Car lease coming to end - end payment looming choices?

Tunster2

Hello all!

I've done plenty of research but want to get some clarification from people and spell out my circumstances so I do the right thing. Hope you can help me!

3 years ago, I took out a lease agreement on a brand new MINI Cooper S and got finanaced through the companies finance company. Quite surprised at the age of 21, I got a 3 year lease agreement at £300 a month on a £21500 car. Luckily I put £4500 down as a deposit (trading in my old car and £1000 from my parents). I know the APR was quite high (somewhere in the low tens), so it seems I've been paying high odds on £6500 to get to the bubble payment which is 6 weeks away.

I know I don't want a new car. 9 months ago, the salesman who sold me the car couldn't get me an upgrade and only offered to wipe the finance and expect me to £4000 down again for a new car. I knew they weren't interested in doing me a good deal (typical car company tactics). He's trying to do the same now and loop me in a new car by trying to sell me the next car up. As much I'd love one, I'm not prepared to pay £300/month on a car again.

So my aim is to keep my current car, take it off MINIs hands and get HPI check clean by getting a personal loan if I want to sell it in future. The bubble payment (or value of the car they calculate after 3 years) is £10500. Now, I know the car privately can fetch £2500 - £3000 more as it has very low milage and I'd be a mug to give it back to them. Especially as they could sell it on their forecourt for a grand or so more. Also, I want to get £300/month down by at least £100-£150 so I can get saving more as a flat/house is my priorty now at 24.

With £3500 in savings (I know I should of put more away in the last 3 years, but I'm reluctant to pay off the car with that). I know Martin's rule is to minimise your debts as much with savings. Here's my options below and questions I will need answered...

1. Buy the car from MINI - Take a personal loan of £10500 at 7.1% and pay £208/month over 5 years (I achieve £100 less a month and put that into savings) and keep my savings as a security.

2. Buy the car from MINI - Put the £3500 into paying it off and get a £7000 loan over 5 years at £148/month. That's £150/month into savings.

3. Give the car back for nothing (option part of the lease agreement and I know I won't have to pay anything as I haven't gone over the milage limit) and put my £3500 into a cheaper car (maybe a year old car with it's valutation plumped down) and then target for £100-150/month car.

4. Any other ideas?

My car currently is not essential (work is like 10 - 15 minute cycle) and I'm possibly going to benefit from a new job soon in London. In my mind, I'd be wasting keeping my low milage MINI but at the same time; I know it's history and has been really good to me. Moving out is priority and I want to get my monthly outgoings down without losing out.

Also, on a loan above; what would be the calculations for terminating a loan early by repaying it well ahead of the duration (if I sold the car privately and wanted to kill the loan). Are there any consequences on credit rating?

FLAPJACK

Hi.

I am in exactly the same situation, albeit I still have 28 months to go until I am where you are as regards the bubble payment.

My situation differs in that took this way of financing a car because being retired I looked for a new car as maybe one to have for the rest of my days ( had the last one 11 years).
But it also gives me the option of trading it in for a new one again next time...as I have no mortgage I look on the payments as one.. therefore every 3 years having a new car with the servicing paid for ..or even free.
Also if my finances hit trouble within the 3 year period I can always trade it in and use the value of the car to downgrade to a cheaper but still new car outright, or stay at the same grade car at a year or so older.

For you though you have other things in life to finance. Looking at your options..(well researched btw) one thing you have to bear in mind is that the value of the car (like all of 'em) is dropping by the day.

If you were to finance for another 5 years you would be paying out for an 8 year old car which will have dropped a lot in value. I think on balance your best option is number 3 I think. Least of all it means you can pump up the monthly savings!

On the credit rating front the fact you have been paying regular for 3 years will have helped it....wouldn't have thought paying a loan off early would damage it though.
As for a charge for paying it off early...as it's only 6 weeks away maybe a months interest? not sure...Should be a clause in the Credit Agreement small print concerning early settlement.

Another angle is... if you are moving to London....will you need a car??
Congestion Charge, parking charges, possibly higher insurance?.

