Car Finance...
04 February 2001, 02:07 AM
#1
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Is there anyone that works for a car finance company here?
Theres something I dont understand, but its hard to explain.
I'll try....
Ok, say I buy a car now for £10,000, paid off over 5 yrs.
After 2 years, I decide to trade it in for another car that is £14,000.
Say I get £5000 for the trade-in, but Ive still got £5000 to pay on the original car...
(still with me? good)
Ok, this would bring the price of the NEW car down to £9000 (with my trade-in)
Heres the bit I dont get...!
Because Ive got £5000 left to pay on my original car, does this get added on to the £9000 for the NEW car, so I end up owing £14000
OR
Does it mean that cos Ive got £5000 trade-in on the original car, yet I still owe £5000 to the finance co, that we are all square?
Which will then mean that I just set up a NEW car agreement...
Where does the garage/dealer come in to all this?
What do they get?
If they are giving me £5000 trade-in, then do they have to use that to pay off the agreement, or is that still upto me?
Im confused here!!!
Basically Ive never understood how you can sell your car before you've even paid for all of it!!!
If someone could help, it would be most appreciated.
The outcome of this may result in first Scooby purchase!!!
(Its an oldie, but if I only keep it for two years, then its not so bad)
Help
Mark...
Theres something I dont understand, but its hard to explain.
I'll try....
Ok, say I buy a car now for £10,000, paid off over 5 yrs.
After 2 years, I decide to trade it in for another car that is £14,000.
Say I get £5000 for the trade-in, but Ive still got £5000 to pay on the original car...
(still with me? good)
Ok, this would bring the price of the NEW car down to £9000 (with my trade-in)
Heres the bit I dont get...!
Because Ive got £5000 left to pay on my original car, does this get added on to the £9000 for the NEW car, so I end up owing £14000
OR
Does it mean that cos Ive got £5000 trade-in on the original car, yet I still owe £5000 to the finance co, that we are all square?
Which will then mean that I just set up a NEW car agreement...
Where does the garage/dealer come in to all this?
What do they get?
If they are giving me £5000 trade-in, then do they have to use that to pay off the agreement, or is that still upto me?
Im confused here!!!
Basically Ive never understood how you can sell your car before you've even paid for all of it!!!
If someone could help, it would be most appreciated.
The outcome of this may result in first Scooby purchase!!!
(Its an oldie, but if I only keep it for two years, then its not so bad)
Help
Mark...
04 February 2001, 08:13 AM
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Mark
You cannot legally sell a car that is on finance because it is actually still owned by the finance company. If the garage is giving you £5000 as a trade in, they will run an Hpi check on your car and see there is outstanding finance, it is then their responsibility to settle it. So....
You have 2 Choices
1) If you have cash sitting in your bank account then simply contact your finance company for a settlement figure and send them a cheque for that amount. It will probably take about 10 days before your cheque has gone through their system and they will relinquish their interest in your vehicle and remove the agreement from Hpi. You will probably find the dealer is reluctant to take your car in as a p/ex until this happens,
2) Alternatively, just let the dealer concerned do the work for you if you have enough equity in your car and they will then simply set up another agreement, maybe even with your existing finance co. You will probably still need to put down a deposit but it saves the delay and you can drive away in your shiny new Scooby even sooner.
Hope this helps
Les H
You cannot legally sell a car that is on finance because it is actually still owned by the finance company. If the garage is giving you £5000 as a trade in, they will run an Hpi check on your car and see there is outstanding finance, it is then their responsibility to settle it. So....
You have 2 Choices
1) If you have cash sitting in your bank account then simply contact your finance company for a settlement figure and send them a cheque for that amount. It will probably take about 10 days before your cheque has gone through their system and they will relinquish their interest in your vehicle and remove the agreement from Hpi. You will probably find the dealer is reluctant to take your car in as a p/ex until this happens,
2) Alternatively, just let the dealer concerned do the work for you if you have enough equity in your car and they will then simply set up another agreement, maybe even with your existing finance co. You will probably still need to put down a deposit but it saves the delay and you can drive away in your shiny new Scooby even sooner.
