Car finance advice

djwolf

Hi all. The time has come to change my car for something newer as it's approaching 100k miles and has started to need repairs lately. I have put a £500 deposit down on a nice low-mileage Honda sportscar. There is now £9000 left to pay on it. I have about £2500 in an ISA but that's on a special 6% rate fixed for 12 months so I don't want to touch that. I have applied for a £9000 loan but the rate I've been offered is 12.9% which is too high really. Therefore it seems my best options are either hire purchase (regular monthly finance deal) or a PCP limited mileage plan (lower monthly payments with a large lump-sum payment at the end). What do people suggest I go for? Also, I suppose it's best to have it over as short a period as possible to avoid paying too much interest?

I currently have a stable job and earn about £1,250 a month. My outgoings total £400 not including this car finance. Still living at home so don't have a mortgage or house bills apart from housekeeping.

Thanks.

CLAPTON

As you are unlikley to get a loan at less than 6%, it makes sense to use the money in the ISA as part of the deposit.


what are the APRs of HP deals and PCP deals?

Personally I'ld keep the current car and save up for the replacement.

djwolf

They claim the rate is 5% but this is 'flat-rate' for the full amount. The total interest fee over 4 years would be £1,900 which makes the APR about 10% in reality. Would I be better off paying a bigger desposit to reduce the loan amount?

CLAPTON

Other things being equal, no point in paying 10%APR on the loan and but earning only 6% in an ISA.

djwolf

Thanks for the advice. After thinking hard about it and talking to my parents I've decided to back out of this deal. I'm going to keep my older car for now which doesn't really owe me anything. Instead I will put the money away into my ISA every month instead of paying off a loan. My problem now is persuading the car company to give me my £500 deposit back.

daveyjp

"My problem now is persuading the car company to give me my £500 deposit back."

No chance.

djwolf

I'm going ahead with the car after all but I'm going to pay more as a deposit so I don't have such a large balance on the finance. I might go for 4 years rather than 5 and put up with slightly higher monthly payments as I'll save about £300 on interest charges.

Swans1912

djwolf wrote: »

Thanks for the advice. After thinking hard about it and talking to my parents I've decided to back out of this deal. I'm going to keep my older car for now which doesn't really owe me anything. Instead I will put the money away into my ISA every month instead of paying off a loan. My problem now is persuading the car company to give me my £500 deposit back.

Looks like this lesson will cost you £500! - Sorry for being harsh but agreeing to buy a car without having the fiance situation sorted is not a good thing to do!

Taking the finance out of the situation, now is a very good time to buy a new car. I bought a Corsa on 0% over 3 years which I am due to pay off in full in the next 3 months, I can't wait to get shot of it (the finance)... however it was worth it!

Swans1912

djwolf wrote: »

I'm going ahead with the car after all but I'm going to pay more as a deposit so I don't have such a large balance on the finance. I might go for 4 years rather than 5 and put up with slightly higher monthly payments as I'll save about £300 on interest charges.

If you have a lump sum at the end of the finance start saving now. If you have to pay £2500 after 4 years that make sure you start saving £53 per month to cover your lump sum!

Enjoy your new car!