But I do realise that once you have had a car it IS very difficult to live without one....just knowing it's there and you can go anywhere.
A friend of mine lives in London (without a car) and says it works out cheaper just to hire a car if he wants to go anywhere long distance i.e weekend deals and discount for regular hiring....just a thought.

The bottom line is "You never win with cars!", mind you Chris Evans just paid £12m for a Ferrari...so maybe you do!.;)

Tunster2

FLAPJACK wrote: »

The bottom line is "You never win with cars!", mind you Chris Evans just paid £12m for a Ferrari...so maybe you do!.;)

Very true! I kind of wished I'd saved up much more after I got my job promotion 3 years ago and gone in with more deposit. However, I cannot change that and now can easily say I've bought/owned a new car. That temptation won't be as great.

I do see what you say about going for a 1 year old car. I could trade in my MINI for a Cooper D (knowing about the fuel going up), but not having my comfort of the car I already own would be difficult to give up. Taking on a car with a history I know nothing about is risky and keeping my current car with very low milage for it's age will keep to the higher tier of a private sell is still an option.

I have just come across the MBNA credit card option and take out a money transfer of £7500, pay £200/month at 5.9% and only take 4 years to pay it. The beauty of this would be if a new job appeared (I'm not tempting a move to London yet, just the thought of £4k/year on trains a possibility), I could sell the car with no penalty and pay off the credit card quickly and take "some profit". I know that depends on the value of the car, but it's an option if I can get the MBNA Rate for Life card.

So many options!

laurel7172

If you are absolutely sure you could sell it for a profit, why not take out a loan that allows early repayment, buy it, sell it, pay back the loan and add the profit to your savings? You could test the water by advertising it now...it would be nice to have a buyer lined up...

I think...and I'm sorry if this is wrong...that what I'm hearing is that you know having this car makes no financial sense, but you love it and you'd really like to keep it. And that's fine, as long as you decide that's your priority. It *is* an expensive, though definitely rather lovely, thing to have. But do you want it more than you want £10500 (plus interest) towards a flat deposit? Only you know...

Tunster2

laurel7172 wrote: »

If you are absolutely sure you could sell it for a profit, why not take out a loan that allows early repayment, buy it, sell it, pay back the loan and add the profit to your savings? You could test the water by advertising it now...it would be nice to have a buyer lined up...

I think...and I'm sorry if this is wrong...that what I'm hearing is that you know having this car makes no financial sense, but you love it and you'd really like to keep it. And that's fine, as long as you decide that's your priority. It *is* an expensive, though definitely rather lovely, thing to have. But do you want it more than you want £10500 (plus interest) towards a flat deposit? Only you know...

The car is kind of essential. I'm not 100% sure I'll end up in London because of the way the way jobs are difficult to come by and if I end up with something more local, I will need the car.

I certainly want the flat/house. However, selling the car at a profit would leave me at possibly 5 or 6k profit and no car. I'm happy to keep the outgoings low for 3 to 5 years and keep the car until it's 6 - 8 years old. I see no harm in that as long as it doesn't develop any major problems. I don't know that, so it's a risk. The alternative would be to go for a smaller new car without any deposit and keep the profit of the car. That means no MOTs, little servicing (most manufactuers include it now for the warranty of the car) and reduce outgoings. Any new job after I do this would help allow me to save even more.

Maybe I need to think about my priorties a bit more. I just need some guidance on my options before I pull the trigger in 6 weeks time.

ali-t

If you get a 5 year loan you will have been paying for the car for 8 years - is it really worth it? I would use the savings and get a loan over a much shorter period of time paying what you currently pay towards the car so you could borrow £7000 for £318pcm over 2 years. If you don't NEED a car just now you could be free from the car in 2 years.

But hey, what would I know I am up to my neck in debt lol If I was 24 I would do as I suggested above and that would prevent getting to 29 and still paying off a bloody car loan on a car that probably doesn't even exist now.

drbesty

From what I work out by the time you've finished paying it off in 5 years you'll have paid nearly £30k for a Mini, does that not seem a little crazy?

