Pay of Hire Purchase Early

sandyman80

I have been told that if I pay off hire purchase of £30000 (£29500) and leave a balance of £500 within 2 weeks of starting the hire purchase agreement that this will prevent early termination fees and that the last payment of £500 (will be technically the first) will end the agreement

Is this correct?

Ayr_Rage

Who has told you that?

If you have taken finance and received an incentive from a dealer/manufacturer then cancelling may mean you need to pay that back.

Read your documentation very carefully!

anniecave

What does the agreement say?   Anyone can say anything but it's what the terms of the agreement say that's relevant. 

sandyman80

anniecave said:

What does the agreement say?   Anyone can say anything but it's what the terms of the agreement say that's relevant. 

Haven't seen it yet, I've not got the car yet. Hopefully next Monday.

This is all talk from friends who are jealous that I, at 80 years old, have bought a new car and are saying I should pay off the hire purchase as soon as possible since I have the cash in the bank and am throwing away the interest I will be paying.

I did get a discount for getting finance which works out about what I would be paying in interest so I will be paying the same whether I pay cash or finance. 

So if I pay of the finance immediately, so I have been told, I get the discount and don't pay interest.

Is it possible and if so how do I do it?

CliveOfIndia

sandyman80 said:

anniecave said:

What does the agreement say?   Anyone can say anything but it's what the terms of the agreement say that's relevant. 

Haven't seen it yet, I've not got the car yet. Hopefully next Monday.

This is all talk from friends who are jealous that I, at 80 years old, have bought a new car and are saying I should pay off the hire purchase as soon as possible since I have the cash in the bank and am throwing away the interest I will be paying.

I did get a discount for getting finance which works out about what I would be paying in interest so I will be paying the same whether I pay cash or finance. 

So if I pay of the finance immediately, so I have been told, I get the discount and don't pay interest.

Is it possible and if so how do I do it?

As has already been correctly pointed out, it's impossible to say without reading the contract carefully.

As far as it goes, the idea of paying all but £500 is correct.  For most credit agreements, if you settle the finance early then they are allowed to charge an early settlement penalty of up to 2 months' interest.  Leaving a small amount to be collected by the scheduled DD can mitigate this (though you will pay a small amount of interest).

But the clincher is whether you'd be asked to repay the discount you got for taking out the finance (it's a similar situation to when they offer free servicing or whatever in return for taking out the finance).  It's impossible to say without seeing the details of the contract you agreed to.

sandyman80

It is Honda Finance and I was reading the agreement online.

It seems that I can make overpayments without penalty, the part that took my interest the most is that I can pay up to £1000 per payment extra  using a credit card.

Now to find a credit or debit card that gives me more cashback than my Amazon/Barclay credit card and more than £1000 limit

It has to be something other than Amex as I was previously turned down for one of them.

CliveOfIndia

sandyman80 said:

the part that took my interest the most is that I can pay up to £1000 per payment extra  using a credit card.

Now to find a credit or debit card that gives me more cashback than my Amazon/Barclay credit card and more than £1000 limit

The one thing you need to be careful about with that approach is that you may well find the credit card treats it as a "cash-like" transaction.  If they do, you'll be charged a cash advance fee, interest from the time of the transaction (even if you repay the statement in full), and it wouldn't be eligible to earn any cashback or other rewards.

I'm not saying that's definitely the case - but it's very common for a credit card to treat payments to another finance agreement as cash.

If you can't establish for sure how such a payment is treated, one way of finding out is to make a payment of £1.  If it does get treated as cash, the interest will be negligible (though you'll still be charged a cash advance fee).  If it goes through as a standard purchase transaction, then happy days.