Should I take a loan out for negative equity on car (PCP), to then get a cheaper car?

theringding

I bought a car on PCP back in January 2023. Car was £35,000, with monthly payments of £508. This was fine back then, I had a short commute and no kids.

I now have a longer commute and a child, and looking to reduce my bills down a bit to make life a bit easier. My current fuel bill is about £210 a month, so around £730 a month spent on my car (before maintenance, etc). The car would currently sell for c£25,000 and I have a settlement figure of £29,000 left on the finance.

Here is my rough plan, let me know if it sounds sensible...

I sell my car for £25,000 and take out a £4,000 loan to cover the outstanding finance (at around £120 a month). I then get a used electric car for around £350 a month, as I get free charging at work (I would never need to pay to charge the car). This then leaves me with a monthly cost of £470 a month, a whole £260 less than before.

How does that sound? I can't buy a car outright as I don't have a huge amount of cash sitting in the bank, and the electric car seems sensible to me due to the free charging. I could get a loan to pay for the car, but that leaves me with limited options for a reliable car.

Any help?

MattMattMattUK

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

fatbelly

Why not do a voluntary termination on the old car?

https://debtcamel.co.uk/vt-end-car-finance-early/

ManyWays

How secure is your job? Because what you are proposing mainly looks great because of the free charging. 
How long-term is the loan for 4k you are looking at?
Will the EV finance be HP, PCP or lease?
have you looked at the insurance cost for the EV as that may be higher than your current car? 

theringding

MattMattMattUK said:

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

44 mile round trip commute. Was looking at a 2022 Ioniq 5 or Kia eNiro, both about £350 a month with 0 deposit.

Rest of finances are ok. By doing this I should have £400-£600 leftover a month.

theringding

fatbelly said:

Why not do a voluntary termination on the old car?

I'm no where near 50% paid off. Car was £36,000 and settlement figure is £29,000.

theringding

ManyWays said:

How secure is your job? Because what you are proposing mainly looks great because of the free charging. 
How long-term is the loan for 4k you are looking at?
Will the EV finance be HP, PCP or lease?
have you looked at the insurance cost for the EV as that may be higher than your current car? 

About as secure as any job can be in the current climate, but I'm not too worried.

Loan would be 3/4 years maybe.

EV will be financed PCP, looking at around £350 a month with 0 deposit.

My current car is already insane on insurance (one of the highest levels), so I should see a slight drop if anything.

RAS

theringding said:

fatbelly said:

Why not do a voluntary termination on the old car?

I'm no where near 50% paid off. Car was £36,000 and settlement figure is £29,000.

You haven't read the article to which fatbelly link? As you don't have to repay £29k.

theringding

RAS said:

theringding said:

fatbelly said:

Why not do a voluntary termination on the old car?

I'm no where near 50% paid off. Car was £36,000 and settlement figure is £29,000.

You haven't read the article to which fatbelly link? As you don't have to repay £29k.

I have read it, but please correct me if I'm wrong. I can VT my contract if I have paid 50% of my payments, or VT early and make the difference up to 50%. I bought the car for £36,000, so won't be at the 50% mark until I have paid of £18,000. Or I can VT now and pay £11,000 to make the difference up. Either way, I'll be better off with my original plan, no?

MattMattMattUK

theringding said:

MattMattMattUK said:

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

44 mile round trip commute. Was looking at a 2022 Ioniq 5 or Kia eNiro, both about £350 a month with 0 deposit.

Rest of finances are ok. By doing this I should have £400-£600 leftover a month.

Why not just get something cheap, a small petrol engine car for a few years, spend £5-6k. It would cost you £120-150 a month in petrol, insurance would be a lot cheaper and you could clear down your debt then start saving whilst you do. You can then buy something newer when your finances are in a better state. 

theringding

MattMattMattUK said:

theringding said:

MattMattMattUK said:

How far do you commute and what EV are you thinking of getting? How much are you planning on spending and what is the finance deal?

What is the state of the rest of your finances, you are going to apply for a loan, then apply for finance for the EV quickly after that, which could be an issue with lenders. How much spare cash do you have each month to act as an affordability buffer?

44 mile round trip commute. Was looking at a 2022 Ioniq 5 or Kia eNiro, both about £350 a month with 0 deposit.

Rest of finances are ok. By doing this I should have £400-£600 leftover a month.

Why not just get something cheap, a small petrol engine car for a few years, spend £5-6k. It would cost you £120-150 a month in petrol, insurance would be a lot cheaper and you could clear down your debt then start saving whilst you do. You can then buy something newer when your finances are in a better state. 

First, I don't have £5-£6k cash to spend. 

Second, it needs to be reliable, my job isn't the kind where I can take a morning off because my car broke down.

Third, it needs to be large enough to fit 2 adults, 2 kids, and all the kids stuff (buggies etc).

Fourth, it needs to be ULEZ compliant.

When you take into consideration those requirements it becomes hard to find a decent car for anywhere close to that price.