Car Loans...Personal Loan or Hire Purchase?

Hi there,I'm in the process of changing my car and am assessing the finance options available. Basically I need to finance approximately €20,000 of a €60,000 total. Through my own research and with help from the Best Buys section on AAM it's clear Tesco's 6.9% fixed rate loan with no penalty for early repayment is the best option. This would suit me as I plan to spread the payments over 3 years but try and hammer away at the loan and get it paid off much earlier. The guy in the garage is trying to get me to sign up for a HP agreement with GE Money which is laughable as the rate is terrible. Obviously he wants his commission! However he did say that a personal loan will affect my ability to get mortgages etc whereas a HP agreement will not because the product is asset backed and therefore not relevant to affordability calculations. This sounds bogus to me and could be just a sales tactic...is it? I'm planning to move house soon so if it is true I'd go with AIB's 6.99% HP rate fixed. The downside with this is that there are penalties for early repayment.Is this guy spoofing or is HP a better route if you're planning to go looking for a big mortgage?Any advice appreciated!

John Rambo said:

Through my own research and with help from the Best Buys section on AAM it's clear Tesco's 6.9% fixed rate loan with no penalty for early repayment is the best option.

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I don't think that every applicant is guaranteed to get that rate. I think they assess each application on its own merits before offering a specific rate.

I suspect that a personal loan would be a better and more cost effective solution than HP.

ClubMan said:

I don't think that every applicant is guaranteed to get that rate. I think they assess each application on its own merits before offering a specific rate.

I suspect that a personal loan would be a better and more cost effective solution than HP.

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That's what I would have thought but have you ever heard anything about banks ignoring HP type car loans when assessing mortgage applications? It doesn't sound right to me...I think it may be a scare tactic from the salesman.

If HP loan agreements are logged with the ICB then mortgage lenders will certainly consider them. They may also ask you explicitly if you have loans other than those listed on your ICB records.

John Rambo said:

That's what I would have thought but have you ever heard anything about banks ignoring HP type car loans when assessing mortgage applications? It doesn't sound right to me...I think it may be a scare tactic from the salesman.

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It doesn't sound right to me either though there are aspects to the underwriting exercise in general that are comical so maybe the sales bloke is right ,though I wouldn't be taking his word for it .

Hi,

I'm currently getting a Tesco loan at the rate of 6.9%. You can't make extra payments off this loan - only the normal repayments or a full once-off settlement. I asked Tesco Loan support this question last night.

HTH, Triona

triona said:

Hi,

I'm currently getting a Tesco loan at the rate of 6.9%. You can't make extra payments off this loan - only the normal repayments or a full once-off settlement. I asked Tesco Loan support this question last night.

HTH, Triona

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That's interesting Triona, thanks.I suppose I can put extra money aside in a regular saving a/c (if there are any left!) and finish it early.

Check out some of the other threads on hire purchase agreements. There are other reasons why i would never go for one. The main one being that the car is not actually yours till the last payment.

Thrifty said:

Check out some of the other threads on hire purchase agreements. There are other reasons why i would never go for one. The main one being that the car is not actually yours till the last payment.

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This is what I thought of straight away particulary as you are only financing 20K part of a 60K asset. In this situation I would want to own the whole car outright and would not like HP.

That wouldn't really bother me...I mean what are the potential downsides? The only problem I can think of is if I died (touch wood)
My main concern is having a 20K loan affecting my borrowing capacity. If with something like the AIB HP deal those repayments won't be on the radar when my maximum borrowings are calculated that is an advantage.

Who would be offering the HP finance? If it's AIB Finance and Leasing then note that they are listed on the [broken link removed] so this might indicate that such finance agreements would be registered there anyway.

Yes, it's AIB alright. The sales guy had to have been making it up. He was basically saying because with HP the "loan" is backed by an asset banks ignore it when calculating mortgage affordability. Why would that be the case with a non-revenue generating item that's actually depreciating? Considering the commissions these guys get on a finance deal I suppose it's to be expected.
Thanks again