Paying off Hire Purchase early

FirstTimeBuy_2

Hello everyone!

Hope I am posting this in the correct place.

I purchased a Seat Ibiza in March this year. Long story short, it was a big mistake and is definitely not the car for me (too small for me and my family). I am wanting to pay off my agreement with VW finance, sell the car and get a different one.

According to my paperwork I have borrowed around £12700 on a hire purchase agreement (pretty sure I was told it was PCP but too late to do anything now). I pay £212 a month. I have paid from March to August currently (£1272ish). Interest is charged at just under 8%. I rang VW finance to obtain a settlement figure, they quoted me £12333. This seems wrong as I have paid off much more than that, plus some of the overall interest should be deducted for me settling early, shouldn't it??

My thinking was to get a loan from my bank to pay the Ibiza off in full, then either privately sell the car and put the money towards a bigger car more suitable for my family, or use the car as part exchange to get another car. Either way, I am stuck with a nearly £13000 loan. I know it was my fault for buying a car I didn't like but unfortunately, there isn't much I can do about it now and I can't see any other way out of it.

So:
1) Why am I being penalised so much for paying off my car early?
2) Is there another option that I have missed??
3) Any other advice please??

Would really appreciate any input from anyone, thank you in advance!!

PS I am aware of the option of terminate my agreement and give my car back but I would still have to fork out £8000 and then would have no car so not a viable option unfortunately.

motorguy

FirstTimeBuy wrote: »

Hello everyone!

Hope I am posting this in the correct place.

I purchased a Seat Ibiza in March this year. Long story short, it was a big mistake and is definitely not the car for me (too small for me and my family). I am wanting to pay off my agreement with VW finance, sell the car and get a different one.

According to my paperwork I have borrowed around £12700 on a hire purchase agreement (pretty sure I was told it was PCP but too late to do anything now). I pay £212 a month. I have paid from March to August currently (£1272ish). Interest is charged at just under 8%. I rang VW finance to obtain a settlement figure, they quoted me £12333. This seems wrong as I have paid off much more than that, plus some of the overall interest should be deducted for me settling early, shouldn't it??

My thinking was to get a loan from my bank to pay the Ibiza off in full, then either privately sell the car and put the money towards a bigger car more suitable for my family, or use the car as part exchange to get another car. Either way, I am stuck with a nearly £13000 loan. I know it was my fault for buying a car I didn't like but unfortunately, there isn't much I can do about it now and I can't see any other way out of it.

So:
1) Why am I being penalised so much for paying off my car early?
2) Is there another option that I have missed??
3) Any other advice please??

Would really appreciate any input from anyone, thank you in advance!!

PS I am aware of the option of terminate my agreement and give my car back but I would still have to fork out £8000 and then would have no car so not a viable option unfortunately.

Most of your initial payments on a loan go towards paying off the interest, rather than reducing the capital borrowed.

What sort of Ibiza is it? You might get a shock when you get a valuation on it - they dont hold their value terribly well.

mark5

I'm guessing the 12700 is the amount of credit at the start of the finance.

The paperwork should give a total amount payable figure as well?

AdrianC

FirstTimeBuy wrote: »

According to my paperwork I have borrowed around £12700 on a hire purchase agreement (pretty sure I was told it was PCP but too late to do anything now). I pay £212 a month. I have paid from March to August currently (£1272ish). Interest is charged at just under 8%. I rang VW finance to obtain a settlement figure, they quoted me £12333. This seems wrong as I have paid off much more than that, plus some of the overall interest should be deducted for me settling early, shouldn't it??

Six months interest on an average balance of around £12,500 at 8% APR is about £500. You've paid nearly £350 off the balance. £870 accounted for of your £1,270ish paid. So that's about £500 in fees and charges for cancelling so early into the term.

I can't say I'm particularly surprised.

How long's the loan? Assuming it is a straight HP deal, then putting £12,700 and 8% into a loan calculator comes up with £220/mo repayments for a 72mo - 6yr - term.

mark5

Was there a dealer or manufacturer deposit contribution you need to repay because of the early settlement?

AdrianC

NewUserHere wrote: »

Unfortunately it's not legal to pay off a HP agreement early due to money laundering regulations.

This is, as we'd expect from NoBrainHere, complete and utter codswallop.

bazzyb

NewUserHere wrote: »

Actually it's true and factual.. Part of EU regulations.

No, it's a load of rubbish, but feel free to post a link to the source of this information.

AdrianC

NewUserHere wrote: »

Actually it's true and factual.. Part of EU regulations.

Ah, bless.

cajef

NewUserHere wrote: »

Part of EU regulations.

Which EU regulation?

NewUserHere

Fat_Walt wrote: »

Has daddy let you use his account to play on the Internet?

Got a few days holiday from my job as BA aviation mechanical engineer

cajef

NewUserHere wrote: »

The ones by the European Union

You appear to be very keen on spouting about EU regulations but when asked to post links to these regulations you seem to have a mental block and no link or proof is ever posted to any specific one in any thread you post in.