interest rates on car loans

G

guest

Guest
Can anybody tell me what are the best fixed rates on car loans for a 4 year term and with which bank, building society etc. Looking to trade my car in, which is on hire purchase at a rate of 7.9% (which I got 2 years ago).
 
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Over how many years is your HP agreement?

If more than the two years you've been paying, the car is not actually yours to trade in without paying the balance owed.
 
low cost loans

I thought I read last week EBS were doing loans for members for as low as 6.9% depending on your years of service with them?
Worth giving them a call anyway if youre with them. I think that rate would beat all.
 
interest rates

Spacer,

Got loan over 4 years. Paid 2 years & 3 months so far. The garage I bought my car from hasn't even hinted that there would be a problem trading up my car - I'd say they would be more than happy to give me more money as there was never a baloon payment agreement. I think I am well in the clear there.
 
Re: interest rates

Hi Guest - I think there may be some confusion over terminology here. Do you have a car loan (where they loan you the money and you buy/own the car) or a HP agreement (where they own the car and you pay them off a certain amount each month - the car is registered in their name until you have paid off the full amount)?
 
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Hi Guest

You've highlighted one of the downsides of HP agreements. They're not "loans" as such and once entered into, the premium/interest can't be reduced by paying back early.

HP agreements are really alternative purchasing arrangements which add a premium (the equivalent of interest) for the convenience of paying by instalment. The critical differnce between them and a standard loan is that the car remains the property of finace company until such time as all repayments have been made. Default on a repayment can result in the car being repossessed. This can't happen with a term loan.

The HP arrangement you made to acquire the car requires you to pay X amount in (I presume) 48 monthly instalments. Until such time as all instalments have been paid, the car does not belong to you - it belongs to the finance company that paid the garage.

However, this would seem an expensive way of doing business. You are obliged to pay the full amount that you said you'd pay over the four year period. There is no financial advantage to paying off early.

If you were to go back to the garage (or any other garage) the amount outstanding could be added to the cost of trading up and and new HP arrangement entered into.

However, you would effectively be paying a premium on the amount outstanding which ALREADY includes a premium on the face value of your existing car.

You could also get a regular loan from a bank but the same principle would apply - you would be paying interest to pay back interest.

The only alternative is to maintain payments at your current frequency for the full duration of the HP arrangement and to use the car WHICH YOU WILL THEN OWN as a means of extracting greater value from both garages and finace providers.
 
selling a car

If your name is on the VLC/log book does that mean it was a loan rather than a HP agreement?
 
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Not sure of whose name is on the VRT in cases of HP, but I suspect it's the purchaser as they're the ones respnsible for car tax, etc. In any event, the type of agreement you signed (of which you should have been given a copy) will state quite clearly whether the agreement is HP or otherwise.

Unfortunately, garages quite often push financial "pacakages" without fully advising the purchaser of the varying implications.
 
car loans

Hi Spacer,

Seems as if you know so much about hire purchase, how come when I went back to the garage where I bought my car to trade it in, there was a settlement figure on the car which I can pay off and then go and get another loan - no different to a bank loan. The car is also registered in my name (i.e. on log book). Like banks and other lending institutions, hp companies will obviously repossess you car if you do not pay up - common sense will tell you that. Anway, most cars on the road are owned by some lending institution.
 
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Just saw this now.

In relation to the HP settlement figure, does this figure represent the total amount outstanding if you were to continue paying at your usual rate or is it a lower amount? If (but only if) it's a lower amount then, yes, I was mistaken. I suspect I'm right though.

In relation to repossession of the car, the type of agreement you have makes a considerable difference. With HP agreements, the finance company can repossess the car and if its subsequent sale doesn't produce the amount you agreed to pay them, they can pursue you for the balance.

If you purchased the car with a standard (non-HP) loan, the lending institution does not have the option of repossession. If you fail to make repayments, their only recourse is to pursue you for the amount you owe, by whatever means are open to them. Repossession, however, is not an option.
 
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