What to do before buying a car on PCP

Geraldthegoat

Hi as a lot of you on here have I have a few debt issues that I've nearly resolved. I currently have just over £5k on an interest free credit card and a £9k loan. However I'm making massive strides to pay this off and should be clear by the end of the year and have some savings.

Now here's the interesting part, I need to order a car to comply with my works requirements under their car allowance scheme and I'm looking to do this around September. I don't have the cash to buy outright so I'm going for a PCP scheme. I will have the cash for the deposit and the monthly repayments are very affordable.

The question is how do I prepare financially before I order the car? I am currently making loan payments and paying the minimum amount on my card each month along with putting over a thousand pounds a month into a savings account. I also save another few hundred into another savings account that I get a bonus interest amount if I don't touch until February.

When I get to the end of July I will have enough money in my main savings account to clear my loan off completely. This would mean that when I order the car I will only have outstanding debt of about £4.5k on my card. I will be able to clear this off by the end of the year.

From the car lenders point of view is this the best plan for me or would I be better off clearing the card and just having a regular loan payment going out? Ideally I would like to clear both the card and loan before I order but this isn't really an option however due to the manufacture time I will be clear before delivery.

When I last looked my credit score I was over 900 but I haven't checked it since I took the loan out and consolidated things at the beginning of January.

I would appreciate any advice on this.

DCFC79

Your score of 900 or 934 or whatever it is now is meaningless. What is more important is your credit history.

Geraldthegoat

I have never missed a payment but if I pay a loan off early will that hurt my credit history as I technically haven't completed the contract as I have terminated it?

[Deleted User]

Paying off the loan early is fine.

Geraldthegoat

But is that better than paying off the card?

wileycat

To be honest pay off whichever has the highest interest rate first as that will save you the most money.

Its the taking out of credit that will temporarily hit you're score.

Cornucopia

What should you do before taking out a PCP?

- Check that the deposit + the payments are the kind of money you want to spend on a car over the period of the agreement. (Ignore any promises made by the Dealership on having a lump sum available at the end of the agreement).

- Check that a Lease would not be cheaper.

- Find out how much your Part Exchange is worth and how much discount is available on the new car, so you can be in a good position when you haggle with the Dealership.

Geraldthegoat

Thanks everyone. I've done all the sums for the PCP and that checks out.

I will continue with my plan to pay the loan off as I am paying interest on that all be it approximately £400 over the whole term but I will be paying it off when I'm approximately a quarter in, theres no early repayment fees. My card is 0% until July 2016 so there's no immediate rush to clear that but even with getting the loan paid, car deposit I should still be paying that off before the new year.

One thing I have thought of though. When I pay the loan off how long will things to show up to say that i'm no longer paying it? I don't want to be in the dealership and they turn me down for PCP because it looks like I'm making loan payments.

Nasqueron

CRA update typically once a month, if you clear in enough time for them to update that month it'll be on the next months report, if you miss the deadline allow 6-8 weeks (and no they won't tell you when they take the snap shot) - so pay off as soon as you can to leave enough time for the loan to be reported as settled and not impacting

Cornucopia

Unless car finance providers have tightened-up significantly, a loan and a credit card debt both in good standing won't be a problem, anyway.

When I completed the paperwork for the PCP on my new car, recently, I put down "Retired" for my occupation rather than go into the complicated nature of my finances. There was no issue with this, not even a query.

Geraldthegoat

Thats great to know I really appreciate everyones help.