Car finance - good rate?

anony-moose

I'm in the market for a new (used) car as my diesel is on it's way out. I have 6 months left to pay on my existing finance HP deal. 

I've gone to see a couple of cars and been told that the rate is 10.9% and 11.9% at each place - hire purchase. Is this a good rate? What's the cheapest way to borrow money for financing a car? I have a credit card that are offering me 0% interest free for 2 years, could I utilise this somehow?

I got my existing car in 2020 and was under the impression that the rate was negotiable through bartering - is that still the case? Is there still scope for negotiation at a dealers - in 2024? Does my credit score determine the rate too?

One of the sales people told me that the interest is only applied each year, so that if I paid it off early I would save money on interest, but I'm pretty sure my existing finance amount was fixed when I took it out, so paying it off early wouldn't have saved me any money. 

Sorry for all the questions. It feels like a lot has changed since I last got a car - in terms of finances at least. 

born_again

You will find most dealers will only take a credit card for deposit.

You might find bank loan is cheaper.

Your credit score is meaningless. No lender see's it as it is a made up figure by the CRA's.

Betterthanlife

born_again said:

You will find most dealers will only take a credit card for deposit.

You might find bank loan is cheaper.

Your credit score is meaningless. No lender see's it as it is a made up figure by the CRA's.

Sometimes 0% credit cards also offer 0% cash transfers, mine does. You pay a 1 off 3% transfer fee. 

anony-moose

@born_again @Betterthanlife Thank you. Is 10.9% and 11.9% a decent rate for car finance?

Betterthanlife

How much are you borrowing?
Maybe try a loan comparison website, it will show you the rates available 

Nearlyold

10% to 11% is a typical ok ish HP rate on a fairly young car. Rates go up the nearer the car you're buying is to banger status. 

Have you asked your bank, Lloyds for example offer HP, PCP,  and Personal Loans directly to  customers to enable you to buy a car from virtually any dealer. When I last checked with them earlier this year they offered me 6%.

anony-moose

Thank you both! I've not looked at anything yet as I thought that figures/rates quoted changed depending on your credit rating. Ie, that I would have to apply before knowing what the rate would be. 

I'll be borrowing about £12k for a 4 year old car. 6% seems a lot better.

born_again

anony-moose said:

@born_again @Betterthanlife Thank you. Is 10.9% and 11.9% a decent rate for car finance?

Let's put it like this.
I would not be paying that much for a loan..
My bank starts @ 6.2% for car loans.

Dave_5150

The Loan Eligibility Caulator on this website may give you an idea on your likely interest rates.

https://www.moneysavingexpert.com/eligibility/loans-calculator/search/

Desmond_Hume

born_again said:

anony-moose said:

@born_again @Betterthanlife Thank you. Is 10.9% and 11.9% a decent rate for car finance?

Let's put it like this.
I would not be paying that much for a loan..
My bank starts @ 6.2% for car loans.

I agree.  The rates quote by the OP are not great. Anything in double digits is poor, IMO. 

anony-moose

I checked the eligibility link above which has given me a better idea of what to expect. It seems to be for personal loans rather than a car loan. Is there any difference? I think the banks also offer car finance, such as HP? Is car finance looked upon more favourably than a loan or credit card debt, in terms of credit score/rating?

The eligibility link said that I was 100% guaranteed a loan with MBNA at 7.6% and then 95% for one with Tesco at 6.1% representative (not guaranteed).

If I apply for the Tesco one and they offer a higher rate, will it hinder my chances of getting the MBNA one? I have a really good credit score, which went down a tiny bit recently when I took out a new SIM only deal, but it's still 'excellent'. Am I most likely to get the 6.1% rate? I don't want to ruin my score/rating. 

I also have the option to borrow £11.5k via money transfer on my existing credit card - 0%, but it's only for 1 year and 5% fee. Obviously cheaper to do that, but a little uncertain of what I do after the year is up. If I do manage to transfer it then I get a more fees which start to add up.

Really appreciate all your help this far. Thank you all. :-)