Loan over-lap

bugsy91

Hi all,

Just wondering if anyone has had the same situation i'm in. I have a car on PCP i got 10 months ago, however since then I've got a new job that requires using the car to and from patients houses, which has taken me from around 400 miles a month to over 1000. The car isn't exactly economical and will not be financially kind to run for the remaining PCP duration, and the cars value would take a nose-dive. The cars settlement figure is £14,700, and I have a dealer who are willing to give me £14,000 for it. I can cover the £700 difference to write the loan off no problem. The issue comes with replacing the car, as I don't have much in the way of savings as I've just bought a house 4 months ago. The dealer who would buy the car off me have a car that I would want to replace it with, however it's too old to qualify for a PCP and the HP figures are 100's more than my current monthlies, so I thought maybe a loan from my bank would be a solution, and then buy cash. However, this would mean having 2 loans, briefly, cross-over one another. I know the bank doesn't know this is what will happen and will purely look at the numbers, but would speaking to them help any application? Has anyone had anything similar happen? Or I am better just biting the bullet and using my current car.

All my credit reports are in good standing. No credit card loans, just a car on PCP and a mortgage. My income is £35k.

Thanks.

DrEskimo

What is the price of the replacement car?

I think you will struggle to get a loan on £35k with a loan of £14k already. Probably be a similar APR to the HP.

I doubt the depreciation and difference in fuel economy will offset the cost to change, so would just keep your current car. 

However having £14k debt on a car and no substantial savings does indicate you have far too much money tied up in cars.....you also need to consider what you are going to do when the PCP term ends....

Anamox

Talk to a loan broker, they will know lenders that they can talk to and an arrangement can probably be made based on the knowledge that you will be clearing the car finance at the same time as getting the new loan. The interest rate will likely be higher than a normal bank loan.

As DrEskimo says, you may be financially better off keeping the car as the fuel costs and extra miles you'll pay for at the end of the PCP (if you give the car back) may be less money than the cost of replacing the car and getting a higher interest loan. 

Grumpy_chap

Maybe the OP should investigate 'bangernomics' and have a car rent-free.  Probably can't really afford a £20k car, and never could.

DCFC79

DrEskimo said:

What is the price of the replacement car?

I think you will struggle to get a loan on £35k with a loan of £14k already. Probably be a similar APR to the HP.

I doubt the depreciation and difference in fuel economy will offset the cost to change, so would just keep your current car. 

However having £14k debt on a car and no substantial savings does indicate you have far too much money tied up in cars.....you also need to consider what you are going to do when the PCP term ends....

Nothing wrong with the advice you posted but I dont see where the OP has mentioned a loan of £35k loan, the income is £35k.

MallyGirl

I think you need to reread what you have quoted - its a loan on £35k not a loan of £35k

bugsy91

DrEskimo said:

What is the price of the replacement car?

I think you will struggle to get a loan on £35k with a loan of £14k already. Probably be a similar APR to the HP.

I doubt the depreciation and difference in fuel economy will offset the cost to change, so would just keep your current car. 

However having £14k debt on a car and no substantial savings does indicate you have far too much money tied up in cars.....you also need to consider what you are going to do when the PCP term ends....

They would sell their car to me for £16k. I know having my current PCP and then applying for that at the same time, the bank wouldn't touch it. I think it was the fuel bills going from £80 a month to over £250 got me flustered. But your probably right and should just keep it.

The reason I don't have much savings is, as I said, I used them to buy a house a few months ago, and have been using surplus cash from my salary to do home improvements. The PCP is due to run for another 3 years, by which time I will have cash put away to tackle it.

DrEskimo

bugsy91 said:

DrEskimo said:

What is the price of the replacement car?

I think you will struggle to get a loan on £35k with a loan of £14k already. Probably be a similar APR to the HP.

I doubt the depreciation and difference in fuel economy will offset the cost to change, so would just keep your current car. 

However having £14k debt on a car and no substantial savings does indicate you have far too much money tied up in cars.....you also need to consider what you are going to do when the PCP term ends....

