paid is £14138.40 made up of £10335.00 + interest at 14.3% apr (not good i know!!!)

I have a settlement figure of £6100 but the car is worth around £5k-ish.

Ideally, I would like to get a new (used) car (approx £6-7k?) and lower my monthly payments as much as poss, but I do not have the spare £1k difference to pay the settlement amount.

Am I best to just be patient and wait until the end of this agreement or are they any tips to get out of this agreement and into a cheaper one???

Thank you!

[Idiophreak]

Is there any reason for wanting/needing a new car? I wouldn't have thought you're going to get much of an improvement between a 5k car and a 6k one tbh...

[bargepole]

Am I best to just be patient and wait until the end of this agreement or are they any tips to get out of this agreement and into a cheaper one???
If you can find a dealer prepared to take your Megane at a reasonable price against the car you want, the dealer can settle your existing finance and roll it into a new agreement, covering the new car + negative equity amount.

But watch out for the APR if you do this, some dealer finance is very expensive.

[Daventry_Dave]

Is there any reason for wanting/needing a new car? I wouldn't have thought you're going to get much of an improvement between a 5k car and a 6k one tbh...

I just want to get my monthly payments down as much as possible.....

[Hintza]

That is awfully expensive and you still have two and half years to run.

Can you get a cheaper loan now? How about a personal loan from the bank should pay around >7% currently (probably going to go up soon). You can then borrow as much as you want and then use some to pay the balance due and some to buy hopefully a replacement car.

There are loads of calculators for doing the sums just google them.

I feel for you...ouch.

[Pew Pew Pew Lasers!]

Isn't it the case that half way through a finance agreement you can just give the car back to them and call it quits?

[daveyjp]

Pew Pew is correct - once 50% of the payments have been made you can hand it back. Check the cancellation/termination terms on your finance agreement.

Check out current loan rates though - to get a payment of less than you are paying now may mean another long term loan as personal loan rates have increased.

£6,000 over 3 years will be £185 a month minimum.

[AdrianHi]

Throw the keys back at them under the 50% rule then lease another brand new Megane from 177 a month including VAT or an Astra. In fact you can check out other lease options in this budget range too:
http://www.whatcar.co.uk/contract-hire-results.aspx?pg=2&RT_ID=467#
What is done is done so don't feel bad about it now, but apart from the expensive finance deal you bought a car which is also very expensive in depreciation (unless you got it nearly new / pre-reg at 25%+ discount) and better off leased or walked away from for something which holds it's value better and is less likely to leave you in negative equity.
If your going to buy into something else look for something that will hold 45% or more of it's value at 3 years (Megane is about 37%) and buy what ever age you can with your £6K. May be a VW Golf, Skoda Fabia / Octavia.

[Daventry_Dave]

Thanks for the replies. I thought that the 50% rule only applied to 'Hire Purchase' agreements whereas my agreement states it is a 'fixed-sum loan' agreement........is that the same thing? (sorry if its a stooopid question!)

[AdrianHi]

Thanks for the replies. I thought that the 50% rule only applied to 'Hire Purchase' agreements whereas my agreement states it is a 'fixed-sum loan' agreement........is that the same thing? (sorry if its a stooopid question!)

I think you are right in thinking the 50% rule does not apply to your circumstances.
Here are the finance and leasing associations guidance notes on fixed-sum loans http://www.fla.org.uk/downloads/download.asp?Ref=4657&hash=c80bb17ed48ee79806155a777a7fbda9

To get out of this you will need a new loan to raise the negative equity of approx. £1000 you pay the finance company then get the buyer of your Megane to pay the finance company direct. You both do this at the time of sale with a settlement figure from the finance company for that time.
As I hinted earlier leasing might work for you here as you only need a small deposit of 2 or 3 months payments. PCP over 36 months may work too, that's a smalll deposit, lowish monthly payment with a balloon figure (usually equal or less than the value of the car) to pay at the end or hand the car back / sell it to settle the finance.
PCP deals are front loaded too so you need to know you will complete the term and leases are 36 or 24 month commitments too.
60 months is a long commitment on one car and not as good as PCP or leasing for keeping the monthly payment low.