Buying a car on finance ( High interest rates)

[Iphammer]

Ok so I found a car which I thought was priced reasonably well howver the interest rate is crazy high at 11.4% APR this is through a main dealer ( Skoda) on a £13.5k car monthly payments are around £290 over 48 months or £255 over 60 months

Bank loan is coming out at 19% apr

Are there any cheaper finance options out there worth looking at ?


The other option I was thinking of is using equity in the property I have a mortgage on to pay for the car. Has anyone gone down this route or would it be best to stick with a car loan ? ( I have 29 years left on the mortgage, with around £100k left, property value £135k )

[ThingsBehindTheSun]

Iphammer said:

Ok so I found a car which I thought was priced reasonably well howver the interest rate is crazy high at 11.4% APR this is through a main dealer ( Skoda) on a £13.5k car monthly payments are around £290 over 48 months or £255 over 60 months

Bank loan is coming out at 19% apr

I assume the four and five year finance deals must have a balloon at the end as well?

As for 19% being the best you can get, do you have a history of bad credit as that seems very high. For comparison I can borrow that amount on my credit card for a 5% fee for 15 months.

I personally would rather drive a shed than pay those sorts of rates, but others clearly accept it.

Here is a search I did on a random used Skoda

Used PCP |09 Škoda Karoq SE 1.6 TDI 115 PS DSG
Retail Cash Price
£12,690
47 Monthly Payments of £203.95
Contract Duration 48 months
Annual Mileage 5 ,000 miles
Customer Deposit £1,269
Total Deposit £1,269
Optional Final Payment £6,210
Option to Purchase Fee £10
Total Amount Payable £17,074.65
Total Amount of Credit £11,421
Excess Mileage (per mile) 7.20 p
Representative APR 12.9 % APR
Rate of Interest 12.87 % Fixed

12.9% and £6,600 interest over 4 years with £6,210 still to pay at the end. How do these salespeople sleep at night?

Edited by ThingsBehindTheSun on Thursday 21st August 19:47

[Blue_star]

Touching the mortgage seems quite nuclear.

- bank interest rate is insane.
- Do you have bad credit?
- If yes then did you try money supermarket for better deals?
- Also, does your bank offer more favourable interest rate for another loan amount?
- is this rate for car they offer? If yes how much is an unsecured loan?
- some credit cards offer money back offers of 10% (offers are at 5 but you prepay so ends up 10) but refinancing in 12 months might keep you awake

13% car loan is not completely insane relative to car loans. Not even awful. At 0% deal interest is within car price.

Clearscore app advertises cheaper loans but unsecured

[ThingsBehindTheSun]

You would almost be better off buying a brand new cheap car with 0% finance.

[C5_Steve]

Sorry but how are you being quotes 19% on a bank loan?? Something wrong there.

[Terminator X]

This can't be right, PH Company Directors always pay cash!

TX.

[samoht]

For the sake of comparison, I'm paying 8.9% APR on my Polestar; that's a manufacturer approved ~4yo car, a bit over half up front and half financed for two years, hire purchase (i.e. to own the car at the end). I suspect that it being an EV and a Polestar there may be some incentive in that rate. (bought in May).

I also tried my bank and they were useless, so went with that.

[Galibier]

Iphammer said:

Ok so I found a car which I thought was priced reasonably well howver the interest rate is crazy high at 11.4% APR this is through a main dealer ( Skoda) on a £13.5k car monthly payments are around £290 over 48 months or £255 over 60 months

Bank loan is coming out at 19% apr

Are there any cheaper finance options out there worth looking at ?


The other option I was thinking of is using equity in the property I have a mortgage on to pay for the car. Has anyone gone down this route or would it be best to stick with a car loan ? ( I have 29 years left on the mortgage, with around £100k left, property value £135k )

Taking equity out of an appreciating asset to pay for a depreciating one is madness. Don’t.

[Hackney2]

19%?Are you crazy?

[_Darren_]

Have you tried a credit union?

[Iphammer]

ThingsBehindTheSun said:

I assume the four and five year finance deals must have a balloon at the end as well?

As for 19% being the best you can get, do you have a history of bad credit as that seems very high. For comparison I can borrow that amount on my credit card for a 5% fee for 15 months.

I personally would rather drive a shed than pay those sorts of rates, but others clearly accept it.

Here is a search I did on a random used Skoda

Used PCP |09 Škoda Karoq SE 1.6 TDI 115 PS DSG
Retail Cash Price
£12,690
47 Monthly Payments of £203.95
Contract Duration 48 months
Annual Mileage 5 ,000 miles
Customer Deposit £1,269
Total Deposit £1,269
Optional Final Payment £6,210
Option to Purchase Fee £10
Total Amount Payable £17,074.65
Total Amount of Credit £11,421
Excess Mileage (per mile) 7.20 p
Representative APR 12.9 % APR
Rate of Interest 12.87 % Fixed

12.9% and £6,600 interest over 4 years with £6,210 still to pay at the end. How do these salespeople sleep at night?