Hope this helps
Les H
04 February 2001, 10:41 AM
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Mark, I'll try and keep this simple and user friendly 
!!!!!!
If you take out finance on a car and owe say £10,000 as a settlement figure (to clear it from finance completly) and the car has been valued at say £5000, then there is a shortfall of £5000 still. If you just wanted rid of the car then you'd need to cough up the extra £5000 to dissolve the finance agreement. If your buying another car that costs £9000, then you will need to add the negative equity of £5000 on top of the £9000 !!!! (A dealer cannot take in a car unless it is cleared from all finance agreements) So hence balance to finance would be £14000 ...........
The dealer will get some sort of a kick back from the finance company so it might be worthwhile approaching the finance company directly to see what there monthly repayments would be for the same amount borrowed and over the same duration!!!
Though try not to go for a 60 month agreement as the amount paid back is horrendous and you'll always be stuck in neagative equity!! Ask the delaer about a personal contract plan too
I hope this helps
Nath
!!!!!!If you take out finance on a car and owe say £10,000 as a settlement figure (to clear it from finance completly) and the car has been valued at say £5000, then there is a shortfall of £5000 still. If you just wanted rid of the car then you'd need to cough up the extra £5000 to dissolve the finance agreement. If your buying another car that costs £9000, then you will need to add the negative equity of £5000 on top of the £9000 !!!! (A dealer cannot take in a car unless it is cleared from all finance agreements) So hence balance to finance would be £14000 ...........
The dealer will get some sort of a kick back from the finance company so it might be worthwhile approaching the finance company directly to see what there monthly repayments would be for the same amount borrowed and over the same duration!!!
Though try not to go for a 60 month agreement as the amount paid back is horrendous and you'll always be stuck in neagative equity!! Ask the delaer about a personal contract plan too
I hope this helps
Nath
04 February 2001, 07:19 PM
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I think your making it look a bit complicated!
Simply put if you have finance secured on your car and you trade it in the dealer will settle the finance with the finance company as it is legally their car.
If for example they offerd you 5k for your car as a straight purchase and you owed 4k in finance you would only see 1k. If you had 6k owing you would have to pay the dealer 1k to take the car off your hands (negative equity). The same applies if you are p/xing ie new car 14k your car 5k with 4k owing = 13k cost to change (14-5+4(new car-p/x+outstanding finance)), if you owed 6k the cost to change would be 15k (14-5+6).
Simple really.
What dot eh dealers get?? Lots they usually take a % or two plus a kick back from the finance co.
Matt.
Simply put if you have finance secured on your car and you trade it in the dealer will settle the finance with the finance company as it is legally their car.
If for example they offerd you 5k for your car as a straight purchase and you owed 4k in finance you would only see 1k. If you had 6k owing you would have to pay the dealer 1k to take the car off your hands (negative equity). The same applies if you are p/xing ie new car 14k your car 5k with 4k owing = 13k cost to change (14-5+4(new car-p/x+outstanding finance)), if you owed 6k the cost to change would be 15k (14-5+6).
Simple really.
What dot eh dealers get?? Lots they usually take a % or two plus a kick back from the finance co.
Matt.
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05 February 2001, 01:01 AM
#8
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Ahhhh, now I get it!
I am AWFUL with figures!!
Cheers MattN for explaining that a bit more simply.
I didnt have a clue what the hell Negative Equity was for starters!
Anway, think Ive decided (sort of!) that £10,995 is a little too much for a MY94 WRX Sti 1
(Devil in head : But its just sat there! BUY IT!
Me : STOP IT!!!)
Cheers
Mark...
I am AWFUL with figures!!
Cheers MattN for explaining that a bit more simply.
I didnt have a clue what the hell Negative Equity was for starters!
Anway, think Ive decided (sort of!) that £10,995 is a little too much for a MY94 WRX Sti 1
(Devil in head : But its just sat there! BUY IT!
Me : STOP IT!!!)
Cheers
Mark...
