What checks are car loan applications subjected to with regard to obligations on other cars?

Farmingtons · 1 January 2023 at 5:30PM

Hello all

Happy New Year and all that business! Cut a long story short... (hopefully)... I'm slightly under 50% of the way through a lease which I'm potentially being released from due to an odd set of circumstances. Given the state of things generally in the economic landscape and how much I need or want an expensive motor these days, I'm looking at buying something used, cheaper, and outright rather than a lease or PCP. I'm stumping up some cash and although I have all the funds available, I'd rather borrow a sizeable chunk from a high street bank as psychologically I don't like raiding the piggy bank too much in one go - I know it doesn't make financial sense per se if you can afford it, but it's just my preference (and not what I ever recommend to anyone else, but I'm very much a "do as I say, not as I do" kind of chap!)

My question is that I suspect some loose ends will be left behind in the immediate aftermath and it will look like I'm still obligated for another 18 months of lease payments when I'm not. Will I get any right of reply, or is there anywhere I can notify a car loan company that the new loan is a replacement for any other car payments my credit file says I am obligated to and supply them with a letter of cancellation? I know that when I applied for a PCP a few years back between two different companies when the car wasn't being traded in but merely handed back to its original source, the new company told me they had an area of the application where it said they could say that the previous car would no longer be on my credit file in order to aid my eligibility. Of course, this may have been utter twaddle. My fear (and indeed likelihood) is it's a bit of a blunt instrument and the credit file is the start and end of their checks. I'm just hoping against hope there might be a bit of a chance it is not the case!

Thanks in advance...

DrEskimo · 1 January 2023 at 6:29PM

Is it a lease of a PCP?

If it's a PCP, simply sell/trade the car in and either pocket the surplus, or settle the shortfall depending on the value relative to the settlement.

You can always use your savings to pay for the car outright and borrow money later (although I suspect you will recognise that it is indeed a bit daft to pay to borrow money you don't need...).

If it's a lease, then check your contract. It's likely you will have to pay 50% of the amount remaning.

Farmingtons · 1 January 2023 at 7:00PM

It's a lease. I pocketed an unexpectedly large PCP surplus in the crazy times which were Autumn 21 and picked up what looked like a gem of a 3 year lease deal which the windfall from my PCP nearly covered, it's just that although brand new it's turned out to be something of a lemon. A shame really as to sell high and buy (well, not buy, but you know...) low on a similar product at the same time is not normally the way the cookie crumbles!

I'm not concerned with how I get out of it as that's not the issue - it's all in hand and if there's any dramatic penalty I won't be doing so and will just be pushing for the lease company to use their leverage to achieve compensation from the intransigent manufacturer as the car has been a constant source of failure and I'm currently on a five month wait for even a diagnostics booking for an issue.

However, if the lease company do release me and I purchase something else outright using a car loan, my query is purely with regard to what the bank will look at in terms of apparent existing payments on a car and whether I am given the opportunity to prove there will be none as the lease has been officially cancelled even though the credit report may still say something else.

DrEskimo · 1 January 2023 at 7:08PM

If you are going used, it's highly unlikely that secured loan from the dealer/garage will be the cost effective option.

Therefore you could cancel the lease, buy the used car outright with savings, wait for all accounts to be marked as settled, then apply for a unsecured loan at the best rate you can achieve (if you must borrow).

Nebulous2 · 1 January 2023 at 8:24PM

Does the lease show on any of the credit reference agencies? My one doesn't. If not, then a new lender wont know anything about it.

Farmingtons · 1 January 2023 at 8:40PM

DrEskimo said:

If you are going used, it's highly unlikely that secured loan from the dealer/garage will be the cost effective option.

Therefore you could cancel the lease, buy the used car outright with savings, wait for all accounts to be marked as settled, then apply for a unsecured loan at the best rate you can achieve (if you must borrow).

On the used market it's never worth borrowing from within the trade and was never the intention. It's just purely a query as to whether a high street financial institution recognises/queries as to whether the loan is for a replacement vehicle rather than an additional one. I just don't want to have to untangle things from investments when they're not currently at their most fruitful.

Farmingtons · 1 January 2023 at 8:41PM

Nebulous2 said:

Does the lease show on any of the credit reference agencies? My one doesn't. If not, then a new lender wont know anything about it.

Good call actually... I haven't looked - I just assumed it would!

Farmingtons · 1 January 2023 at 8:53PM

Nebulous2 said:

Does the lease show on any of the credit reference agencies? My one doesn't. If not, then a new lender wont know anything about it.

Turns out it does. Big "Leases" header on my MSE credit report anyway with all the gubbins underneath. It's up higher than my mortgage on the list.

DrEskimo · 1 January 2023 at 8:56PM

Farmingtons said:

DrEskimo said:

If you are going used, it's highly unlikely that secured loan from the dealer/garage will be the cost effective option.

Therefore you could cancel the lease, buy the used car outright with savings, wait for all accounts to be marked as settled, then apply for a unsecured loan at the best rate you can achieve (if you must borrow).

On the used market it's never worth borrowing from within the trade and was never the intention. It's just purely a query as to whether a high street financial institution recognises/queries as to whether the loan is for a replacement vehicle rather than an additional one. I just don't want to have to untangle things from investments when they're not currently at their most fruitful.

No, the loan will be treated as additional borrowing. There is no mechanism to query why you may be rejected or offered a specific rate and it will depend on a multitude of different factors.

You have to apply and if you do not like the offer, you can apply elsewhere. Just be aware that multiple hard searches from multiple loan applications can impact you chances of being successful.

I was always under the impression that a lease was a finance arrangement like any other, and would appear as a loan for the total cost of the contracted lease agreement.

Farmingtons · 1 January 2023 at 9:19PM

DrEskimo said:

Farmingtons said:

DrEskimo said:

If you are going used, it's highly unlikely that secured loan from the dealer/garage will be the cost effective option.

Therefore you could cancel the lease, buy the used car outright with savings, wait for all accounts to be marked as settled, then apply for a unsecured loan at the best rate you can achieve (if you must borrow).

On the used market it's never worth borrowing from within the trade and was never the intention. It's just purely a query as to whether a high street financial institution recognises/queries as to whether the loan is for a replacement vehicle rather than an additional one. I just don't want to have to untangle things from investments when they're not currently at their most fruitful.

No, the loan will be treated as additional borrowing. There is no mechanism to query why you may be rejected or offered a specific rate and it will depend on a multitude of different factors.

You have to apply and if you do not like the offer, you can apply elsewhere. Just be aware that multiple hard searches from multiple loan applications can impact you chances of being successful.

I was always under the impression that a lease was a finance arrangement like any other, and would appear as a loan for the total cost of the contracted lease agreement.

Cheers. It probably wouldn't have entered my head to even enquire were it not for the case that my previous PCP said it was something they could throw in the mix. If I currently have a car lease and apply specifically for a car loan I just hoped I might be able to line everything up. Oh well - see what happens. I'll hold out the begging bowl and if no-one coughs up I'll just have to sort it myself. Not the end of the world.

MrFrugalFever · 1 January 2023 at 9:47PM

When I propose information to a well known consumer finance service, I have the ability to upload documents and make brief notes to the underwriting team to support the application. I would imagine, as an application to a bank or other lender by yourself won’t allow this, you’ll have some form of chance AFTER an application has gone through, I.e. the 7 day right of appeal. Often evidence and explanation can be provided at that stage I believe.