Edited by ThingsBehindTheSun on Thursday 21st August 19:47

No this is a HP finance option so own the car outright at the end

[Wacky Racer]

Whatever you do, don't even think about involving your mortgage in any way, shape or form to buy a car.

Surely you could find a decent car for around 6k that will give you five years or more service if you look hard enough?

[ATG]

Galibier said:

Taking equity out of an appreciating asset to pay for a depreciating one is madness. Don’t.

This is genuinely meaningless. I know it's trotted out all the time, but it is still nonsense.

Borrowing is borrowing is borrowing. It makes sense to finance all your debt as cheaply as possible. Typically the cheapest loan you can take out is a mortgage. Extending that to buy a car makes perfect sense if that is genuinely the cheapest way of financing the car after you've taken all cashflows into account and factored in any flexibility you might be foregoing if you're locking yourself into any fixed terms.

[fflump]

ATG said:

Galibier said:

Taking equity out of an appreciating asset to pay for a depreciating one is madness. Don’t.

This is genuinely meaningless. I know it's trotted out all the time, but it is still nonsense.

Borrowing is borrowing is borrowing. It makes sense to finance all your debt as cheaply as possible. Typically the cheapest loan you can take out is a mortgage. Extending that to buy a car makes perfect sense if that is genuinely the cheapest way of financing the car after you've taken all cashflows into account and factored in any flexibility you might be foregoing if you're locking yourself into any fixed terms.

Agree it is meaningless to state this out of hand, though you mention the risks of extending a secured loan over an unsecured loan . Paying off the extra part of the mortgage over the same term as the loan will by definition be cheaper. Adding it to a 20 year term however is of course going to be more expensive than a short term loan. In the specific case of the OP I’d be wary of spending so much on a car relative to the equity they hold in their property unless large pay rises are inevitable.

[the-photographer]

11.4% isn't bad for used car finance, my local Skoda dealer is charging 13%

HOWEVER, Tesco bank loan is 6.3% or 5.9% with a clubcard

£260 for 60 months, total payable £15,700

[Galibier]

fflump said:

Agree it is meaningless to state this out of hand, though you mention the risks of extending a secured loan over an unsecured loan . Paying off the extra part of the mortgage over the same term as the loan will by definition be cheaper. Adding it to a 20 year term however is of course going to be more expensive than a short term loan. In the specific case of the OP I’d be wary of spending so much on a car relative to the equity they hold in their property unless large pay rises are inevitable.

Correct - and the OP has 29 years remaining, with a small amount of equity today, which would be diminished by over a third. Now consider extending that debt into a secured loan, against an asset that can only depreciate.

A fool and his money....

[123DWA]

ThingsBehindTheSun said:

How do these salespeople sleep at night?

By knowing that we're selling the car to a grown up who is capable of reading the contract. Some people just have to have something now at whatever cost be that a car, holiday or designer coat. You can try and help them out and talk them out of it but they'll just go and buy it from somewhere else.

I once had a customer with a £7k deposit for a Mercedes GL, the only finance company that would accept him were somewhere around 40% APR. At the same time i had a nice E class estate for £7k. I tried explaining to him that his best option was to buy the E class and then get a low limit credit card to try and build his credit back up but he wouldn't have it, it was the GL or nothing.

[ThingsBehindTheSun]

123DWA said:

ThingsBehindTheSun said:

How do these salespeople sleep at night?

By knowing that we're selling the car to a grown up who is capable of reading the contract. Some people just have to have something now at whatever cost be that a car, holiday or designer coat. You can try and help them out and talk them out of it but they'll just go and buy it from somewhere else.

I once had a customer with a £7k deposit for a Mercedes GL, the only finance company that would accept him were somewhere around 40% APR. At the same time i had a nice E class estate for £7k. I tried explaining to him that his best option was to buy the E class and then get a low limit credit card to try and build his credit back up but he wouldn't have it, it was the GL or nothing.

Agreed, and it just goes back to the idea that finance should be taught as a subject in school. However, part of me thinks the government want a financially illiterate population, otherwise the whole ponzi economy would collapse.

I think when you buy a car on finance, instead of signing a bit of paper they should hand a carrier bag with the cash in to the purchaser and tell them to hand it over to the car dealer. I wonder how many people would have second thoughts when they saw the money in piles of cash in front of them.

[GeniusOfLove]

Has OP considered a car he can actually afford as an alternative?

[ARHarh]

GeniusOfLove said:

Has OP considered a car he can actually afford as an alternative?

I am not sure he can afford any car