HP with sky high APR

dilemma10

Hi All,

Am pondering what to do with my car. I am tied into a 5 year HP deal on a Citroen DS3, the APR is sky high (34.9%) and the settlement figure requested against the current value of the car is pretty much like-for-like if not slight negative equity. I am now 2 years into this deal and given the high APR it's showing up as a massive amount of borrowing on my credit file, which I am keen to continue to repair.

I do a lot of miles in my car and affordability is now no longer an issue as I have a good wage but my credit rating isn't fantastic.

Would leasing be a better option for me, does the car value show up as the overall amount borrowed?

I have called them up to renegotiate APR but this does not seem to be an option.

I could sell the car and attempt to make up the negative equity difference but really that would mean starting again and without a fantastic credit rating, I cannot seem to secure better deals.

I am a little bit fed up with the situation - the only other option is to save up towards owning my own car but this is not a priority for me.

Any thoughts?

forgotmyname

Buy a slightly used car and save money is not a priority?

Paying money to return a car seems silly to me. Give them say £2k and hand it back. Paying to not have it? Just stick it out and dont make that mistake again?

thescouselander

There's loads of options on how to get a car but one thing you should definitely do it try to end the arrangement you have at 34.9 APR.

If you like the car and it's in good nick it might be worth just settling the HP agreement and refinancing somewhere else at a better rate as you'll have already taken most of the hit on depreciation. If you get a lease car you'll be paying for another lot of depreciation in addition to your HP settlement costs.

Mercdriver

You can often get an idea of what loans you can get with a soft search. If you sign up to Noddle or Clear Score they will often give you links to personal loans that you might be able to get - certain loan providers will do a soft search that isn't seen by others. This will give you an idea of APRs you might get.

System

Leasing is not a better idea as most leases come with low annual mileage limits usually 10,000 miles a year or less. Go over that and you pay a per mile penalty.

foxy-stoat

Find out when the half way point is and VT, buy a cheaper second hand one.

AdrianC

35% APR on a depreciating asset...? Wow. Over the course of that loan, you'll have paid nearly 220% of the original purchase price for something that'll be worth a fraction of that original purchase price...

You're two years into a five-year contract - so, no, you can't just phone up and say "I'd like to pay you less money for the same thing, please". You wouldn't like that boot to be on the other foot, would you?

You are tied to what the contract (and law) defines for early termination, and the costs they calculate.

Cornucopia

Depending on your exact requirements, a Lease could work out better. The built-in interest rate will certainly not be 34.9% or anything close.

Leases are specified as X + Y *payment, e.g. 3+35 @ £192.22pm. This means 3 payments down, and then 35 monthly payments. There will be an agreed mileage pa as stated above. In many cases, you can go searching online for the best deal on the car you want and then collect from a main dealer locally. Some lease rates will be specified as Exc VAT - in which case personal buyers need to add 20%.

I would have thought that building a credit history was as much about borrowing and paying back without problems as it is avoiding borrowing in the first place. As such, I'm not sure I'd worry too much about whether a leased car's value will appear in your credit history.

Questions to help you get more specific advice:-

- How many miles is "a lot"?
- Roughly how much negative equity?
- Would you be looking for a similar car again, or something different (is part of this that your needs have changed?)

debtdebt

Why was the 35% apr rate acceptable at the beginning of the term but not now?

rich13348

You can make overpayments on the loan. This will mean the principal amount will be paid quicker and less interest accrued and the debt paid quicker. You could pay something like 50 or 100 extra each month and you will pay it off quicker and less interest to you.

foxy-stoat

debtdebt wrote: »

Why was the 35% apr rate acceptable at the beginning of the term but not now?

Maybe they have just read the paperwork?