Fancy a change, advice on hire purchase req'd

Pete.g

Hi I am looking at changing my car what I'm posting for is I could do with a little advice regarding hire purchase.

Now the car I presently have I bought with a 0% credit card and when I sell it it will cover what is still owed on the card with not much left over.

I want a new car on hire purchase so I can hand it back half way through my term (can you still do this?)

I do in the region of 25k a year so I'm not fancying getting a loan for a car as by the time it's paid for the miles would be over well 100k and the car not worth much so I'm thinking hp is the way to go and just keep handing it back and changing every 2 1/2yrs. I know this is "dead money" but I think owning the car after a loan period in my case is not very beneficial.

So basically what I need to know is do you think hp is a good idea in my case and can you still hand cars back after half way through you agreement with no extra cost or back mark against your credit rating?

Thanks,

Pete.

AdrianHi

Firstly I think the idea that you never really "own" the car because it's not really an asset since eventually it's worthless and off the the recycling yard - is a good one.
I like to measure a cars costs as an average monthly expense over the period I have the use of it and my objective is getting that figure as low as possible for the car I want. With that in mind I would investigate leasing, PCP, HP, loan, cash whichever it took to get the monthly figure in the right place.

25K miles is a lot, rules out leasing new really.
HP is hard to cope with if you have no deposit and since your not planning on keeping the car longer term not neccessarilty the best option - high monthly payments because your trying to pay off the whole value of the car.
PCP (personal contract plan) might be more suitable as it has low deposit and monthly payments more like lease payments. It amounts to paying for the depreciation on the car plus finance charges and nothing else.
A strategy for you to consider (I know people who do this) is buy a car 6 to 12 months old with just a few thousand miles on it, get it onto PCP, after 9 to 12 months sell it on before the mileage gets too above average devalueing the car too much.
You can either settle the PCP finance in cooperation with the buyer or if you go back to the same dealer you'll usually be able to move the whole deal on to a younger car with just a (sometimes small) change in monthly payment to deal with.
Best value probably comes from selling the car privately each time.
Specific example - someone I know of has just agreed to swap a 4 year old BMW 330d for a 3 year old BMW 530. It is all on PCP the term of which had not completed for the 330d, financially he has just had to increase his monthly payments by £20 and extend the end date of the PCP.
Dealers do this sort of thing quite a lot for most car manufacturers.

Pete.g

Thanks Adrian you seem to know your stuff.

Basically I'm looking for a bmw 320D touring or similar such as Merc C220, Volvo V50, or A4 Avant (which I have now) I'm not really wanting monthly payments to exceed £230-50 is it possible to get this sort of car on these sort of repayments?

I would go to my local dealers but dont want to get my shirt lifted because I dont know what I'm taking about.

Thanks,

Pete.

kevsan

I am partway through a 4 year pcp deal with a V50 from my local volvo dealer.

Having come out of a company car scheme, i had no deposit so this worked for me... the v50 is just over £300 a month, and was just over a year old when I got it.

I didn't haggle for the best deal, because I only had 3 weeks before I had to hand the car back.

bclark

Pete.g wrote: »

Thanks Adrian you seem to know your stuff.

Basically I'm looking for a bmw 320D touring or similar such as Merc C220, Volvo V50, or A4 Avant (which I have now) I'm not really wanting monthly payments to exceed £230-50 is it possible to get this sort of car on these sort of repayments?

I would go to my local dealers but dont want to get my shirt lifted because I dont know what I'm taking about.

Thanks,

Pete.

Are you talking brand new here? Have you got a deposit?

As a small guide a BMW 320 ES touring from an internet broker with a £3800 saving off list price (no options) would be a monthly payment of £598 over 48 months with no deposit on HP.

Pete.g

Thanks kevsan. Unfortunatly can't stretch to that sort of payment a month, but something to think about.

Pete.g

bclark wrote: »

Are you talking brand new here? Have you got a deposit?

As a small guide a BMW 320 ES touring from an internet broker with a £3800 saving off list price (no options) would be a monthly payment of £598 over 48 months with no deposit on HP.

No not brand new I'm looking at 55plate onwards with below 50k on ideally thats why I thought hp might be better so in 2-3yrs when I handed it back with 100k+ it would be the finance company's problem to get rid.

But thats why I'm here, to get your opinions as you guys know the system better than me.

Thanks,

Pete.

