Advice re Hire Purchase of a Car

babelfish

Its not harsh Red-Squirrel but my question wasn't to ask about what she (or us) can afford in terms of buying a car. This is the only trouble when asking a question on MSE, that people often don't answer the question you ask but instead make judgements about what you propose to do!

Im simply asking about the pro's and cons of HP (being a HP virgin so to speak!) so I can weigh up whether we'd prefer a personal loan. In her new job she can afford the repayments whichever we decide.

davetrousers

babelfish wrote: »

If the car was to be written off at any point what happens about the HP loan?

She still has to pay it! Gap insurance is an option to cover it, but another expense.

Get a cheaper car.

Nearlyold

babelfish wrote: »

Its not harsh Red-Squirrel but my question wasn't to ask about what she (or us) can afford in terms of buying a car. This is the only trouble when asking a question on MSE, that people often don't answer the question you ask but instead make judgements about what you propose to do!

Im simply asking about the pro's and cons of HP (being a HP virgin so to speak!) so I can weigh up whether we'd prefer a personal loan. In her new job she can afford the repayments whichever we decide.

Yes know what you mean babelfish reminds me of the Harry Enfield character "You don't want to do that"


In answer to your question on HP and write offs.


The insurance company would pay the finance company the market value at the time of the loss for the written off car, the finance company would calculate the settlement figure for the outstanding finance (using the same calculation as for early settlement), any shortfall on the market value against the settlement would have to be paid by your daughter (which is why its advisable to consider GAP insurance) any surplus on the market value against the settlement would be paid to your daughter.

Red-Squirrel_2

babelfish wrote: »

Its not harsh Red-Squirrel but my question wasn't to ask about what she (or us) can afford in terms of buying a car. This is the only trouble when asking a question on MSE, that people often don't answer the question you ask but instead make judgements about what you propose to do!

Im simply asking about the pro's and cons of HP (being a HP virgin so to speak!) so I can weigh up whether we'd prefer a personal loan. In her new job she can afford the repayments whichever we decide.

If its just about which is the better financially, its a no-brainer. Paying less interest and having full ownership beats expensive HP.

I know what I answered wasn't what you asked exactly, but I've found that sometimes responses on here can be food for thought even if they weren't what you'd choose to read!

Good luck anyway.

babelfish

If we had a bank loan and the car was written off (just by way of comparison) then the insurance still only pays for the market value but repaying the loan early because of the car being written off means that you owe the loan company/bank less than you would the HP company in the same situation?

babelfish

Thanks Red-Squirrel, its always useful to bounce ideas around!

babelfish

The car in question should be about £10,000 if we went in and bought the same one brand new. However, we're buying it for £8250 because its a demo car. Its still brand new but its just got around 2000 on the clock. So, would there be a Gap in the first place? I think if this car were to be sold privately it would be about £8000, so that is the market value is it not?

Vikipollard

Sorry if I have missed this in an earlier post, but is there a reason why your daughter cannot apply to her own bank for a loan?


When my son bought his first decent car last year (which cost him £5k), - and I say that after his previous one was an absolute death trap, but at the time it was what he could afford (£900) - we went through all the options with him and in the end he went with a bank loan because it meant if he needed to, he could sell it. We also made him afford it out of the money he saved per month, not what he believed he *should* have left each month on paper.


I appreciate the genuine thought about you potentially getting a better rate, but it is a good opportunity for her to show her bank she has a handle on her expenditure.


Hope this helps.

Jon_B_2

Let her find a loan and do some research by herself. Maybe give her some guidance about interest rates and go through options

She's 25. Two years younger than me, I appreciate you are only trying to do your best by her (I have a child of my own), but it's the kind of life experiences she should be having now.

Another reason her getting a loan or HP herself will be to get a credit file up and running, in sure you're hoping she will be looking to fly the nest and get a place of her own and associated mortgage with it in the next few years.

babelfish

She has applied for a loan and was turned down, so this isn't an option. When doing a soft search for a loan on MSE the results show that she hasn't got a lot of chance of getting one. The HP company, however, have agreed her finance. This is why I was thinking her own HP loan would be better in the long run than us funding the car for her because her credit rating will be much better and stand her in good stead when she does fly the nest.

She was special needs at school and isn't very good at maths and that type of thing (she has something similar to dyselxia) which is why we're helping her so much!