New to this, keep the car on HP or buy it?

aliette

I'm hoping someone can help me understand this. I am a new driver. I bought a polo 1.4 diesel 2004 39000 miles for £5,675 in November 2009. I bought it on HP 13.8%APR duration 2 years. I was told that HP was much better and didn't question it at the time. Something to do with being able to return it to the finance company once it's half paid.

Total cost of financing = £1644

Now I have the cash in hand to repay it fully. Given how low interest rates are for any savings, it seems that the best thing to do it is to buy the car.

- Is there any reason not to? I'm very happy with the car so far. It's a bit small for the family and I would like one I can drive for very long distances (going to Europe over the summer). I would love to buy a slightly bigger one in the future but my income will most likely not allow it for a few years so until then, I think I will keep that one.
- Is it even possible, it's not mentioned in the HP agreement (with skoda finance)

Any help or advice, this motoring thing is completely new to me.

NickWarren_2

If i were you I would be calling Skoda Finance and asking them for an early settlement Figure, Which they will probably send you in the post, Then you pay it off and job done.

aliette

arggh I wish I had looked into it earlier. It seems the right thing to do, what about that thing of having to trade it in when you buy the next one?

kwaks

you could certainly ask for a settlement figure, however most HP agreements are set up so that you wont actually save much by paying off early, certainly worth the enquiry though.

aliette

I got the figures:

Purchase price: £5,675
Paid so far: £451.38 (+169 acceptance fee)
Settlement price: £5438.98

If I calculate that right, I have £6770 left to pay in the agreement (£150.46 * 45) (2 years minus 3 months already paid) so paying it now would save me £1331. Is that right

NickWarren_2

aliette wrote: »

I got the figures:

Purchase price: £5,675
Paid so far: £451.38 (+169 acceptance fee)
Settlement price: £5438.98

If I calculate that right, I have £6770 left to pay in the agreement (£150.46 * 45) (2 years minus 3 months already paid) so paying it now would save me £1331. Is that right

I'm a little confused, there are only 12 months in a year so how come 48 - 3 already made payments?

I take it you are on a 4 year deal not 2.

So it would seem that you are saving yourself a few hundred in interest each year.

Personally if I were you and I could afford to pay it off then I would be.

aliette

doh :embarasse:embarasse you're right. it is four years.

NickWarren_2

I'd still be paying it off if it were 2 or 4 years, unless its going to lead to financial problems a few months down the line?

aliette

Thanks, Yes I do expect difficulties (recently single mum with 2 kids) so i have to use the cash I have wisely. I'm cutting expenses left and right to match my income and expenses but it still seems the right thing to do. £30 a month of interest is a lot.