Car finance high APR% - could I save by part exchange?

fullfuller88

Hello, sorry I’m new here so apologies if this is the wrong place. 

Essentially I was young and desperate with a bad credit score and got a car on finance (HP) the car was £5050 when bought and it is around 51% APR as the total cost for finance was £11000. I just needed the car for university and agreed as I had plans to pay off big chunks earlier, which I wasn’t able to do in the end. So now it’s been 2 years of paying and I’ve started to get my financials in order and got a bit more knowledge I was looking where I could save money and realised how bad this deal was. My credit score is far better now and I thought I could refinance with a lower APR. 

To be clear my settlement amount is £3900 but if I continue to pay over 2 years I have £5400 left to pay (cars not even worth 3 grand anymore)

I got a deal to refinance the settlement amount of £3900 at 16% APR. Which worked out to around £4500 in total which I thought was good because I’d save £900. However the lady said this was only allowed for PCP and not HP. But she said I could find a new car and part exchange my old car and still use the deal with the 16% APR and she said I’d get a newer car and likely save myself some money in the long run. 

She stated that I could find a new car worth up to £9,000 part exchange my old financed car for £2900 (which they would pay directly to the finance company) and then with the remaining £1000 left on finance I could add this to my new car finance deal and the old car finance would be completely settled and I’d have a new finance agreement with 16% APR and a newer car for my expanded family. 

The lady really sold this as a great idea but she’s a car saleswoman so of course she would. I have nobody in my family that manages finances well or understand car finance and I feel like I could get sucked in and taken advantage of because I’m naive. 

Can someone help should I continue to pay £5400 on my current car finance agreement and just get it paid off so after it’s done I don’t have any monthly payment for a car (would take me 2 more years). 

Or
should I part exchange and get a new finance agreement with a better APR so I can get out of my old agreement and get a newer car. 

Long term wise I don’t want to have to pay monthly for a car, but I’m kicking myself knowing I’ve already paid over £5000 for this 2014 car and I have over £5000 left to pay when it’s only worth £3000. 

I don’t know what to do any suggestions please?

DrEskimo

I personally wouldn't do what the sale person is suggesting.

You are going to end up with a higher debt with a lower APR, but possibly still paying more in interest than the current loan (particularly as the PCP is a different loan structure, with a large final payment known as a 'balloon payment').

Have you looked at just getting a personal loan? I would explore all other options to refinance before getting enticed to part-exchange for a more expensive car, albeit at a lower rate.

If you are interested in borrowing more and getting a new car, then I would always suggest you to separate out the sale of your current car and the purchase of a new car if you can. Check around sites like WBAC and CarWoW, and also ring local dealers and see what they will offer to buy your current car off you. It may be that they will buy it for £3900 and you can then just use the new personal loan to buy another car outright.

born_again

You are aware that with PCP, you either hand the car back or pay a balloon payment to keep the car at the end of the term. Which on a 2nd hand car might mean you end up paying more & not saving money.


Best bet Personal loan. Or pay as much as you can as fast as you can at the current loan.

fullfuller88

Thanks for your responses so far, just to clarify the lady said I could not have the deal whereby I would save £900 because my car is HP and it’s only offered to PCP. She was not suggesting my new agreement be PCP, it would be HP. 

I’m going to look at personal loans this evening to see if I can get a good deal. Thank you. 

facade

Maybe things have changed, but don't disclose that you want the loan to pay off another loan, you want it to buy a car (which is true.....) as lenders never used to like giving loans to pay off other loans.

Goudy

If there is nothing wrong with your current car and it will do for another few years, look at settling the finance at a cheaper rate than you have now.
Then work hard on settling that as soon as you can.

Don't snowball the outstanding finance into another cars finance deal as you'll be in the same position as you are now, owing far more than the car is worth, but this time it would be at the start of the deal not later on in the deal like now and the amount owed in total will be double.

Check out all the loan avenues to pay the settlement amount of £3900, the main site has a personal loan checker facility.

A money transfer credit card might be another option.
You might pay a small percent to transfer the cash into you bank to pay the £3900 but you might find it's 0% interest for 12 months or more.
If you can't pay this card off in 12 months you can always transfer what's left to a 0% balance transfer card when the original 12 months ends.

Yes there might be small fees of 3% to transfer the balance but it's nothing like 51% or even 16%.
Each month you'll pay far more capital off than interest, so if you do have to do a balance transfer after 12 months, it's 3% of a lot less.

Bigphil1474

Agree with above if the car is fine. Getting a newer car because you need it or would like one is different to getting one to somehow reduce your debts by paying more. Try the usual compares sites for loans but particularly your own bank. I've been given lower rates by my own bank more often than not in the past. Get a loan for the £3,900 at a realistic interest rate (anything above 10% is high), and pay that off as soon as you can. 

Goudy

I checked the eligibility checker and I was offered a Money Transfer Card with 4% transfer fee and 12 months at 0% interest.

So if I did this I would pay only £156 transfer fee.
Zero interest for 12 months.
£338 a month to clear it in 12 months.
Plus I'd have a paid for used car which will still have some value in 12 months.

If say I could only afford half the payments per month (£170).
I could then move the outstanding £2000 after the first 12 months to a 12 month 0% balance transfer card with a 3% transfer fee (£60) and still pay the same payments for the next 12 months to pay it off completely.

That's £3900 financed for 24 months at a cost of £216 at around £170 a month.

I know not everyone will get offered the same cards at the same rates, but it shows how cheap it might be to pay this off with a bit of jiggery pokery.

Sounds like a lot of hassle?
It would save you nearly £1300 in interest!