Car PCP or loan - best for mortgage?

dracook

I currently have a car on PCP.  If I took a loan out to settle the agreement it would be a lower rate of interest and therefore cost me less in the long term but I don't want to do anything that will affect the chance of remortgaging.  The last time I remortgaged I had PCP on a different car with higher monthly payments so I have a baseline to work from.  Does anyone know whether, from a mortgage likelihood perspective, I'm better sticking with my PCP deal or shifting it to a loan?  I don't know whether they consider PCP and loans in the same way, whether monthly outgoings or overall loan value is most important and if the latter whether the PCP loan value is for the whole cost including balloon payment or just the amount if you don't hand back the car.

Examples below (not real figures but used as an illustration as I'm working on principles rather than after details so please don't question whether they add up or make sense!).

Option 1 - PCP.   £200 p/m for 4 years (plus balloon payment).  total to repay £20k (£14k + £6k balloon payment if I don't hand back the car but could settle now for £15k). 9% APR
Option 2 - payoff PCP with loan.  £15k required. 3% APR. £250 p/m for 4 years
Option 3 - as option 2 but split over 5 years to reduce monthly expenditure - £150 p/m for 5 years

Thanks in advance.

Cscott139

For affordability reasons you want the lowest monthly outgoing as this is what they will use to work out affordability, however, if you are very close to applying for a new mortgage and affordability isn't an issue I wouldn't do anything right now.

[Deleted User]

It depends how close you are to affordability limits whether the lower payments make a difference. It matters not if its PCP or loan. They just ask the monthly payment amount. 

Credit cards are treated differently as they ask for the outstanding balance and decide a notional payment per month. 

£150,£200 or £250 unlikely to make a massive difference but Id play around with various affordability calculators and pop in your figures. Nationwide and Santander ( intermediary ) both have decent ones. 

BUT ....... Id defo not be playing around with applying for loans or credit just before remortgaging if it doesnt make a difference and is a moot point anyway. 

dracook

Thanks both (and any future input from others)
I remortgaged in the summer so doubt I'll be doing it for a while (unless the rates really drop!) but didn't want to do anything now that might cause problems in a year or 2.  
I wasn't sure of how they considered it as when I remortgaged they were concerned about balance when it came to credit card and monthly payment for PCP and I wasn't sure what was considered for a loan, monthly payment or amount of debt.
Looks like a loan is the best option then as I could switch to a loan and up my payments by £100 a month and the car would be all mine in 4 years (essentially no balloon payment!).  Alternatively I could extend the loan over 5 years and have the same monthly payments as the PCP but just pay them for an extra year (and again avoid balloon payment).  Either way I'll be better off than now and the monthly outgoing would be less than the previous PCP I had when I remortgaged so affordability not an issue when the time comes.

[Deleted User]

thats the best way. Have a long term plan - keep the credit apps down, bank statements tidy in the few months before remortgage. Reduce credit where you can. On my bank loan I can pay extra in whenever I want. If I avoid a bottle of wine or new shoes - I pay extra off my loan, with the aim to clear it in 2022 and remortgage time