New and old finance to overlap. 22 April 2021 at 12:59AM in Loans 6 replies 362 views

eezyrider

I have a car on a PCP which no longer suits my purpose. I need a larger car due to family addition. The supplying dealer is offering a very good price for my car for p/ex or not. Unfortunately they do not have a model that suits. 

Due to my age I don't want to take on a vast amount of finance and so want to buy a cheaper used car. This means I would want to arrange finance for the replacement whilst still paying the PCP otherwise I would be without a car in the interim. I intend to use the Voluntary termination method and the balance to 50% of the agreement is only less than £300 added to the dealer offer.

As I see it I probably won't be able to take out new finance until the PCP is settled, scuppering my plans. Would that be correct?

DrEskimo

It may be difficult to get a personal loan at a good rate whilst you have outstanding debt levels from the PCP. The extent to which this affects you will depend on all your other circumstances (how much you want to borrow, your income, your other debt, your credit history, etc.).

I don't understand why you would go the route of VT if you are getting a good offer from a dealer to buy the car from you? Of course you may get a similar or better price from any other garage, including the one where you may buy your used car from? Have you also looked at WBAC and other online car buying sites, like motorway? It's far easier to just sell it/trade it than going through the process of VT, which may involve other charges (excess mileage/wear and tear), which can be unfairly imposed and involves arguing with the finance company.

The best route would be to try and minimise your borrowing and go for as cheap as possible.

eezyrider

Thanks for your reply.

I assumed that I would need to go VT because I have 13 payments to make on the PCP incl residual?

The real figures are:-

Original total amount incl residual is 12990 x50% = 6495. Amount owing is 7187. Dealer offer is 6909 leaving a shortfall of 278.

Due to my age I don't want to take on a huge finance amount. I would like to buy a car at £5000 to £6000. I could buy this outright but with current low finance rates it makes sense to borrow. I suppose the answer is to buy the replacement with cash and refinance but at the back of my mind there is the doubt I will not get the finance deal I want.

So are you saying that I do not need to go VT and that the dealer would take care of this?

DrEskimo

I would need all the figures of the PCP, but basically try and get the best possible price on your car to settle the finance (preferably with surplus). Look at every avenue available to do that (dealers, garages, WBAC, etc.). If you can't, and you are past the VT point, then sure, that is an option. Just be aware of any mileage charges (are you above the pro-rata amount?) and damage above fair wear and tear. If that is likely to be more than £300, then you are still better off selling it.

Even though rates are low, it's still costing you additional money. As long as you have savings above the cost of the car, then use your savings. Presumably it's what you are saving for...?

benbay001

eezyrider said:

I could buy this outright but with current low finance rates it makes sense to borrow. 

That depends upon what the money will otherwise be doing.

You would have to take alot of risk to hope to beat the interest rate on the average loan.

Herzlos

You might be best finding a car that is suitable and getting a p/x figure from that dealership, and then you don't need to worry about the overlap

eezyrider

 Just to update....
The dealer offered £900 less when I called in. Nothing to do with condition (it had only done 4400 miles) so I left in a huff.
Tried webuyanycar.com and they initially offered £500 more. Sold the car to an independent garage for £6800. Went online to one of my banks and within 1 hour they deposited £5000 into my account.
Since then webuyanycar have upped their offer to match what I sold it for.

Independent has settled the finance and I've got a replacement car. Total interest on 5k is £400 over 48 months.
Thanks all for the comments.