Getting a car loan when you've recently had credit

RedBetter

I was recently in the process of buying a car. Took out a loan of £25k through Tesco, planned to pay £10k of my own money (£35k purchase price).

When it was time to pick the car up, it became clear that it had been in an accident so the purchase fell through. I paid back the Tesco loan instantly (within the 14 day cooling off period).

I then realised Halifax do car loans with a pretty low APR. I got an instant quote through my online banking and was approved for the full amount at about 3%, valid until October.

It's taken a couple of months to find another car of the same spec, but I've finally found one so logged into my online banking to check the loan was still available. Unfortunately, there was a message to say that they could no longer offer me credit. Called up the bank and the lady said it's probably due to the fact I have the Tesco search on my credit report, and there is no way they can now offer me credit.

I think I'm going to get the same issue applying for a loan anywhere now, I've tried one of the "compare the market" sites and it looks like my only options are going to be someone like Amigo (49.9% APR, no thanks!)

I'm 27 years old, living rent free and earning over £60k a year. Outgoings are minimal (Currently able to save over £2500 a month), and I have about £60k in savings. Is there anywhere I can apply for a loan with a supporting letter to the underwriters to explain my situation? I think if a human looked at the situation they'd be able to see that I am credit worthy, but the automatic decision making processes are seeing the Tesco loan and rejecting me instantly. I could pay for the car outright, but don't want to take my money out of my S&S ISA when money is available at close to 3%.

DCFC79

RedBetter wrote: »

I was recently in the process of buying a car. Took out a loan of £25k through Tesco, planned to pay £10k of my own money (£35k purchase price).

When it was time to pick the car up, it became clear that it had been in an accident so the purchase fell through. I paid back the Tesco loan instantly (within the 14 day cooling off period).

I then realised Halifax do car loans with a pretty low APR. I got an instant quote through my online banking and was approved for the full amount at about 3%, valid until October.

It's taken a couple of months to find another car of the same spec, but I've finally found one so logged into my online banking to check the loan was still available. Unfortunately, there was a message to say that they could no longer offer me credit. Called up the bank and the lady said it's probably due to the fact I have the Tesco search on my credit report, and there is no way they can now offer me credit.

I think I'm going to get the same issue applying for a loan anywhere now, I've tried one of the "compare the market" sites and it looks like my only options are going to be someone like Amigo (49.9% APR, no thanks!)

I'm 27 years old, living rent free and earning over £60k a year. Outgoings are minimal (Currently able to save over £2500 a month), and I have about £60k in savings. Is there anywhere I can apply for a loan with a supporting letter to the underwriters to explain my situation? I think if a human looked at the situation they'd be able to see that I am credit worthy, but the automatic decision making processes are seeing the Tesco loan and rejecting me instantly. I could pay for the car outright, but don't want to take my money out of my S&S ISA when money is available at close to 3%.

Why not use your savings ?

You earn that much you should be able to replace what you have spent on it.

What's exactly on your credit files ?

Debtnomoreplease

Sorry, but I struggle to understand why on earth you would take credit out and pay interest when you can clearly afford to save up and buy the car you want. You live rent free and earn over 60k a year? Crazy to take out such credit!

macman

What is the current return on your S and S ISA?
In just ten months you could save the additional £25K you need, even if you don't use your savings.

madvicker

I see where he is coming from, if his return is greater than 3% (which it likely is, as its a S&S ISA), it doesn't actually make sense to use his savings if the borrowing costs are 3%. However, a car is a depreciating asset....

If you have had numerous hard searches in the past 6 months, it will be difficult to secure a low APR loan. Likely just to be a case of waiting a couple of months and trying again. How urgently do you need the car?

Craig1981

using your savings will still leave you with £25k in savings for emergencies, and you'd make that back up pretty quickly by the sounds of it

if you were to be accepted again for a loan at 3%, then whats the difference between paying 3% interest in loan or losing nearly 3% interest on savings amount?

any loan with APR higher that your interest received via savings is losing money

RedBetter

macman wrote: »

What is the current return on your S and S ISA?
In just ten months you could save the additional £25K you need, even if you don't use your savings.

I'm not sure current return is that relevant, because it doesn't really tell me what the future return will be. For what it's worth, my annualised return for the last 3 years is about 18%.

madvicker wrote: »

I see where he is coming from, if his return is greater than 3% (which it likely is, as its a S&S ISA), it doesn't actually make sense to use his savings if the borrowing costs are 3%. However, a car is a depreciating asset....

If you have had numerous hard searches in the past 6 months, it will be difficult to secure a low APR loan. Likely just to be a case of waiting a couple of months and trying again. How urgently do you need the car?

It's not really a need, more of a want. The car is for pleasure/entertainment, ideally I'd get it as soon as possible but there is no rush!

Craig1981 wrote: »

using your savings will still leave you with £25k in savings for emergencies, and you'd make that back up pretty quickly by the sounds of it

if you were to be accepted again for a loan at 3%, then whats the difference between paying 3% interest in loan or losing nearly 3% interest on savings amount?

any loan with APR higher that your interest received via savings is losing money

DCFC79 wrote: »

Why not use your savings ?

You earn that much you should be able to replace what you have spent on it.

What's exactly on your credit files ?

The issue is my money has been invested with a long term view in mind. Monthly direct debits into a S&S ISA and forgotten about, planning not to touch it for 20 years or so. My assumption is that the long term return will beat 3%.

Credit file now shows a hard search for a loan with Tesco. No outstanding balance though.

System

Craig1981 wrote: »

if you were to be accepted again for a loan at 3%, then whats the difference between paying 3% interest in loan or losing nearly 3% interest on savings amount?

Probably quite considerable. Many funds popular in S&S ISAs have been knocking on the door of double digit percentage gains.

jimbo747

How long do you intend on keeping the car? If 4 years or less, ideally 2 or 3 have a look at leasing.

john1002

Also Likely that the tesco loan is showing still live on your credit reports as they take months to update, worth a look?

John

Herzlos

Craig1981 wrote: »

if you were to be accepted again for a loan at 3%, then whats the difference between paying 3% interest in loan or losing nearly 3% interest on savings amount?

You wouldn't have to withdraw more than your annual ISA allowance (£20k), which means it'd take you 2 years to put the money back in and may prevent you saving more.


Will the car dealer not offer you finance at somewhere between Halifax's 3% and Amigos 49.9%?
Assuming you're overpaying it at over £2k/month and will have it clear within a year, the interest should be negligible.


It may be that people don't want to lend to you because you paid the Tesco one off so quickly, because there's no money in it.