Short term car finance

barryjohnsmith

Hi

I have just arranged to buy a car for £5,000. I need to finance it for the short term, probably around 6 months, until the proceeds of a house sale come through.

Obviously I want to avoid anything with repayment penalties. The dealer has been trying to get me to take out Renault Finance on a 5 year package, and tells me there is no fee for early settlement. Repayments look good, as does the APR. I'm just wondering whether what he says is true - I thought paying off an HP loan early always carried repayment charges.

I've also found a few loans that have no early repayment fees, but the APR is slightly higher and obviously they aren't as convenient to arrange.

The other option is to pay with credit card cheques. I've got a 0% and a 5.9% promotion with two cards at the minute, and there would be no problem repaying here. The only downside is the 2.5% fee they charge for the cheques.

Any advice?

Thanks.

peterg1965

I always thought, maybe in error, that the APR reflected the early settlement penalty. If the APR from renault is competitive I would take it and settle when you can, I also think they are limited to a maximum of two months interest as an early repayment penalty. If in doubt give them a call and ask.
This is the blurb form the RFS website:

You could, if you like, pay off everything you owe us by asking for a settlement quotation on 0845 300 3179. The calculation behind this figure varies depending upon the type of agreement you have and when it was signed.

If you have a Regulated agreement, (i.e. you are not a Limited Company or Partnership, and are borrowing less than £25,000), the formula we use to calculate the settlement figure is either specified by the Consumer Credit (Early Settlement) Regulations 2004 if your agreement was taken out after 30th May 2005, or the Consumer Credit (Early Settlement) Regulations 1983 if your agreement was taken out before 31st May 2005.

The amount of interest you pay will be less than you would have paid if the loan had run its full course, unless you settle very close to the end of the agreement term. In the first few months of your loan, the amount that you pay will include more interest than later on in the agreement. The FLA produce a leaflet which explains in full the calculation behind Regulated agreement settlement calculations. This leaflet can be obtained by calling RFS Customer Services on 0845 601 0033 or the FLA on 020 7836 6511 or online at https://www.fla.org.uk

barryjohnsmith

Thanks - that's really useful.

There are loans around with slightly lower APR's. But in my experience, when they actually get around to making you an offer, the APR is actually around 2% higher than advertised. So I think sticking with Renault is probably best.