Advice re Hire Purchase of a Car

babelfish

She's applied to her own bank as well as Sainsburys. Sainsburys approved her but when she rang them up to query the details they asked her a few more questions then rejected her application. I don't know why because her pay and outgoings were all in the original application.

beSavvi are given a 50% chance of accepting her but Im worried if she applies a fourth time (including her accepted HP finance) this will badly affect her credit score.

andyfromotley

Its fairy straightforward.

If you want her to do this on her own then HP or preferably a loan (if eligible and cheaper) is the way forward.

If you want to take out a loan for her, this will almost certainly be cheaper, (dependant on the APR offered) and will save your daughter hundreds if not thousands in interest. Its a nice thing to do but you have to recognise that it comes with risks for you. No matter what happens YOU will be responsible for this loan, if she smashes up the car, get the sack, falls ill and can't work,just decides not to repay you, goes to prison or heaven forbid dies, you will still have to pay the loan. As long as you understand that and accept the risk then why not. Do be warned though that these boards have regular postings from people who did exactly that thinking the car owner would always pay, but guess what, they stopped paying!!

In general ime car HP deals are nearly always worse than straight loans to finance cars. But you will have to crunch the numbers thoroughly to make sure that this is the case in this instance.

Hope this helps.

Swami_Trinel

babelfish wrote: »

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?

There will always be a gap because the cars value will fall every year of the HP agreement. In fact, the value of the car will drop the second your daughter gets in it and drives off the forecourt. Unfortunately the cars value will fall faster than the amount outstanding.
Also what an insurance company considers to be market value may disappoint you. If you're buying the car its either gap insurance or drive very carefully.

FWIW, out of absolute necessity I bought a car through Red Potato 30 months ago. Since then I've rebuilt my credit score and just got a loan from Zopa to repay the HP settlement figure in full. This has saved me nearly £1000.

dcouponzzzz

I'm not a fan of HP agreements with the final purchase cost, not to mention the 3-6p per mile you add on to that final payment. I have a joint mortgage (since 23) with my sister which likely contributed to me being accepted with Tesco Loans for a personal loan at age 25 for my first car. The problem being that the advertised interest was 3.6% and I was offered 7.8%.

I did this the complete opposite to you. My parents paid for the car outright... deposit on a credit card and pension/savings for the rest. I took the loan out and gave them the cash, so they were out of pocket for a day at most, but the car was a cash sale and I had full ownership.

This was an unsecured loan, so any slip up from me would cost big... I've since swapped cars to a secured loan with Hitachi Capital, which is much less risky, like a mortgage because the finance is linked to the asset.

I agree that independance is important, but as her guide you should try your best to pass on what you've learned from living it all yourself. This should mean that not only should your daughter be able to afford the payments, but she should have enough left over to create an emergency fund (insurance excess?), a maintenance fund, and still save for holidays and big purchases (maybe a mortgage deposit). My parents didn't impart this wisdom on me (or I didn't let them ) so now I'm picking myself up and admitting my mistakes.