High mileage commuter options

dpaterson

Hi everyone,

I'm brand new to this, so hopefully I'm not breaking any rules or cross-posting - please just point me in the right direction if I am!

I am thinking about replacing my car, and wondered if anyone can give me some tips on what might be the best finance option.

I do somewhere between 15 and 20k miles per year, but the majority of this is commuting from home to my office (approx. 50 miles each way, four days a week), a tiny bit is for business (for which I claim mileage from my firm) and the rest is social.

I seem to be stuck in a cycle of negative equity - the purchase price of the cars I've gone for have never been more than £10k, yet I'm currently paying >£230 per month on a five-year finance deal. I'm keen to get out of this and wondered what my options are.

Am I better keeping this car until the loan runs out, by which point the car will be worth next to nothing, but at least I will own it outright; or should I be looking to get out of this agreement early and upgrade? Is a personal lease better than HP for my circumstances?

The dealer I've been using recently valued my car at approx. £6,500 (though had grossly underestimated the mileage) and I've still got approx £7,500 to pay on the loan (I am two years into the five-year agreement).

Spending so much time in my car, I'd really like to go for something that isn't the base model next time, so any pointers would be much appreciated!

Herzlos

Your best bet at breaking the equity cycle is to hold off upgrading a bit longer. If you trade in now, you're going to just add that £1k difference onto the next loan.

I'd let the current finance deal complete, and then see how you're getting on. The car will lose less money in the next 3 years than it has over the last 2, especially if you've put 40k miles on it already.

I'd only recommend upgrading now if you'd save the money back in fuel costs, or really needed something more comfortable.

facade

Don't go for dealer finance unless you are buying brand new. The interest rates on second hand are huge, which is why you are paying back 60*230=£13800 on a £10,000 car.

A new one has lower interest rate, and usually manufacturer "contributions" that make the repayment about the same, or less, for brand new than 12 months old.

When you replace the car, try and get a personal loan (if you intend on keeping it), this will be at a much lower interest rate than finance. (But you cannot hand it back when you have paid 50%- a VT)

As to the current car,

• ask the finance for a settlement figure, then it may save money if you get a personal loan to pay it off (over the remaining two years- don't do it to reduce the payment by stretching it over longer than you had left).
• Just keep paying until the finance finishes.

If you want to drive a brand new car every three years, and never actually own anything, consider a 3 year PCP deal on something that is on offer, but do the sums as to what you will actually pay over the PCP.
If you think you might buy it at the end of the PCP, add the balloon payment/36 to your monthly payment, as you will need to save this amount to buy it. (When you do this, PCP is likely more than the subsidised manufacturer finance on a brand new car over 3 years the same, as PCP makes money for someone!)

Avoid PCP on a second hand car full stop, it costs too much in interest, and the car goes out of warranty, so if it breaks you are in trouble.

JP1978

High miles doesn't automatically mean worth nothing, it will always be worth something.

My 92,000 mile 61 plate Skoda is still worth something and will be worth something when its done over 100k.

Your 20k/annum over 5 years is 100k - what miles did the car have on it when you purchased - I personally have never bought a car on such a long term, a, as I like to swap cars every two to three years and b, with the high mileage I do, if it turned out to be unreliable within the finance, I would be stuck - max for me has been 3.5 years for the current car and that is now paid off.

As long as your car is been reliable, keep with it at least until the point (assuming its an HP) of the 50% VT point - and then depending on the reliability, do a VT. However, you would then be starting a new finance off for a new car with no or little deposit I assume and so be in the same boat. Better to keep the car as long as you can so at least you have some deposit on the next one and ultimately, keep lowering the length of the finance

Mercdriver

Dealer finance isn't always sky high. I bought my Mazda from Eden in Taunton. It's a model that is just under 2 years old. Added extended warranty that goes a year beyond the end of the finance. Finance is 0% for 3 years. No deposit was necessary, but I used my Merc as a £6250 deposit. Payments before extended warranty are £377 a month. If I wanted to pay over 4 or 5 years they were offering 3.2%. I had the money to pay outright but decided 0% finance was a good option.

harrys_dad

Mercdriver wrote: »

Dealer finance isn't always sky high. I bought my Mazda from Eden in Taunton. It's a model that is just under 2 years old. Added extended warranty that goes a year beyond the end of the finance. Finance is 0% for 3 years. No deposit was necessary, but I used my Merc as a £6250 deposit. Payments before extended warranty are £377 a month. If I wanted to pay over 4 or 5 years they were offering 3.2%. I had the money to pay outright but decided 0% finance was a good option.

That is because you paid virtually £20000 for a two year old Mazda. All the interest is in the inflated price.

Mercdriver

harrys_dad wrote: »

That is because you paid virtually £20000 for a two year old Mazda. All the interest is in the inflated price.

It was bang on the dealer selling price suggested by several online valuers - Parkers, What Car, and more, so no I didn't over-pay. Below average miles (though I'll soon sort that out) top of the range Sport Nav CX5 with safety pack. I didn't underpay, but the price wasn't inflated.