They would sell their car to me for £16k. I know having my current PCP and then applying for that at the same time, the bank wouldn't touch it. I think it was the fuel bills going from £80 a month to over £250 got me flustered. But your probably right and should just keep it.

The reason I don't have much savings is, as I said, I used them to buy a house a few months ago, and have been using surplus cash from my salary to do home improvements. The PCP is due to run for another 3 years, by which time I will have cash put away to tackle it.

Yea that's understandable. I think it's worth bearing in mind that even an increase of 10MPG won't have much effect on the fuel bill. Over 12,000miles at 40MPG assuming £1.15/lt, it would cost you ~£1,500. Improving the economy to 50MPG would reduce the bill to ~£1,200. So just a £300 saving over the whole year!

Where things get interesting is with an EV, where fuel costs are dramatically reduced, but I won't go banging my EV drum in this thread :P

The thing to bare in mind is you will instantly lose a few grand on buying a new car due to the dealer mark up. What he sells it for is not what you can trade it in for. If you stick the reg and mileage into WBAC and you will see what it's trade value is. So you know off the bat how much extra the new car is costing you in just extra depreciation. This of course is not true of your current car.

Whether the new car will depreciate at the same rate as your current car with the same mileage is unknown. It probably will be similar?

Also consider overpaying the PCP if you can. You will then make savings on interest

bugsy91

DrEskimo said:

bugsy91 said:

DrEskimo said:

What is the price of the replacement car?

I think you will struggle to get a loan on £35k with a loan of £14k already. Probably be a similar APR to the HP.

I doubt the depreciation and difference in fuel economy will offset the cost to change, so would just keep your current car. 

However having £14k debt on a car and no substantial savings does indicate you have far too much money tied up in cars.....you also need to consider what you are going to do when the PCP term ends....

They would sell their car to me for £16k. I know having my current PCP and then applying for that at the same time, the bank wouldn't touch it. I think it was the fuel bills going from £80 a month to over £250 got me flustered. But your probably right and should just keep it.

The reason I don't have much savings is, as I said, I used them to buy a house a few months ago, and have been using surplus cash from my salary to do home improvements. The PCP is due to run for another 3 years, by which time I will have cash put away to tackle it.

Yea that's understandable. I think it's worth bearing in mind that even an increase of 10MPG won't have much effect on the fuel bill. Over 12,000miles at 40MPG assuming £1.15/lt, it would cost you ~£1,500. Improving the economy to 50MPG would reduce the bill to ~£1,200. So just a £300 saving over the whole year!

Where things get interesting is with an EV, where fuel costs are dramatically reduced, but I won't go banging my EV drum in this thread :P

The thing to bare in mind is you will instantly lose a few grand on buying a new car due to the dealer mark up. What he sells it for is not what you can trade it in for. If you stick the reg and mileage into WBAC and you will see what it's trade value is. So you know off the bat how much extra the new car is costing you in just extra depreciation. This of course is not true of your current car.

Whether the new car will depreciate at the same rate as your current car with the same mileage is unknown. It probably will be similar?

Also consider overpaying the PCP if you can. You will then make savings on interest

My car currently struggle to get over 25mpg but I know where you coming from. I'd love to get an EV, the NHS have some incredible deals on lease EV's that come with cash grants for charging stations, but not suitable for me at the moment! Hopefully in the future. Thanks for your replies / help, much appreciated

Grumpy_chap

What is your current car to only manage 25 mpg?
Is that mostly short runs in built up area?
If you will be driving more on faster, flowing roads  that will improve your mpg.

bugsy91

Grumpy_chap said:

What is your current car to only manage 25 mpg?
Is that mostly short runs in built up area?
If you will be driving more on faster, flowing roads  that will improve your mpg.

SEAT Leon Cupra. Depends where I'm sent on visits. Could be an hour on the motorway where it improves to about 30, or could be town start stop where it gets about 22 - 23.