Refinancing baloon payment

Goudy

Ectophile said:

Goudy said:

anto135 said:

Given I’m in positive equity, would it be a better idea to part exchange, I’m guessing that would that just come down to my personal choice?

All things being equal, that makes sense.
You owe less for your car than it's worth so it might appear a good option to cash in now, trade it in for a new car and use the difference towards the deposit on the new one.

You aren't borrowing again to pay off a loan that has already had a load of interest slapped on it, you're just borrowing again for a new product.

Dealers will quickly workout what the GFV is and will often push their trade in prices up to get a new deal over the line.
Other times you have to play hardball and insist you have a certain amount of equity to take forward. Quite often this means back and forth trips to various dealers to see who jumps first.

Your current car might now to starting to want various bits and pieces or a major service is on the horizon. Tyres, brakes or even a timing belt which might be worth avoiding.
(for anyone interested, I recently heard MG Motors charge £940 for their MG3 Hybrid Plus 4th year service, so the cost of it's 1st, 2nd, 3rd and 4th servicing is over £2000 and it doesn't look like they offer a 4 year service plan either)

I manage to eek out my cars for 3 or 4 year as I rotate the tyres and I've always easy on things like brakes. Maybe a little more if it has a longer warranty and I've had to change a tyre or two because of punctures.

If it's looking like it's time for me to chop it in, I'll work my butt off on the trade in value first. I usually qualify for a NHS discount (which I hit them after arranging trade in price) so it makes the changes a bit more bearable.

Thing is now not everything is equal.
There is a massive difference between what you paid for your car 3 or 4 years ago to what the same/similar model costs today.

New prices have climbed a lot in the last few years. Your basic entry level Dacia Sandero is now nearly £14k when a few years ago it was more like £7k. (no one bought that one, so lets say £8k for the next one up).

Fords cheapest car last year a new Fiesta for around £19k, now you pay over £25k for a Puma which is now their cheapest car.

This means a bit of thought is needed.
Do you borrow again to pay off what you already borrowed and continue to maintain the car which could be outside of warranty and due some work.
Or
Borrow for a new one, knowing you'll probably have to borrow a bit more unless you are down sizing car.

And that way leads to paying finance on a car every month for the rest of your life, or at least until you're too old to drive and hand your licence back.

The alternative is to finish paying for the finance, and then keep the car until it's no longer economically viable to maintain

Not always and if it's done with a bit of thought and care I can get myself in a new car every 3 or 4 years with cash (or further finance if it comes with a contribution and then settled) 
Quite often just a few grand to change.

Initially, yes I have taken out a PCP and taken it to the balloon payment, then traded it in.
I used the original PCP to get me in the new to three year old car ball park and taken it from there.

After that I've hunted around for the best price for the trade in and the best deal on a new car and either paid cash or taken finance and settled.

I don't pay out for breakdown, they have full warranties, everything is new and the first few years of servicing are often the cheapest.

My current car is around 4.5 year old, I've kept hold of it a bit longer as up until recently I've had use of a works car so it's thrown my usual plan out a bit but not by much.
It's value for trade in is around £13k.
I paid £18.5k on a deal back in 2020. ( I admit this deal was well under invoice, but that's where the care and thought come in)

If I swapped it now like for like, I would need to find around £6k or so by taking another finance deal and settling it within the first month.
That means my current car has cost me around £111 a month so far and to be honest, what would that get me in the used car market?

I could lease the same car.
Over 48 months that would be £1900 deposit and £205 a month, that's £11,700. (though they would pay the 3x£190 RFL so we can take that off) and I wouldn't even own it at the end for a trade in.

I could carry on with my current car, but I know the day is coming that it'll want repair, even the best, most reliable makes and models require them from time to time.
Parts supply can be an issue, labour rates can't be expensive particularly if it has to go to the dealers for a specific dealer only repair and there is a cost for me to be without a car.

And quite frankly, I don't really have to worry about the unexpected.
If I factor in my time I would spend to sort repairs, alternative transport etc, it's actually works out cheap for me to do it like this.

I've been driving a long time and I've ran older cars, I have the physical and emotional scars from doing it myself and I've had older used cars drain my bank account.

At the end of the day it's down to the OP, but they could do with looking at all the options before deciding. I am just highlighting one of them. 

They might think it's worthwhile swapping to new again now while there is value in their current car as the cost to change is acceptable to them.

If that is what they want to do, the cost to change is never really going to get any better than it is now.