Car loan with no credit history.

[Benbay001]

I have never borrowed money, and my phone contract is in my mums name, therefore i am without a credit history.
I earn about £12000 before tax but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

I would like to borrow £10000 over 3 years.
Will i stand much of a chance? I dont want to go getting quotes and what not because i dont intend on swapping car until next year.

I will also have about £7000 of my own money to put into the car.

Thank you.

[miln0039]

Benbay001 said:

I have never borrowed money, and my phone contract is in my mums name, therefore i am without a credit history.
I earn about £12000 before tax but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

I would like to borrow £10000 over 3 years.
Will i stand much of a chance? I dont want to go getting quotes and what not because i dont intend on swapping car until next year.

I will also have about £7000 of my own money to put into the car.

Thank you.

You can get quotes for a "poor" credit profile through the various money comparing websites out there. Most loans will require you to declare you're over 18 and have income of X before you start the application. I'll be honest, in most cases the X will be more like £18k than £12k....I'd just spend £7k on a car if I were you!

[cossy400]

miln0039 said:

Benbay001 said:

I have never borrowed money, and my phone contract is in my mums name, therefore i am without a credit history.
I earn about £12000 before tax but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

I would like to borrow £10000 over 3 years.
Will i stand much of a chance? I dont want to go getting quotes and what not because i dont intend on swapping car until next year.

I will also have about £7000 of my own money to put into the car.

Thank you.

You can get quotes for a "poor" credit profile through the various money comparing websites out there. Most loans will require you to declare you're over 18 and have income of X before you start the application. I'll be honest, in most cases the X will be more like £18k than £12k....I'd just spend £7k on a car if I were you!

Pretty much this is what id suggest too. Maybe get a store card to give you some credit history.

Obviously as long as you pay it off quickly etc.

[jas xjr]

try your bank before you get a quote from a dealer

[Benbay001]

Cheers guys.

[Sir Bagalot]

So you are planning on borrowing £10K and along with your own £7K you'll buy a £15-18K car..... paying back £300pm... tax, insure and maintain it all on £918 pm salary.....

[audidoody]

You'll be able to get the car on HP as the car is security for the loan (after a deposit).

[Benbay001]

Sir Bagalot said:

So you are planning on borrowing £10K and along with your own £7K you'll buy a £15-18K car..... paying back £300pm... tax, insure and maintain it all on £918 pm salary.....

Benbay001 said:

but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

[Benbay001]

audidoody said:

You'll be able to get the car on HP as the car is security for the loan (after a deposit).

How does that work? I am completely new to finance in all forms. My mum used to bank manage for NatWest, therefore she did almost all my financial paperwork, im literally clueless on this front.

All i know is that i could easily afford the repayments with the money i save switching from a supercharged v8 to a light 4 cylinder (my intended plan is for a Lotus or Caterham)

[oldnbold]

Benbay001 said:

audidoody said:

You'll be able to get the car on HP as the car is security for the loan (after a deposit).

How does that work? I am completely new to finance in all forms. My mum used to bank manage for NatWest, therefore she did almost all my financial paperwork, im literally clueless on this front.

All i know is that i could easily afford the repayments with the money i save switching from a supercharged v8 to a light 4 cylinder (my intended plan is for a Lotus or Caterham)

You buy a £17k car. You put a £7k deposit down and borrow £10k on HP.

If you default on the payments the HP company reposses the car and with the £7k deposit that you paid, the car should always be worth more than the amount you owe on it through out the loan period. Therefore risk to the loan company is very little.

Buy £17k car with £1k deposit and you will be in negative equity through out the loan period, ie the car will probably be worth less than the outstanding balance of the loan, risk to HP company is high.

So with your large deposit you shouldn't have a problem with HP, however might be worth getting a credit card and paying for your fuel each month on it and paying it off in full to increase your credit score.

[P-Jay]

I think you're going to run into problems here.

With zero credit history you're an unknown quantity and will be booted out by a lot of automated underwriting systems which will ask for 3 years history, you're probably not going to appear on Experian et al's radar at all, which will cause alarm bells to ring.

If you're not on the voters roll you can forget about it, a few years ago a lot of fraud was caused by people applying for birth certs for people who died as children or teenagers and using them to build identities before hitting the banks for as much as possible and disappearing into the night.

You're also going to suffer because of the Car you're looking at - Catherham's and other low volume manufactures often don't appear on the check-box list of vehicles for underwriting and their values aren't easily established because Glass's Guides and the like don't list them, or the myriad of options and various versions so they can't establish whether they have any security in the asset or what it may be worth 12, 24, 36 months into the deal.

You have to remember that in order to sell finance / loans for the sorts of rates they do they have to do so as efficiently as possible so it's all automated and in order to manage the hugely complex systems they use to set their conditions for acceptance the human element is given little or no say in decisions - if "computer says no" it's no.

Which would make your bank the best option but again this is problematic, they're probably not going to be able to offer you a secured deal, they tend to only offer unsecured loans which means forgetting all other aspects you're asking to borrow £10k with an income of £12k which isn't a favourable ratio unless it's to consolidate existing borrowing to reduce outgoings, your living status is difficult too, for the sake of having a box to tick you'll fall under the "living with parents" banner which not all banks like - it might save you money now, but will you still be there in 2 years?

[P-Jay]

oldnbold said:

You buy a £17k car. You put a £7k deposit down and borrow £10k on HP.

