Hire Purchase vs Personal Loan

MikeyDG

Hi, I traded my car in a couple of years back taking out new finance. My previous car was financed under a Hire Purchase agreement and as I was half way through the term I had the oppartunity of handing the car back with no further payments. When I mentioned this to the Sales guy he told me this was frowned upon in the industry and may cause problems in future financing. He then offered a trade in price that came reasonably close with a shortfall of about 300 quid. My wife and I decided this was probably the least painful option and went for it...now for my question, the Sales guy said he could get finance at the same rate as before so we accepted, but what I didn't realise at that point was it was no longer HP but a personal loan. This wasn't explained and I'd have never have accepted this as I liked the ability to hand the car back after half the term and didn't mind paying the higher HP rate for this. Do they get more commision for personal loans.... ?

barclaysguy

Dealers dont tend to sell personal loans, commisions on car agreements are normally pretty good as the debt is secured so lower risk then personal loans. When did you take the agreement out and how much was it? It may be that its unregulated therefore not giving you the VT right.

MikeyDG

The loan agreement was 2 years ago this January for 6K approx, excuse my ignorance but what's the "VT right" ?

barclaysguy

The VT right is that you can return your car with no further penalties as long as you pay 50% of the total finance that needs to be paid. Check your agreement or call the lender.

VT - Voluntary termination

scotsgirl_3

sorry to disagree with you barclaysguy but dealers frequently do offer personal loans for vehicles - often people don't even realise this is the cases. Unfortunately this comes without any VT rights either as its not HP. I have seen way too many people stung by it

~Brock~

scotsgirl wrote: »

sorry to disagree with you barclaysguy but dealers frequently do offer personal loans for vehicles - often people don't even realise this is the cases. Unfortunately this comes without any VT rights either as its not HP. I have seen way too many people stung by it

Not sure what you mean by 'stung' by it because on the other side of the coin if it's a personal loan then the car belongs to the customer and they can sell it whenever they want.

scotsgirl_3

I meant stung by in terms of not being fully aware of the product they have been sold and that they don't have VT rights - you are quite correct that there are good points and bad points of both.

PH1LL

never buy a car on a personal loan.

Hp is the way to go as you have a your vt right.

The only reason why a car dealer would sell you a personal loan rather than hp is because the loan to value on the car is too high - ie paying too much for it.

Th finance comps will only lend so much against a car thin up to about 90% of its value before its max advanced.

Sorry to say but it sounds like you were stitched up when you bought your car. dont go back to them.

personal loan is still linked to the car, just ot secured by it.

Phill

PH1LL

brock - you can still sell a car whenever you want if its on hp - just get a settlement figure from finance company

PH1LL

also using your VT rights shouldnt effect your credit rating, as long as your not sub prime (bad credit etc)

PH1LL

things to watch out for when doing a VT

milage - if you have done over average milage you will b e charged
Damage over fair wear and tear
missing service history
bald tyres
etc etc

also make sure you have met the requirements
You have to have paid 50% of total amount repayable inc interest

eg

cash price £5000
interest £1000
admin fees £150

toatal amount payable £6150

you can vt oce you have paid £3075