19% APR on car loan

RRS

Both our old cars are dying after years of daily use. One of them is a huge 2.4l petrol MPV which does 23 miles to a gallon. I do drive about 50 miles a day now to work and school runs. Thinking of getting rid of 1 car and upgrading the MPV as need it for the family. Credit rating is not good but a very, very well-known used car dealer in london has offered me 8k at 19% APR.

Is 19% APR too high? What should I do? Looking at the prices of MPVs, I think I'd need 10k for a decent used 7 seater. I love the 'big car' but it does only 23 miles to a gallon of petrol and road tax is £25 per month.

Please advise me as to what to do. Where can I get a cheaper loan with a bad credit history (DMP, no CCJ).
Thanks in advance.

[Deleted User]

It's high but that's probably the best you can get with a DMP. Are you even allowed to take further credit on a DMP?

What savings do you have? Best idea by far is to pay cash.

RRS

Thanks a lot for your reply. The DMP started in November 2012 and we are 75% debt-free. I will ask about being allowed to borrow but I am sure a small-engine diesel car with half the road-tax will pay for itself as I drive. We'll get rid of the other car as well.

DCFC79

Didn't think you could take out more credit when in a DMP, you may need to rethink the idea.

RRS

I have looked it up. You can but I think you are right. I should rethink it, go down to one car and try and reduce the mileage. My wife has never been on DMP and works. Maybe she should try.

Thanks for your helpful replies.

DCFC79

RRS wrote: »

I have looked it up. You can but I think you are right. I should rethink it, go down to one car and try and reduce the mileage. My wife has never been on DMP and works. Maybe she should try.

Thanks for your helpful replies.

Yes maybe she should try and get accepted.

If your financially linked then it might not work.

lopsyfa

My advice is don't do it. Downgrade to one car and keep paying your DMP. Once that is done, start savings and once you have enough savings buy the car you want cash down.

Let's assume you do 1000 miles a month and you replace the car (doing 25mpg) with a more efficient diesel that does 50mpg, monthly you'll save like £90 on fuel (it will probably be less if your mileage is not on the motorway). If you add the £25, that will be a savings of £115.

However, on the new car, if you pay a deposit of £1000 and finance the £7k at 19% APR for 36 months, that will be £257. So you will be roughly £142 worse off. If you factor in the residual value of the newer car, maybe not that worse off but you won't be better off.

RRS

lopsyfa wrote: »

My advice is don't do it. Downgrade to one car and keep paying your DMP. Once that is done, start savings and once you have enough savings buy the car you want cash down.

Let's assume you do 1000 miles a month and you replace the car (doing 25mpg) with a more efficient diesel that does 50mpg, monthly you'll save like £90 on fuel (it will probably be less if your mileage is not on the motorway). If you add the £25, that will be a savings of £115.

However, on the new car, if you pay a deposit of £1000 and finance the £7k at 19% APR for 36 months, that will be £257. So you will be roughly £142 worse off. If you factor in the residual value of the newer car, maybe not that worse off but you won't be better off.

That is good advice. Our finances are not linked so my wife has been approved. They'll phone her tomorrow with details. If it is more than 9% APR, we'll say no.

System

RRS wrote: »

Both our old cars are dying after years of daily use. One of them is a huge 2.4l petrol MPV which does 23 miles to a gallon. I do drive about 50 miles a day now to work and school runs. Thinking of getting rid of 1 car and upgrading the MPV as need it for the family. Credit rating is not good but a very, very well-known used car dealer in london has offered me 8k at 19% APR.

The cost of the finance will more than wipe out the fuel savings you make and then some. Even if the finance was at 0% you're going to end up poorer, considerably poorer and I don't think you understand how much.

250 miles a week, lets call it 12,000 miles a year. 23MPG @ £5.30 a gallon = £2765 in fuel.
12000 miles a year at 40MPG @ £5.30 a gallon = £1590
Total saving in fuel: £1175.

How much are your car payments going to be? How much is the annual depreciation?

Assuming £10,000 car bought over 5 years at 0% APR you're going to be repaying £2,000 a year leaving you £825 a year worse off than now plus any impact of depreciation as well.

All of a sudden does that 23MPG look as bad as it did?

Sell the other car, bank the money to cover costs of repairs on the MPV. You're in a DMP and the last thing you can afford to do is be £800-£1000 a year worse off than you are now.