Car Finance Dismay!

CraigBry

Hi, new to MSE Forums but looking for some urgent advice.

I purchased a car using finance a little over 2yrs ago over 5yrs. At the time the costs all worked out and it made perfect sense. However, circumstances have since changed and the car has become an expense I can no longer easily afford.

Being my first financed vehicle I have no idea what my options are (if any) other than to see the agreement to the end (33 x @£230p/m).

Furthermore, how I should finance a replacement vehicle to make the necessary savings.

Any help here would be gratefully received

Kind regards

Craig

Britnall7700

What makes the current Car unaffordable? The finance payments? Fuel? Tax? Insurance?

What's the Car worth vs. what you owe?

On the back of that, what makes you think that changing Cars would reduce costs?

CraigBry

Thank you for the quick response!

Entirely the finance outlay, £230p/m as a family car seemed affordable but we are no longer together but the car was in my name alone.

Fuel, tax and servicing is relatively cheap but at this moment in time a shiny new-ish car means nothing, i'd rather have more money to spend on my children.

I think a reasonable outlay would be £100p/m on an older car but I need rid of this one and work out if finance or a loan is the correct route.

Thanks again

Craig

Britnall7700

What type of agreement did you purchase it under? Hire Purchase?

There are rights on agreements like PCP, such as the 'voluntary termination' clause. Not so on HP.

£230 is quite a lot per month, but it's certainly not a crazy amount. The Car would have been about £12,500 when you bought it, right? What's it worth now? If it's worth less than you owe now then you'd lose out as you would need to find more money to pay off the loan. If it's worth more than you owe then that opens up more avenues.

Also worth considering running costs. A £100/month Car is likely to be older/higher mileage/other unknown quantities. At least you know your current Car. What's to say a new Car wouldn't throw a big service bill? Not that your current Car is immune to that, but worth bearing in mind.

CraigBry

Correct on all counts there!

I believe it was HP, £7500 outstanding, £6500 settlement figure and the car is probably worth £6000. All very valid points about the risks on the older car but I can't see any other way of making savings as the car is the biggest bill outside of the house.

Is it correct at half the agreement term I could give the car back? but what issues could this cause?

Thanks again

Oakdene

If its HP Im not sure you can hand the car back on a VT...

Britnall7700

I don't believe you can VT on HP.

Just on the VT / PCP, it's not 50% of the term in months, it's 50% of the agreed finance value. More often than not, that's more likely the 75-85% term in months. Easy enough to work out if you have the figures. Although it sounds like it doesn't apply here.

You could sell the Car, but technically you should clear the finance on it first to make it yours before doing so. Any prospective buyer should check it's clear of finance before buying, but that's their prerogative.

Another option would be to take a loan for the settlement figure over an extended period to reduce the monthly payments. So that £7500 over a new 5 year agreement.

My biggest bill after the household stuff is the Car but rightfully so, it's something I enjoy and it's the most expensive thing I've ever bought.

Britnall7700

Although I do stand corrected on VT on HP, based on information given by the Money Advice Service.

With hire purchase (HP), you can return the car early if you’ve already paid for at least half of its cost or make up the difference between what you’ve already paid and half of its cost.

(source: moneyadviceservice.org.uk/en/articles/cut-your-car-finance-hire-purchase-and-other-finance-costs)

CraigBry

Thanks both... perhaps I'll call the finance company, be honest and see what my options are. Good shout on the loan too, well worth a look into.

Thank you!

Britnall7700

Let us know the outcome, it may be helpful to others.

CraigBry

Definitely, lots to think about but all positive