Hire Purchase worth just handing back?

randomnut

Hi,
Almost 2 years ago I purchased a car on a 5-year hire purchase deal at around £16k.

I currently have around £10k-ish left on the car to pay.

I do a lot of mileage (almost at 50k miles) so the car is estimated at around £7-8K value and decreasing faster than my payments.

I understand I can simply hand the car back half way through the agreement with no effect on my credit rating.

Is there any benefit to paying the car off in full? With its value decreasing so fast is the best option to wait until half way through and then cut my losses at that point and get a different car?

motorguy

On a five year agreement, typically you will owe more than your car is worth, probably until late in year 4 or early into year 5, so your situation in that sense is 'normal'.

Also, its not when you're halfway through the agreement, its when you've paid 50% of the total cost of the agreement.

If you are otherwise happy with the car, i'd drive on at it, unless of course you plan on buying something cheap with cash and driving that instead. If you're just going to finance another car over a similar timeframe, expect to be in exactly the same position with that.

randomnut

Thanks, its given me something to think about. I know cars depreciate the most in their first years of life but wasn't sure with my mileage if i'll ever be 'equal', or if i'm depreciating the car so fast continuing past the half way mark is a false economy.

I may just continue on, I keep being tempted by a mazda 6 but in honesty my current Astra is OK and with their lifetime/100k mile warranty I should be good on that front until around the 4 year mark.

OddballJamie

Did you purchase it on their 5 years 0% finance deal?

If you did, you should be able to hand it back at 30 months.

randomnut

No it wasn't 0%, but the car was 20% off, they seem to switch the offers around every so often but I think works out the same.

OddballJamie

Overall it works out the same.

Difference is with the 0% one it's straightforward to work out when 50% has been paid.

motorguy

OddballJamie wrote: »

Overall it works out the same.

Difference is with the 0% one it's straightforward to work out when 50% has been paid.

It'll be on the finance agreement when 50% has been reached, so no working out necessary.

motorguy

OddballJamie wrote: »

Did you purchase it on their 5 years 0% finance deal?

If you did, you should be able to hand it back at 30 months.

Only if they paid no deposit. If they paid a deposit, that becomes part of the total transaction, thus it could be handed back sooner than 30 months if 0%.

GwylimT

What is the mileage limit on your hire purchase agreement? Unless you set your mileage limit at around 25,000 when you signed the agreement you will be 'fined' x amount for each excess mile.

With five year deals the last two or three do seem expensive as of course cars lose the most money within the first two years, but thats quite clear at the start. So essentially you can pay £16K and have a car for keeps which you can then sell on in the future, or you can continue 'renting' cars. Long term, actually purchasing the car is the cheaper option.

eschaton

GwylimT wrote: »

What is the mileage limit on your hire purchase agreement? Unless you set your mileage limit at around 25,000 when you signed the agreement you will be 'fined' x amount for each excess mile.

With five year deals the last two or three do seem expensive as of course cars lose the most money within the first two years, but thats quite clear at the start. So essentially you can pay £16K and have a car for keeps which you can then sell on in the future, or you can continue 'renting' cars. Long term, actually purchasing the car is the cheaper option.

When do you set a mileage limit on a HP agreement?

GwylimT

eschaton wrote: »

When do you set a mileage limit on a HP agreement?

The standard agreements have a standard limit, but you can change the limit if you will be going over the standard limit, or if you will be doing much lower mileage you can lower the limit which will then lower your monthly payments.

If you have a car on hire purchase your contract will detail your mileage limit, now some detail the fee for excess mileage, some however don't and simply state that a mileage excess will be charged at the current rate when the car is returned.