Car HP confusion

cederic

If I take a dealer's car HP agreement (with a third party lender) there's a 14 day cooling off period.
Online guidance is that cancelling the agreement means I have to return the car to the dealer.

Question 1 - can I cancel the agreement, pay the lender in full and keep the car?

If I don't cancel the agreement but make an immediate overpayment for £10 less than the amount of credit, the repayment balance is still £10 plus the 'Total charge for credit'. (In numbers: I pay £990 on a £1000 loan but the credit charge was £300 so I still 'owe' £310)

Question 2 - if I do that then settle within a few days, doesn't that leave me paying the whole 'Hire Purchase Charges' less the interest rebate on that amount; so basically most of the hire purchase charge plus the original loan amount. (in numbers, £1210 in total)

If I instead make an immediate overpayment for £10 less than the repayment balance, the repayment balance becomes £10. 

Question 3 - if I do that then settle within a few days, doesn't that mean I've paid for interest I should never have been charged? Do I get a refund? (In numbers, a refund of around £280)

Sorry, slightly confused questions but I have the horrible feeling I've got no sensible early redemption option which doesn't leave me paying all the interest anyway. The dealer has assured me that there's no redemption fee but I've found out since the lender will always charge you 58 days interest after the point at which you request a settlement figure.

I need to decide whether to withdraw from purchasing a car and/or try and renegotiate based on the inability to redeem the loan early without vast cost.

Isthisforreal99

Obvious question is if you have the funds to clear the finance then why not just pay cash?

cederic

It's a reasonable question. Farcically taking out finance is quicker than paying cash and I'm currently without car. Some other complications too. This is the end of a multi-month nightmare.

retiredbanker1

If you take out the finance will the dealer offer you a kick back of some kind? eg discount - free servicing etc.

If not, I agree no point and it will cost you a fee in most cases.

diveunderthebonnet

I am sure  i read on this forum that if you take a car out on finance BUT pay it off quickly you only get charged something like 58 days interest rather than 3 years interest if you take the finance out for 36 months so only a few pounds rather than hundreds of pounds.

CliveOfIndia

diveunderthebonnet said:

I am sure  i read on this forum that if you take a car out on finance BUT pay it off quickly you only get charged something like 58 days interest rather than 3 years interest if you take the finance out for 36 months so only a few pounds rather than hundreds of pounds.

That's standard for any loan - if you pay it off early, they're allowed to charge an early settlement penalty of up to 2 month's worth of interest (1 month if there's less than a year left to run on the loan).

What I don't know about car finance in particular is, if they give you an incentive to take the finance (dealer contribution, free servicing, whatever), do you forfeit this if you pay it off early, or within a specified time period?

cederic

The dealer has offered incentive but I don't think they can withdraw that if I don't cancel the finance - e.g. if I pay it off early. Even paying 58 days interest leaves me better off but it's marginal.

The dealer has however promised me there's no early redemption penalty so I'll discuss with them tomorrow.

Other factors are at play behind taking the finance. I will read all the small print and I can afford it if I end up paying off the stated amount every month through the full term so I'm not acting irresponsibly. (Well, not in that regard).

I'm just looking at options for clearing it fast, as I hate being in debt.

Thank you all for the thoughts.

cederic

Just to close this: Your queries, feedback and comments helped me decide today not to take out finance. I do have a new (second hand) car, bought outright, and that does mean I need to make some other changes, but I'll get that done, and I now have certainty.

thanks