AdrianHi

I'm driving a '55 plate E91 320d SE touring on 51,000 miles.
Not for sale right now though

Managing depreciation is key, it's the biggest single cost.
Consider this.
There is always the difference between purchase price and trade in price to account for, but looking at the difference in trade in values over time it's worth looking at what the loss is each year.
No figures handy for a 1 year loss on a 55 plate, but 57 plate to 56 plate is about £1900. 58 plate to 57 plate is £2600. £700 more.
But the 3 year old car is out of warranty, BMW extended warranty with £100 excess is £350 or you need to at least attach a £350 cost if your taking the risk yourself. Now add MOT £55 ... and breakdown cover say £100. If you pay the BMW ealer to do it the first rear brake pad change is imminent on the 50K miles car at £260.
So the car in year 4 comes with extra expenses £350 + £55 + £100 + £260 = £765 which actualyl make it marginally more expensive / about the same as the car a year younger and still under original manufacteres warranty.
The case for the younger 320d gets stronger when you buy one built after September 2008 because that is the 177bhp efficient dynamics model which is 20% more fuel efficient which on 25,000 miles a year saves you about another £360 a year on fuel. Now the year 4 car is looking quite expensive !
This is why I'm saying buy something around a year old and run it for a short enough time to keep it at average mileage, certainly under 60,000 miles because that's when it's value drops in the eyes of the BMW dealer because that's when they cannot sell it as BMW AUC anymore and the BMW extended warranty price goes up.

You might wonder why I'm still keeping the car older than 3 years old. It's because the used car market fell to pieces last year and recession has hit my income hard so I didn't want the cash flow challenge of changing car, I own the one I have out right at the moment.

Pete.g wrote:

I'm not really wanting monthly payments to exceed £230-50 is it possible to get this sort of car on these sort of repayments?

I can think on one person who bought a 1 year old on that sort of monthly PCP payment. There is always the 318d if you need to trim the costs down a bit further, the September 2008 onwards efficient dynamics version of that car is still 150bhp and 0-60 under 9 seconds.

My brother had a quote for a 36 month lease on 320d M Sport touring £408 a month ex. VAT. That's on the average 10,000 miles a year and it's probably fleet prices (IBM).

standupguy

Pete.g wrote: »

Hi I am looking at changing my car what I'm posting for is I could do with a little advice regarding hire purchase.

Now the car I presently have I bought with a 0% credit card and when I sell it it will cover what is still owed on the card with not much left over.

I want a new car on hire purchase so I can hand it back half way through my term (can you still do this?)

I do in the region of 25k a year so I'm not fancying getting a loan for a car as by the time it's paid for the miles would be over well 100k and the car not worth much so I'm thinking hp is the way to go and just keep handing it back and changing every 2 1/2yrs. I know this is "dead money" but I think owning the car after a loan period in my case is not very beneficial.

So basically what I need to know is do you think hp is a good idea in my case and can you still hand cars back after half way through you agreement with no extra cost or back mark against your credit rating?

Thanks,

Pete.

Unless you know exactly what you are doing and understand the variable pitfalls with hp underwriting and vt you risk getting yourself into trouble.

Firstly you will want to find hp on a 5 year term and minimal deposit - most lenders now faced with this scenario will only lend on a loan agreement as it stops them getting the car back and losing money.

The longer the term and the lower the deposit the more chance of not getting hp.

Once you have vt'd one agreement it will be noted on your credit file and this may put future hp lenders off as they will be thinking you will do it to them unless they get a large deposit and repay over a short term with high repayments - so you may find terms tightened or just a straight decline in future hp lending

The half rule (vt) was only ever there to help genuine people who fell on bad times and could no longer afford the car - for the last few years with low deposits and extended repayment terms and high depreciation it has given all hp borrowers options to do as you are suggesting but beware - Lenders know what is going on and will continue to do what they can to protect their own interests.

Beware that your efforts to turn over hp companies do not come back to haunt you.

Pete.g

Thanks for all the advice guys looks like a trip to my local BMW dealer is called for to see what they can come up with.

To be honest the 318D would be fine as these days I'm no speed demon, I'd rather put the emphasis on comfort and fuel efficiency.

Thanks,

Pete.

Lemonade_Pockets

Pete.g wrote: »

Hi I am looking at changing my car what I'm posting for is I could do with a little advice regarding hire purchase.

Now the car I presently have I bought with a 0% credit card and when I sell it it will cover what is still owed on the card with not much left over.

I want a new car on hire purchase so I can hand it back half way through my term (can you still do this?)

I do in the region of 25k a year so I'm not fancying getting a loan for a car as by the time it's paid for the miles would be over well 100k and the car not worth much so I'm thinking hp is the way to go and just keep handing it back and changing every 2 1/2yrs. I know this is "dead money" but I think owning the car after a loan period in my case is not very beneficial.

So basically what I need to know is do you think hp is a good idea in my case and can you still hand cars back after half way through you agreement with no extra cost or back mark against your credit rating?

Thanks,

Pete.

Agree with everything else thats been said but thought i'd add/re-iterate what stand-up guy said in response to your previous question.

You can still voluntary terminate halfway through HP agreements (the same facility exists in PCP's too) and there is no penalty as such for doing this in terms of your credit rating. However your loan company will keep it on record and (not your credit record) and it will count against you when applying for a HP agreement again. In other words you might get away with it once or maybe even twice but it won't be long before you find yourself forced to look for personal loans as no-one will lend you it under HP terms.

'In mini rant mode' it is not what this feature of HP is designed for and like insurance premiums i don't want my interest rates going up just because some people decide not to pay up.