How does Car Finance work?

edd1e

edd1e

edd1e

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Hi guys and gals.

Just looking at purchasing a car on Finance. Can some tell me how it works exactly.

I know the its a set payment amount every month of X amount but what would happen for example if i need to get rid of the car after a year or so? and i have already paid X amount into the car.

Cheers for the help.

Edd
 
hi :)....you would first put a small deposit down on the car which then would be deducted off your finance....then follow with X amount of payments....if you wanted to get rid of the car after a year or so with X amount of finance outstanding i think you would have to settle any outstanding finance before selling the car (if selling private)......you would need to ring your finance company and get a settlement figure(which would be less as you wouldnt have the interest on from the other x amount of years outstanding).....pretty simple but only one winner with finance :)

sorry if thats a little confusing but its the best i could do for 7:52am :)
 
If it is in a negative equity due to depreciation you'll owe more than you get for the car when you sell it.

If not, you'd pay off the outstanding finance with cash received.

Cosmicman said:
.....pretty simple but only one winner with finance :)
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It doesn't read like it, but I hope you mean the finance company.
 
Gilly said:
If it is in a negative equity due to depreciation you'll owe more than you get for the car when you sell it.

If not, you'd pay off the outstanding finance with cash received.



It doesn't read like it, but I hope you mean the finance company.
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i do :) i did the same as you and got rid after 2 years on a 4yr plan......and got a lot less than what was owed , so was stuck with a stupid amount which i had to pay off at the end.
 
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Cosmicman said:
pretty simple but only one winner with finance :)
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:confused: I don't get it? The deal i had was £99 deposit and interest free for 5yrs. Which means i have kept the £8k i would have paid for the car to either save or invest in other stuff i wanted. How does that make it the finance company being the only winner???
 
kefkef said:
:confused: I don't get it? The deal i had was £99 deposit and interest free for 5yrs. Which means i have kept the £8k i would have paid for the car to either save or invest in other stuff i wanted. How does that make it the finance company being the only winner???
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o % interest deals are rare

it is very possible that the deal is 0 % interest for 5 years, but then a 6th year at 40 % apr or something silly. Check the small print

if it is indeed a true 0% apr for the entire duration of the repayment periods, theres probably some agreement with variable payment ammounts, enabling you to pay off what you want. Idea with this is so you dont repay the full ammount in the 5 years, and then need to extend the load past the o% and into the 40 % (or whatever stupid APR) territory. Again check the small print.
 
Right ok cheers guys.

just one question. How are you surposed to the sell the car with finance still outstanding on it?

Also cannot you not hand it back to the garage and they work out something for you? not sure how this would work though.
 
im not quite sure of the procedure, but i know the prospective buyer has to approach the finanance company, as it will technically be their car.

Only the finanace company can officially give permission to the buyer to buy it.
 
MrLOL said:
o % interest deals are rare

it is very possible that the deal is 0 % interest for 5 years, but then a 6th year at 40 % apr or something silly. Check the small print

if it is indeed a true 0% apr for the entire duration of the repayment periods, theres probably some agreement with variable payment ammounts, enabling you to pay off what you want. Idea with this is so you dont repay the full ammount in the 5 years, and then need to extend the load past the o% and into the 40 % (or whatever stupid APR) territory. Again check the small print.
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It's a full 0% deal, the 60 payments add up to what the car cost minus the £99 deposit. No final payment. Not saying it was easy to get the deal ;) took a fair bit of too-ing and fro-ing between a couple of dealerships (and arguing the toss about how they were advertising the deals they were doing) but they eventually caved in, more to get rid of me than anything else i suppose.
 
eddie500 said:
Also cannot you not hand it back to the garage and they work out something for you? not sure how this would work though.
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Think it is something like 50% of the way through the deal and you can hand it back without penalty (usually), 70% of the deal they cannot reposses the car as easily if you don't make/miss any payments. Sure someone will come along and set it straight. I do recall someone saying something like 50th's and 70th's in finance deals.
 
Hi there, thanks for that.

I'm aware if you have paid at least 50% you can usally hand it back to the finance company without penalty as a friend of mine did this but what would happen to the money you have paid into the car.

heres an example of how i'm guessing it works?

Car bought for 12,000 with monthly payments of £250 over 4 years.

1 year of payments paid so £9,000 remaining.

If i then wanted to return the car to the finance company / garage would they offer me a price for the car? Say 11,000 (lost 1k due to depreiation). that would then leave 2,000 difference. what would happen to this money?

also as touched on earlier, is not impossiable to sell the car with finance outstanding on it as it would surely show on a HPI report.
 
kefkef said:
:confused: I don't get it? The deal i had was £99 deposit and interest free for 5yrs. Which means i have kept the £8k i would have paid for the car to either save or invest in other stuff i wanted. How does that make it the finance company being the only winner???
Click to expand...

Probably because you had to pay list price for a not particularly desirable car. But still if you were going to buy that car brand new anyway it's probably not a bad deal.
 
kefkef said:
It's a full 0% deal, the 60 payments add up to what the car cost minus the £99 deposit. No final payment. Not saying it was easy to get the deal ;) took a fair bit of too-ing and fro-ing between a couple of dealerships (and arguing the toss about how they were advertising the deals they were doing) but they eventually caved in, more to get rid of me than anything else i suppose.
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you've prooved our point

unless your willing to argue, and generally be a pain in the ***, the finance company gets the better deal ;)
 
K.C. Leblanc said:
Probably because you had to pay list price for a not particularly desirable car. But still if you were going to buy that car brand new anyway it's probably not a bad deal.
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:confused: 1yr old, '04 Plate 2nd hand Renault Clio 1.5dCi Dynamique with 3000 miles on the clock for average market value price at the time(£8k, they were about £12.5k new)? As has been said by Mr LoL, it's up to you to get the best deal possible, not just take the first one offered.

With regards Eddies question, if you got rid of it within the 50% rule, there would more than likely be penalty clauses in the contract (so many months payments plus admin fee), and don't forget, you don't actually own the car yet, the finance company does, so any cash/equity released from the 'sale' would be theirs.
 
eddie500 said:
If i then wanted to return the car to the finance company / garage would they offer me a price for the car? Say 11,000 (lost 1k due to depreiation). that would then leave 2,000 difference. what would happen to this money?
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i believe you'd get the 2k back, but the chances of only losing 1k on a brand new car in a year are very slim, unless your buying an R8 :D
 
[TW]Fox;10832620 said:
And you got 0% finance on that? Thats almost unheard of.
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amazing what a desparate salesman will offer when times are down i guess

i know my dads mate beat his Honda Salesman into a pulp. offering 0 % finanace and free upgrades etc.. on ...

a honda Jazz

but i guess that was because nobody else wanted one ;)
 
It's hard to see why any dealer would offer 0% finance on a used car at book price.

There is no profit in it for the finance company, so the dealer would have to pay them to offer it. This is usually then taken out of the profit of a new car at list price. But of course, this is a used car at book price. Which they could probably have sold to someone paying cash/with their own bank loan had they note sold it to you.

I honestly dont see why they would offer 0%. But lucky for you they did I guess!
 
like i said, it can only be the for purposes of numbers

ie he needed x number of sales or whatever and was desparate to get his numbers, he was willing to let the car go practically at a loss.
 
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