Negative Equity on a Car

Naughty_Sausage

Hi

We have about £1700 negative equity on our car but we want to get rid of it. Long story. Crap car, expensive to run, far too big for our requirements now.

We have an idea of the car which we want to buy (pre owned Lancer estate). Have spoken to man at garage who advised us about the finance. We already have a loan with them for my car and the terms seem comparable to other companies. He said that we could have finance for the new car and the negative equity. This is an option but I can't help but think its not the best option.

We have about £2200 of savings which I think it would be better to use but husband is reluctant to nearly clear out our savings leaving us with not a lot for emergencies. I can see his point but I suppose in an emergency we could use our credit card. My plan was to repalce the savings using direct debits every month.

We even spoke to mortgage company (i know not great but this is a hole which we need to get out of). We did not like the idea of paying this off over 23 years!

What are other peoples experiences, advice, thoughts?

Thanks all

NS x

CHR15

Savings are achieving negligable returns so it makes sense to use savings to reduce the interest you are paying.
I do agree though that it is comforting to have something for emergencies.

Personally, I would keep the savings even though it is not the best thing to do (financially)

Have you read through the finance documnets to ensure you are being quoted APR and not FLAT RATE figures?

I wouldn't consider remortagaging to buy a car, the novelty of a new car doesn't last long no matter how much you dream of owning it (as you have already found out)

Naughty_Sausage

thanks for your reply.

When looking at the loan we compared very simple like for like. So we compared monthly amounts paid. I don't know if I am making myself clear here. We got quotes from internet etc for £x over 4 years which was say £108 pm. We then asked the garage for the same loan and the money paid each month was pretty much the same.

Probably not the MSE thing to do but thereya go!

Hintza

How close can you get to covering the shortfall if you sell privately? What is your car (in detail) and what have you been offered for it?

Naughty_Sausage

Its a Y Reg Ford Galaxy. 2.3l Ghia

Been offered £2000.

Hubby reluctant to sell privately cos the car seems to develop faults on a monthly basis and wants to avoid anyone moaning about their purchase and the hassle of selling privately.

Naughty_Sausage

man at garage has just called back. Their finance deals are rubbish.

Now looking at covering it all with a personal loan from Tesco, Nationwide etc

What thoughts?

AdrianHi

Check the conditions of your mortgage.
I have a fully flexible mortgage where I can borrow to buy a car and then pay back the car loan element of the borrowing over a short period and no the whole term of the mortage like 23 year which would indeed be silly.
Some mortgages allow enough flexibility to do this sort of thing where you can make capital repayments whenever you want. Usually with limitations such as minimum amount £500 and you cannot pay back more than 10% of original mortgage amount in a year.
Other than that use the savings and credit card for emergencies that may never happen.

candice56

Just my 2 pence worth.

This happens alot and in the long run you could end up refinancing another lot of neg eq and compounding the problem.

I sympathise that the car isnt suitable but as far as costing you too much to run you should remember £1700 buys you a lot of 'running'.

If you can, keep it, the value/worth will plateau at a certain age pretty much and that sounds the case here. Of course if it costs a lot to fix then get rid and swallow the neg eq.

Have you considered a voluntary termination if your car is on hire purchase, you have to be 50% paid into your agreement, check your original paperwork.

HTH

Naughty_Sausage

We have had the car MOTd/serviced twice since owning and never had a bill for less than £400 for repairs! Plus odd bits inbetween.

Costs hubby quite a lot in petrol (32mpg if you are lucky).

Road tax going to be £500 a year if the new bandings come in!

Thats a lot to us.

We had it cos we needed something big enough for us, the 2 kids seats and my Mom who needed regular hospital visits. Mom sadly died so the cars too big for us now.

candice56

I may be wrong but I believe the new tax bandings are mostly going to affect new cars.

Anyway, so long as you do what is right for you then thats best but even though its bigger than you need you could keep the car a year and probably still get offered a similar price to now and have paid more off your loan in the meantime.

If you do go for the change, checking your monthly payments AND total payable is the best way to compare loans. Negotiate till youre blue in the face and shop around for insurance! Im sure that was your plan anyway

Good luck with it

hewhoisnotintheknow

not being rude, but, if things are tight, getting more finance can only lead to more pain


spend the difference on running what you already have