What do i do?

Casdawer

Casdawer

Casdawer

Soldato
Joined
14 May 2009
Posts
4,281
Location
Hampshire
Ok, I asked this question a little while back as I was sorting out some of my other finances (which is all done now! \o/)

ANYWAY, one of the questions was regarding my car which I got on Finance from VW.

It's a 1.2l Polo, basic edition with no remote central locking just AC and is currently costing me £190pm - my mileage limit PA is 12,000 which I will go over (I bought this car when I had a job closer to home but had to change due to getting fired) and it's an extra 0.45p PER MILE. I will be going over by about 2/3k so this will cost me an extra £1,000 per year.

Now, as well as paying that £190, I am also paying £150 for a car that I no longer own and still have 3 years left on it (I've been stupid with my money thus why I asked OcUK for finical advise which helped very much).

So currently at the moment I am paying £340 for this car (technically).

Now, I have a plan so please feel free to tell me how stupid / great my idea is and give any pointers when / if needed.

My plan is simple, find out how much it would cost to pay off the Finance then find out how much the VW and hopefully the 2 will match up (give or take) then take a loan out for the remaining loan balance of the £150 loan (about 4k) as well as an extra £8k to pay for a new car.

This of course would be a 12k loan which over 60 months is £240 which is £100 cheaper and it also means that -

a) I own the car
b) I do not have to pay to go over my mileage
c) the car is WAY better
d) I don't have to worry about buying the car after the 3 years are up.

SO, question is my fellow OcUKers - is it a good idea?
 
How much did you put down as a deposit? You'll probably find that you're in negative equity on your PCP unless you put down a hefty deposit.
 
Are you able to do another version of your plan where you keep the current car and end up with a smaller debt to pay back?

Getting another new car seems like it would add even more debt (and interest) to an already bad situation.
 
When did you buy the VW?

Have a look your paperwork and see what voluntary termination options you have. I think you may be able to pass it back if you have paid over half.

Jack
 
Well, if you really want rid of the Polo you need to request a settlement figure from the finance company, and then find out what it's worth.

Also, do you have to spend £8k on a replacement car? It sounds like you have a lot of debt and borrowing loads more won't help!
 
JackRegan said:
When did you buy the VW?

Have a look your paperwork and see what voluntary termination options you have. I think you may be able to pass it back if you have paid over half.

Jack
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Early termination is very difficult with PCP's because you have to have paid back more than half of the total amount payable, which includes the balloon at the end and not just half of the monthly payments. Early termination for a HP is obviously much easier as there's no balloon to worry about.
 
While it is true that £240/month is less than £340/month the £150/month for a car you no longer have is only for 3 years, the new loan would tie you down for 5.

Surely if you are to set yourself a goal then the goal should be to become debt free (ish) as soon as you can be then you can start your finances with a clean slate and not have to make tough decisions like you are having to now. However you haven't said what sort of interest rates you are looking at here so maybe your plan will cost you less in the long run (unlikely, but possible)

I have a question though, why £8k? okay, its not a huge sum as cars go, but its still going to be more than you need to spend. Even £3-4k as something cheap to run around in for a few years, hardly scraping the bottom of the barrel and should be able to get something better than a base spec polo. You get a better car and more money, win win!
 
£340 per month and for that you get to drive a 1.2 Polo??!! I think I'd slit my wrists. How about not getting into debt by wasting huge amounts of money on finance and depressingly dull, but new cars? I honestly can't understand why people do this sort of thing. Is it just - oooh new car - shiney, and people will think I'm successful - ah, can't afford - mmm get raped by bad finance deal - yeah, good idea? I mean it's not like you're any kind of car enthusiast at all - it's a 1.2 Polo.

Ah well, never mind - dont mean to have a go. Back to my nice large, comfortable, powerful, reliable motor that costs me £0 per month. :)
 
Liampope said:
£340 per month and for that you get to drive a 1.2 Polo??!! I think I'd slit my wrists. How about not getting into debt by wasting huge amounts of money on finance and depressingly dull, but new cars? I honestly can't understand why people do this sort of thing. Is it just - oooh new car - shiney, and people will think I'm successful - ah, can't afford - mmm get raped by bad finance deal - yeah, good idea? I mean it's not like you're any kind of car enthusiast at all - it's a 1.2 Polo.

Ah well, never mind - dont mean to have a go. Back to my nice large, comfortable, powerful, reliable motor that costs me £0 per month. :)
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So the guy comes looking for help, and all that you can offer is to brag about your car, and how much of an idiot he is.

To be honest, it says a lot more about you than the OP's post did about him ;).
 
DAnDan said:
So the guy comes looking for help, and all that you can offer is to brag about your car, and how much of an idiot he is.

To be honest, it says a lot more about you than the OP's post did about him ;).
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I'm just struggling to understand why someone who (reading his financial advice thread) as of January was at least £16k in debt is considering taking out a loan to buy a new £8k source of depreciation! :)

I can hardly brag about my own car - it's practically worthless. But that was sort of my point - it's nice without getting me into debt I can't really afford. I dont understand my some people seem to value 'newness' of a car more than anything else, like for example how good it is.

Ah well
 
Liampope said:
I'm just struggling to understand why someone who (reading his financial advice thread) as of January was at least £16k in debt is considering taking out a loan to buy a new £8k source of depreciation! :)

I can hardly brag about my own car - it's practically worthless. But that was sort of my point - it's nice without getting me into debt I can't really afford. I dont understand my some people seem to value 'newness' of a car more than anything else, like for example how good it is.

Ah well
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and your post helped in what way??
 
Are you sure about the excess mileage?? Are pcp deals typically that bad? The worst lease excess mileage I've ever seen was about 15p per mile
 
I have no idea what the interest rate is for my VW Finance agreement so cannot comment on that.

With the £190 + £150 = £340 x 36 = £12,400 + the extra for the extra mileage and the last payment to own the car.

With the new 'plan' it's £12,000 + 10% (loan interest) = £13,200 over 60 months = £240pm.

The 'plan' is the cheaper way of doing it - I'm still paying the exact same amount of money but just over a longer period of time. And in that time, I can be saving money to pay off the debt sooner (say £100pm * 36 = £3600 which means that I could pay off the loan 1 year earlier, possibly earlier).
 
Casdawer said:
I have no idea what the interest rate is for my VW Finance agreement so cannot comment on that.
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It'll be on the paperwork, you need to find out - I can't believe you signed it without reading it properly!

With the £190 + £150 = £340 x 36 = £12,400 + the extra for the extra mileage and the last payment to own the car.
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Stop confusing the two payments - they are for different things. You must have had an unsecured loan for your old car and for some reason didn't settle it when you got rid of it?

With the new 'plan' it's £12,000 + 10% (loan interest) = £13,200 over 60 months = £240pm.
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10% on a £12,000 loan is not a good rate. It's also not £13,200 over 60 months so I'm not sure where that figure has come from... £12,000 over 5 years @ 6.1% APR gives a total amount payable of £13910.81 so at 10% it'll be a lot more than that!
 
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There's one other thing to bear in mind here - you will possibly struggle to borrow £12,000 unsecured if you already have lots of debt elsewhere.

They will ask you for the purpose of the loan but even if you tell them that it's for debt consolidation they still have to assume that you will spend all of it and not repay any of your existing borrowing, and work out affordability based on what you currently owe PLUS the new amount.
 
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