Brendan Burgess
Founder
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Car finance/HP agreement
This is what you will be offered by a car dealer. It is also what your bank will try to get you take out if you ask for a car loan.
Early repayment penalties as it is a fixed rate loan. These penalties could be up to 6 months interest. – Note that around 60% of 5 year HP agreements are paid off within 3 years.
If you fall behind, cannot easily be rescheduled which explains why lenders are much more aggressive with borrowers in arrears. This can result in a bad credit history.
HP agreements sometimes have a balloon payment at the end where you pay a big lump of cash to buy the car. Very difficult to factor these into the real cost.
Not easy to evaluate as there are other fees such as documentation fees & arrangement fees.
Might be cheaper than a personal loan
Best buys
The following branded products are HP agreements:
Personal loan
Your bank will try to steer you to a HP agreement as the loan is secured on the car. But insist on a personal loan or take your business elsewhere.
Much more flexible – no penalties for paying it off early or paying a lump sum off the outstanding amount.
Easier to reschedule if you get into difficulties
Remortgage
The cheapest form of borrowing is a mortgage – current rates around 4.5% or less.
People will argue that you should not use 20 year finance to buy a 5 year car, but there is nothing to stop you paying off the car loan bit over 5 years or fewer.
There will be legal costs involved, so it might not be worth doing for smaller loans
You may have to increase your Mortgage Protection Policy
Some experiencesof remortgaging
Credit Unions
Some Credit Unions may be cheap and their loans are flexible. But some are extremely dear so be very careful.
Avoid Payment Protection Policies
The car dealers make big money selling these policies and they are poor value and add a lot to your repayments.
Other Tips
There have been reports of GE Capital/Woodchester taking a very aggressive attitude to people in arrears
Always shop around A car dealer has enormous scope to reduce the rate he is charging you.
You are usually better off with a personal loan rather than HP, but don’t tell the car dealer that you have the finance until you have the price agreed on the car. They make more money from selling finance than from selling cars.
Some car companies and dealers do special deals to shift cars e.g. Ford two step finance and Keary’s in Cork but make sure that the price of the car is not inflated.
Handy site for checking the history of a second hand car
cartell.ie
If you buy a second hand car and there is HP/car finance outstanding on it, you will have to pay off the HP. So check beforehand by by calling HP Ireland on 2600905.
This is what you will be offered by a car dealer. It is also what your bank will try to get you take out if you ask for a car loan.
Early repayment penalties as it is a fixed rate loan. These penalties could be up to 6 months interest. – Note that around 60% of 5 year HP agreements are paid off within 3 years.
If you fall behind, cannot easily be rescheduled which explains why lenders are much more aggressive with borrowers in arrears. This can result in a bad credit history.
HP agreements sometimes have a balloon payment at the end where you pay a big lump of cash to buy the car. Very difficult to factor these into the real cost.
Not easy to evaluate as there are other fees such as documentation fees & arrangement fees.
Might be cheaper than a personal loan
Best buys
The following branded products are HP agreements:
Personal loan
Your bank will try to steer you to a HP agreement as the loan is secured on the car. But insist on a personal loan or take your business elsewhere.
Much more flexible – no penalties for paying it off early or paying a lump sum off the outstanding amount.
Easier to reschedule if you get into difficulties
Remortgage
The cheapest form of borrowing is a mortgage – current rates around 4.5% or less.
People will argue that you should not use 20 year finance to buy a 5 year car, but there is nothing to stop you paying off the car loan bit over 5 years or fewer.
There will be legal costs involved, so it might not be worth doing for smaller loans
You may have to increase your Mortgage Protection Policy
Some experiencesof remortgaging
Credit Unions
Some Credit Unions may be cheap and their loans are flexible. But some are extremely dear so be very careful.
Avoid Payment Protection Policies
The car dealers make big money selling these policies and they are poor value and add a lot to your repayments.
Other Tips
There have been reports of GE Capital/Woodchester taking a very aggressive attitude to people in arrears
Always shop around A car dealer has enormous scope to reduce the rate he is charging you.
You are usually better off with a personal loan rather than HP, but don’t tell the car dealer that you have the finance until you have the price agreed on the car. They make more money from selling finance than from selling cars.
Some car companies and dealers do special deals to shift cars e.g. Ford two step finance and Keary’s in Cork but make sure that the price of the car is not inflated.
Handy site for checking the history of a second hand car
cartell.ie
If you buy a second hand car and there is HP/car finance outstanding on it, you will have to pay off the HP. So check beforehand by by calling HP Ireland on 2600905.