Replace Car Finance With bank Loan

elfy1807

Hi.

I bought a new car January 12th 2014 on a 60 month finance.
It cost £9999.
My monthly payments are £218.81 after a £500 deposit.

Someone mentioned loans.

Having a little browse around, I could get a loan to cover the cost of the car over 60 months and the repayments would cost around £170-£180 - a saving of around £40 per month which I could use towards paying back my mum.

2 questions.

1) What is your opinion on doing this? Is it silly to pay a finance with a loan? Am I just going to cause myself problems?

2) Am I likely to get a loan after getting car finance so recently?

In my head it seems like a good idea - I'd have extra money each month available to pay back my mum/put into savings, but I don't know whether I'm being silly to get a loan out.
I already have a finance, which would be replaced by the loan, so isn't really too different.

Just curious on people's opinions

Thanks

bigadaj

Using the often quoted 50% of salary limits for borrowing you'd need to earn over £40k to refinance as it will be assumed that the loan will be in addition to the car payments.

Are there any penalties in repaying your current loan early?

Also if you're looking at a personal loan they don't have to give you the headline rate if they offer the money at all so the savings could be much less.

With hindsight a cheaper car would have saved you a lot of money but what's done is done.

elfy1807

I'm not bothered about the price of the car.
My old car had had it and was going to cost a fortune to get it to pass it's MOT, so in fact, buying a brand new car was the cheaper option.
Especially as it's an eco car, so it costs £0 for tax, my petrol use is better and I have no MOT until 2016.

In all honesty, I don't know whether there's penalties for paying my finance off early, purely because this is something I'm only just looking into. I'm trying to get as much info first before delving further in.

I'm aware I may not get the headline rate, which is why I used the word "could get a loan at..." rather than "can get a loan at..."

And they shouldn't assume that it's going to be in addition to my finance. That's wrong of the banks to do so, and I'll be upfront with them, telling them that I'd be getting the loan to pay the car.

I find your last comment about hindsight a little rude in all honesty, as if you're trying to make me feel stupid for buying a car. As if I hadn't looked at the possibilities of cheaper cars.
I don't have many other luxuries in life, so why shouldn't I buy myself a new car?
I have no issues with paying my bills, and don't even see it as a debt as such. It's something I needed and use every day.
I was just curious on people's opinions - whether they would get a loan to pay a car finance.

DCFC79

elfy1807 wrote: »

And they shouldn't assume that it's going to be in addition to my finance. That's wrong of the banks to do so, and I'll be upfront with them, telling them that I'd be getting the loan to pay the car.

I find your last comment about hindsight a little rude in all honesty,

They take the worst case scenario so will assume (an rightly so since the lenders can choose who to lend to) you wont use the loan to pay the finance off is what the banks will go with. In all honesty you could say what you want but wont chnage the fact that you wouldn't be obliged to pay the finance off.

So you find this comment rude " With hindsight a cheaper car would have saved you a lot of money but what's done is done "

Its not rude but an honest opinion.

imoneyop

elfy1807 wrote: »

And they shouldn't assume that it's going to be in addition to my finance. That's wrong of the banks to do so, and I'll be upfront with them, telling them that I'd be getting the loan to pay the car.

Yes they should, because that is what their experinece tells them could happen - so they will underwrite on the worst case basis and that is that you will get the loan and think stuff repaying the finance I'll buy some new shiny stuff

elfy1807 wrote: »

I find your last comment about hindsight a little rude in all honesty

If that is rude then you've obviously lead a very sheltered life.

As DCFC said, it is an opinion, pity you're not adult enough to accept someone else's point of view.

[Deleted User]

elfy1807 wrote: »

I could get a loan to cover the cost of the car over 60 months and the repayments would cost around £170-£180

Except you no longer need the selling price of the car.

You need the selling price, plus any interest due to the date you repay the car finance, plus any early settlement fees/charges.

You need to contact the car finance company, and find out the actual cost of settling now.

bigadaj

The OP needs to understand that they've taken a loan on a depreciating asset, which they'll find very difficult to refinance.

