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Loan for car

8 replies 291 views
kieronridingkieronriding Forumite
4 posts
First Post
MoneySaving Newbie
Hi, 
I'm coming to the end of my PCP car finance and am looking for a new car. I'm looking at a HP finance scheme this time as I want to keep the car at the end, I don't do lots of miles to could potentially profit by selling the car at the end of the 5 years.  After looking at the HP finance scheme it seems I would be paying £2750 in interest, while shopping around I found that it could be better to get a personal loan from the bank with a lower interest rate.  After getting a quote for a loan on compare the market I actually did find I'd make a huge savings of £2000, resulting in my only paying £750 interest over the same length of time.  

I am going to the dealer tomorrow to see if some negotiations can be done but I don't believe they can knock me 2 grand off so I'll be going with the bank loan option. Before committing to this I wanted some advice.

I currently live with my parents and am looking to buy a house within the next 18 months. Will this bank loan have a big negative impact when I come to get a mortgage? 

Will a HP finance option have less of an impact? 

Thanks in advance
Kieron 


Replies

  • edited 15 March at 8:29AM
    zx81zx81 Forumite
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    edited 15 March at 8:29AM
    Any debt will hit your affordability and therefore reduce what you can borrow on a mortgage, or increase the chances of decline.

    But it depends on your circumstances.
  • DrEskimoDrEskimo Forumite
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    As above. PCP or HP will affect your borrowing capacity the same, as you are borrowing the same amount. HP loan will have a larger impact on affordability though, as naturally the monthly payments are higher.

    How much is it to just pay off your current car? Is that cheaper than the new car you are looking at?
  • kieronridingkieronriding Forumite
    4 posts
    First Post
    MoneySaving Newbie
    The car I am looking at now is 12 grand. The current car I have has a 5 grand balloon payment. I'm not really interested in keeping the current car as it is a 1L and a bit slow for me.  

    Including insurance I will have a 275 outgoing bill Evey month. The only other outgoing bill being a phone bill of £40. Having never applied for a mortgage before,I don't know if the bank would class this as a big out going or this is acceptable. I'm on 25k a year and looking for houses around 100k.  


  • DrEskimoDrEskimo Forumite
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    The car I am looking at now is 12 grand. The current car I have has a 5 grand balloon payment. I'm not really interested in keeping the current car as it is a 1L and a bit slow for me.  

    Including insurance I will have a 275 outgoing bill Evey month. The only other outgoing bill being a phone bill of £40. Having never applied for a mortgage before,I don't know if the bank would class this as a big out going or this is acceptable. I'm on 25k a year and looking for houses around 100k.  


    Well we all want things, the question is whether we should given other financial priorities. I would highly recommend just keeping your current car and pay it off as soon as possible. Keeping in perpetual debt over new cars that depreciate like a rock is a sure fire way to never build any wealth.....

    Regarding your mortgage, what sort of deposit do you have?
  • DCFC79DCFC79 Forumite
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    Why not look at a car cost less.
    That's a big loan when your on £25k, just under half of what you earn.
  • AnotherJoeAnotherJoe Forumite
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    Why don't you get a loan and buy out the current PCP ?
  • chelseabluechelseablue Forumite
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    As above I'd pay the balloon and keep the car. Then when your settled in a house maybe look to change then 
  • foxy-stoatfoxy-stoat Forumite
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    Buy a £6,000 car - borrow half the money over half of the time, so you will be a few months away from the end of the loan when your due to buy your first property.  Once you are on the ladder and a few months into home ownership you will see if you can afford a £12,000 car on finance.
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