If you default on the payments the HP company reposses the car and with the £7k deposit that you paid, the car should always be worth more than the amount you owe on it through out the loan period. Therefore risk to the loan company is very little.

Buy £17k car with £1k deposit and you will be in negative equity through out the loan period, ie the car will probably be worth less than the outstanding balance of the loan, risk to HP company is high.

So with your large deposit you shouldn't have a problem with HP, however might be worth getting a credit card and paying for your fuel each month on it and paying it off in full to increase your credit score.

That's not fantastic for them either - the way the law sits the total amount to pay for this car is:

£17,980 which is his £7k deposit plus the repayments of £305 (for the sake of example) x 36.

Once he has paid £8990 then the balance of ownership is his and they cannot repo the car because it's more his than theirs - so 7 months into the deal they have zero asset security.

[Muzzer79]

Benbay001 said:

Sir Bagalot said:

So you are planning on borrowing £10K and along with your own £7K you'll buy a £15-18K car..... paying back £300pm... tax, insure and maintain it all on £918 pm salary.....

Benbay001 said:

but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

I'm still concerned.

£300 has it sitting on your drive.
You then have to fuel it. You're going to want to drive it (obviously) so let's call that £100 a month
Insure it? I assume you're quite young so let's say £85 pm?
Tax it? £25 pm
Maintain it? Tough one here but servicing, tyres, consumables and other sundries I think you need to assume £90pm if nothing goes wrong?

That leaves you with £300 a month to live on. Even taking into account food & lodgings being provided for, spending two-thirds of your income on a car is stretching man-maths to say the least.

I speak from experience. I had a BMW 3 series when I was earning 50% more than you, costing £200pm on finance, and I soon wanted rid as it was costing too much.....

[Condi]

Muzzer79 said:

Benbay001 said:

Sir Bagalot said:

So you are planning on borrowing £10K and along with your own £7K you'll buy a £15-18K car..... paying back £300pm... tax, insure and maintain it all on £918 pm salary.....

Benbay001 said:

but have no outgoings other than my car (i work for my mum and get my lodgings and food paid for).

I'm still concerned.

£300 has it sitting on your drive.
You then have to fuel it. You're going to want to drive it (obviously) so let's call that £100 a month
Insure it? I assume you're quite young so let's say £85 pm?
Tax it? £25 pm
Maintain it? Tough one here but servicing, tyres, consumables and other sundries I think you need to assume £90pm if nothing goes wrong?

That leaves you with £300 a month to live on. Even taking into account food & lodgings being provided for, spending two-thirds of your income on a car is stretching man-maths to say the least.

I speak from experience. I had a BMW 3 series when I was earning 50% more than you, costing £200pm on finance, and I soon wanted rid as it was costing too much.....

Yes, please dont underestimate how much it will cost! A mate did the same, did the sums, found it could work. Unfortunately, not being able to buy beers, go to football games or do much else for fun got very boring very quickly. The car eventually went when he moved to the big smoke, but it was not a great decision in hindsight.

[Benbay001]

My calculations go something like this.

Current car

Per year

£650 insurance
£280 tax
£3000 fuel
£1000 depreciation
£500 tyres
£1000 maintainance and servicing
Total-
£6400

Caterham, Lotus or VX220
Per year
£2400 repayments
£800 insurance
£2000 fuel
£500 depreciation
£200 tyres
£1000 maintainance and servicing.
Total-
£6900

[miln0039]

You missed tax off the second lot of calculations.

Also £200 per month for £10k with no credit rating!! No chance.

[crazy about cars]

Sounds like your mum gives you money so why not borrow from her?

[fandango_c]

Benbay001 said:

My calculations go something like this.

Current car

Per year

£650 insurance
£280 tax
£3000 fuel
£1000 depreciation
£500 tyres
£1000 maintainance and servicing
Total-
£6400

Caterham, Lotus or VX220
Per year
£2400 repayments
£800 insurance
£2000 fuel
£500 depreciation
£200 tyres
£1000 maintainance and servicing.
Total-
£6900

Depreciation should not be included in the above calculation - it is not something that will cause a cashflow each year - it will only materialise when you come to sell the car and represents the difference in the purchase and sale prices.

[miln0039]

fandango_c said:

Depreciation should not be included in the above calculation - it is not something that will cause a cashflow each year - it will only materialise when you come to sell the car and represents the difference in the purchase and sale prices.

I didn't even see that in there when I first looked. Easy way to manipulate £500 of man maths..... But I should still say I think this financial assessment won't work.

[Muzzer79]

Benbay001 said:

My calculations go something like this.

Current car

Per year

£650 insurance
£280 tax
£3000 fuel
£1000 depreciation
£500 tyres
£1000 maintainance and servicing
Total-
£6400

Caterham, Lotus or VX220
Per year
£2400 repayments
£800 insurance
£2000 fuel
£500 depreciation
£200 tyres
£1000 maintainance and servicing.
Total-
£6900

Let me get this straight.

Out of your £11k take-home pay per year, you want to spend £7k on a car. A device for getting from A to B.

Leaving you £333 per month to spend on you - your life. Meeting friends, going out, having fun, buying stuff, treating your OH.
£83 per week to spend on your annual holiday, saving for the future, saving for your next car.

Mate, I'm all for living for the moment and having car-based fun but you're absolutely stark-raving nuts.