We've all given honest opinions but it's not what they want to hear.

They appear to have actually got a decent rate for finance, so borrowing elsewhere is unlikely to be beneficial.

[Deleted User]

bigadaj wrote: »

They appear to have actually got a decent rate for finance

It's 13.55%

Assuming the bank loan will be for the same amount as the car finance, ie. £9499, that would be around 4%

It's just a pity the OP didn't go with the separate loan to begin with.

dresdendave

elfy1807 wrote: »

I'm not bothered about the price of the car.

.

With that casual attitude to spending you are going to have a long road to becoming debt free. You should be "bothered" about the price of everything you purchase, particularly expensive items. I'm not suggesting you live like a hermit and never purchase anything, but always use the mantra, do I need it?, and is it worth it?

Pipz

1) What is your opinion on doing this? Is it silly to pay a finance with a loan? Am I just going to cause myself problems?

I initially had a Hire Purchase Agreement at 16% APR and eventually replaced this with a personal loan at 7% APR. The benefits to me were the lower APR and the fact the finance was no longer secured on the vehicle.

2) Am I likely to get a loan after getting car finance so recently?

It will depend on your credit history.

I was lucky to be approved for the credit, I believe this was only the case as I sorted it all out within a month so CRA's weren't necessarily updated between searches, I can't say for sure.

elfy1807

dresdendave wrote: »

With that casual attitude to spending you are going to have a long road to becoming debt free. You should be "bothered" about the price of everything you purchase, particularly expensive items. I'm not suggesting you live like a hermit and never purchase anything, but always use the mantra, do I need it?, and is it worth it?

I suppose I worded that wrong. I don't have a casual attitude to spending in the slightest.
I'm very aware of my spending habits.
There are so many things that I want or like, but I stop myself 97% of the time from buying things purely because I don't need it.
When I wanted a new laptop, I saved until I had enough money to buy one.
With the car, it was a necessity.
I work 10 miles away from where I live, and although we have public transport which would get me to the city centre, I would then have to walk 20 minutes to the outskirts of town where I work.
Getting home would be a problem though as buses to my town stop after about 630/7pm and I sometimes finish as late as 815, so would have to arrange lifts or get a taxi - so I might as well not bother doing that shift. So a car was a definite need to me.

Of course I was "bothered" about the price of the car, and looked at the possibility of getting an older car, but went for a newer car to last me longer.
With an older car, it could cause more maintenance costs in a shorter time.
At the moment, my car is under guarantee/warranty, whichever is the correct word to use, until 2016.
So anything that goes wrong with it (like the engine light coming on 3 weeks after I bought it), it goes straight to the dealer free of charge to me.
Obviously wear and tear problems are down to me, but they shouldn't occur as soon/as often as an older car like my previous one would.

As for whether this one was worth it - I absolutely believe so.
Firstly, my old car would've easily cost over £300 to get it fixed to pass it's MOT at the end of January. Then the cost of the MOT as well.
My new car doesn't need an MOT until 2016
Next - old car tax - £120 a year. New car tax - £0 due to it being an eco engine.

So between now and March 2016 I will be saving £300 fixing (plus any other maintenance fees in the meantime), £100 MOTs, £240 tax (and tax in years from then).
Petrol consumption is also slightly better in my new car.

I will admit, my whole car buying process was a bit quick.
I was planning on buying a new one this year, but due to having a low speed crash just before christmas last year, a new car before MOT was needed, which is why I didn't look into a loan beforehand.
However I made sure that I was able to afford the payments with my wages before agreeing to buy the car.

I live on £10 a week allowance (after bills, petrol, board etc).
This is an amount I have imposed on myself and very rarely go over it just because I have no need to spend it.
So no, my attitude to spending is not casual in the slightest.
I managed to knock down a £26 pcm phone bill with 1GB, 300 minutes, unlimited texts to £16 with 1.5GB, 2000 minutes and unlimited texts by telling my provider than other providers can do better for cheaper. If I was casual, I would've just let it carry on.

But thanks for your reply anyway.