Tunster2

drbesty wrote: »

From what I work out by the time you've finished paying it off in 5 years you'll have paid nearly £30k for a Mini, does that not seem a little crazy?

It does when you look at it that way, but kind of serves me right for not saving enough in this 3 year period I've had the car, or I could of technically paid off the car with my own money

I'm just not 100% on what to do. This is why I'm in such limbo. I'd rather keep the car than put the money into another older car I have no idea of its history and possibly costing me more money in the long run.

This is why I'm asking now and still 5 people onwards, I'm still unsure on what to do.

notafan

If you've been driving around in a brand new mini for three years and paying £300 quid for the privilege then i think its safe to say you loved the car. But its now 3 years old, its MOT's are now annual and you could technically go and get another brand new car for that sort of money or at least a younger model. Chances are if your into your cars that much you'd rather have a brand new one anyway at some point during the time of the loan you'd have to take out, and that's more expense then.

If your not sure I'd say give it back, your committing yourself to pay another 10k on a car that already cost that much and will be 8 years old at the end of 5yr loan . Don't get in more debt for it when its getting into the phase were all its problems start to become your financial responsibility. Regardless of make the older the car the less reliable. If your moving to somewhere new, keep your savings, give the car back and put the 300 (plus insurance, fuel, tax etc) you've been paying into your savings in the meantime.

That way if you move or not you've got the option of using it for another car or a house deposit when you're sure of what your doing, and if you go for another car your loan will at least be that bit more cheaper because of the extra you've saved in the meantime.

EDIT - i forgot the money you put down already, if you've paid that much already then don't commit to paying even more for upto another 5 years

If you give it back your then at to square one again, you don't owe anything on it and you have some savings.

As a bit of different answer - if you love the mini that much why not get one a bit older or higher mileage but one that you can buy out of your savings directly. I know i said about repairs on the older ones but at least you wont be attached to a loan you'll own a car outright so and repairs you could cover by that loan payment if necessary you can sell it whenever if you move or need the money, still own a mini which won't be massively different to the one you have, and then you can still put the money you would have spent on a car towards a deposit for a flat/house?

jonjamie1970

I have been in a similar situation in October, I had a 330ci BMW that cost me £580 per month...... I know I know. Anyway I traded it back in and they gave me the equivalent to the balloon, wasnt worth refinancing as by then it was 4 years old. I dropped down to a 1 series 123d which is lovely but part of me is regretting taking on more finance again, albeit half as much.

My advice for what its worth is to give the car back, see what its like without for a while and give yourself a few weeks before deciding what to do. Borrow a car or use the train and tube for a while and enjot the money.

lawrie28

So, the car cost £21k, and you put £4.5k down to get your monthly repayment to £300. After 36months at £300, (£3.6k) you will have spent £8,100 on this car? Is that right, or have I lost something, because you then say that the balloon is £6500?

The thing to do is firstly, confirm how much for you to buy the car. THen, as suggested, advertise the car to be sold and see if you can sell it for more, making a quick buck (always nice, and a surprise with cars). Remember though, this is not profit, this is just reducing the amount the car has cost you over the last three years.

Then, you need to find yourself another car - one that cost £3-4k should be sufficient - a little corsa/micra/fiat500/C1/Aygo etc that is cheaper to run as well (less road tax, lower insurance etc.) Use your savings to do this, and then put the £300 per month car cost PLUS whatever you where normally saving in the bank. This will quickly return your savings pot, and mean you pay no interest on the new car.

It may be nice to have the mini, but as you said, it is a luxury.

If you wanted to be clever, hunt yourself out a nice cheap convertable, then sell it in the summer and you should make a few quid, as people pay more for a soft top when the sun is out. (£4.5k will get you a used megane CC with hard folding roof)

If you wanted to keep the mini, you wouldn't come on here, you would have got the loan already. Get rid of the car, it will eat money (MOT, Service, Tyres all will need doing soon......) and the value will fall when they inevitably, if they havn't already, release a new model.