05 February 2001, 01:40 PM
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Mark,
Do NOT use finance if you can get an unsecured personal loan.
The Government insists that all finance deals are given an APR. This allows you to compare how much the deal is going to cost you.
Finance on a car will be around the 12-14% apr mark.
One of the current best lenders is Northern Rock who'll do 9.4% for £10K and they have no redemption fee.
So if you borrow the money over 5 years then after 2 years you simply owe 3/5 of the original loan. You have already paid 2 years interest, but you don't need to pay any more interest to redeem the loan.
The other advantage is that you own the car since the loan is unsecured.
On a finance scheme the finance company owns your car.
I suppose the only reasons to go with a finance scheme are:
It's quicker to organise
You may get other benefits (but these may have to be negotiated)
Since it's a secured loan you can get one even if you have a dodgy credit history.
[This message has been edited by Dippy (edited 05 February 2001).]
Do NOT use finance if you can get an unsecured personal loan.
The Government insists that all finance deals are given an APR. This allows you to compare how much the deal is going to cost you.
Finance on a car will be around the 12-14% apr mark.
One of the current best lenders is Northern Rock who'll do 9.4% for £10K and they have no redemption fee.
So if you borrow the money over 5 years then after 2 years you simply owe 3/5 of the original loan. You have already paid 2 years interest, but you don't need to pay any more interest to redeem the loan.
The other advantage is that you own the car since the loan is unsecured.
On a finance scheme the finance company owns your car.
I suppose the only reasons to go with a finance scheme are:
It's quicker to organise
You may get other benefits (but these may have to be negotiated)
Since it's a secured loan you can get one even if you have a dodgy credit history.
[This message has been edited by Dippy (edited 05 February 2001).]
06 February 2001, 10:51 PM
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Hmmmm, cheers Dippy.
I take it by an "unsecured personal loan" you mean a bank loan or similar?
I always thought that I would have to pay a much higher interest than to a finance company.
Ah well, something else to look into...
Ta
Mark...
I take it by an "unsecured personal loan" you mean a bank loan or similar?
I always thought that I would have to pay a much higher interest than to a finance company.
Ah well, something else to look into...
Ta
Mark...
07 February 2001, 12:08 PM
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no no no.
Unsecured loans are always the best way to go. Car finance is only good if you are buying an expensive car, as you can only generally borrow about 50% of your salary on personal loans.
APR's are generally lower on a personal loan although an APR itself can have anything up to a 2% variance (the calculations behind an APR are very complicated). But that said check the actual repayments and the total amount to pay, sometimes they're not all that different despite different APR's.
If you ask for an 'interest rate' from a dealer they may give you the flat rate, which is not the APR. A flat rate will be typically 7 or 8 %. This figure should not be confused with an APR. It's something completeley different.
If you get stuck or need advice mail me offline and I'd be happy to give you advice, although I must stress that any advice I give is my opinion (based on my many years experience) and should not be considered anything else (bit like a disclaimer this!!)
Matt.
Unsecured loans are always the best way to go. Car finance is only good if you are buying an expensive car, as you can only generally borrow about 50% of your salary on personal loans.
APR's are generally lower on a personal loan although an APR itself can have anything up to a 2% variance (the calculations behind an APR are very complicated). But that said check the actual repayments and the total amount to pay, sometimes they're not all that different despite different APR's.
If you ask for an 'interest rate' from a dealer they may give you the flat rate, which is not the APR. A flat rate will be typically 7 or 8 %. This figure should not be confused with an APR. It's something completeley different.
If you get stuck or need advice mail me offline and I'd be happy to give you advice, although I must stress that any advice I give is my opinion (based on my many years experience) and should not be considered anything else (bit like a disclaimer this!!
)Matt.
07 February 2001, 12:17 PM
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just to mention, under the credit consumer act 1974, the most a personal loan company can charge for settlement is the next 3 months interest.
Also remember if your settling early, you might get a shock from the settlement figure, you pay far more interest than capital to start with.
Also remember if your settling early, you might get a shock from the settlement figure, you pay far more interest than capital to start with.
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