Motoring Discussion > Paying off car finance Miscellaneous
Thread Author: midlifecrisis Replies: 28
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 Fri 16 Apr 10 19:01 
 Paying off car finance - midlifecrisis
I'm looking at a second hand car and the manufacturer is currently offering two free services if you take a minimum of £7000 finance. I don't need the finance, but the servicing for the manufacturer isn't cheap, so two free is an attractive offer.

I was thinking of taking the finance, then paying it off immediately. However, I'm sure it can't be that simple!

Any advice (and the sooner the better) appreciated.
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 Fri 16 Apr 10 19:15 
 Paying off car finance - Manatee
Well they can't stop you paying the finance off, and the settlement calculation is statutory - if you settle before the first payment date they can't charge you more than two month's interest so at say 10% APR on a scale of £100. There might be "documentation" fees involved though - IMO these should be considered as interest charges and subject to the same scale of rebate but they might have a wrinkle. Can you get a blank agreement form to look at?

If it's a 'local' initiative there's more chance of them cutting up rough - they are presumably funding the services out of finance commission which almost certainly will be debited back from them if you settle in the first month or two. Doesn't mean they are entitled to do this of course, and they may be philosophical about it. If it's a manufacturer sponsored thing there's probably less chance of a fallout.

Check the T&Cs carefully - are you obliged to keep the loan for a minimum period to keep the offer?

PS - leaving your hat on the back seat when you take it for the service might reduce the chances of them weaseling ;-)
Last edited by: Manatee on Fri 16 Apr 10 at 19:17
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 Fri 16 Apr 10 19:19 
 Paying off car finance - PeteW
What sort of finance is it?
If it's straight loan then maximum early settlement penalty by law is 28 days notice plus 1 months interest on the outstanding balance. Note you would NOT ask for a settlement figure before repaying ( which would include additional charges) but a balance figure. The best way if it's possible to do is then pay in a lump sum of the balance figure less the next months direct debit repayment amount. The following month the debit payment is taken and the account is settled in full - with no early penalty. Remember however that whatever you do the balance figure will contain a percentage of the total interest due on the loan.

If it's HP or a PCP then it tends to becomes more difficult and costly to get out earlier than the term agreed.

One thought. If you have, say £7000 in the bank earning ?3.5-4.0% interest and you can borrow at a rate no more than double that over a year or so, it MAY be that you could ultimately be better off using someone elses money taking into account the free servicing etc. Using credit also gives you added protection under the Consumer Credit Act which makes the lender jointly liable for guarantees and any declarations/information given by the seller when forming the sales agreement. Basically it gives you a third party interest in the cars well being who will fight your corner should things go wrong with your relationship with the seller.

*Please note all of the above is my opinion/experience only and is not professional financial advice.*
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 Fri 16 Apr 10 19:27 
 Paying off car finance - midlifecrisis
It's a manufacturer deal , not from the dealer. Straight finance, not a PCP. They would actually have to give me £3000 as cashback in order for me to 'loan' £7000. The two services I'd estimate at £450-500, so any cost would have to be below that.

This particular car is 130 miles away, so not that easy to look the T+C. I might see if they'll send me them by e-mail.

I have an aversion to finance and I'd like to avoid any possible negative affect on my credit rating.

(If I did take it out, wonder the penalty charges be less if it was over 12 months or 36 months?)
Last edited by: midlifecrisis on Fri 16 Apr 10 at 19:29
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 Fri 16 Apr 10 19:37 
 Paying off car finance - Manatee
>>The two services I'd estimate at £450-500

I can see where you're coming from but I'm not sure I could be bothered - would you have to take the car back to the supplying dealer? If there's an element of dealer contribution (i.e. they only get £30 an hour from the manufacturer instead of £100 an hour from you) they'll possibly be looking to cash in with a few brake disc/pad replacements; and if you decide to part company with the car you'll maybe lose out.

Have you tried telling them you don't want the finance but you'll be delighted to shake hands if they'll give you the services anyway, or is the deal already done?
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 Fri 16 Apr 10 19:27 
 Paying off car finance - Zero
>in the bank earning ?3.5-4.0% interest

let me know your bank please, I would love to get that rate.
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 Fri 16 Apr 10 19:41 
 Paying off car finance - midlifecrisis
I've got a pretty good 'price to change' deal, but haven't 100% made up my mind. The manufacturer pays for the services, so the dealer is adamant they can't provide the services without the finance. I'm pretty sure I could have the car serviced anywhere as it's a national offer.

But it could quite possibly be more trouble than it's worth.
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 Fri 16 Apr 10 20:00 
 Paying off car finance - Manatee
Unless they've made it an explicit condition up front that if you early-settle you lose the incentive - which would be of questionable legality anyway, as it would arguably be a settlement charge - then I think you'll be entitled to your services. If the dealer gets paid anyway, and a different one at that, then apart from being alert to any enterprising efforts by them to bolster the cut-price servicing rate the manufacturer pays, you should be OK by the sound of it.

It would be nice to know the settlement cost for sure before you sign up though. Maybe the finance company will tell you? Presumably it's a manufacturer sponsored/owned one?

E&OE, and look at the fine print though!
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 Fri 16 Apr 10 20:01 
 Paying off car finance - Iffy
...I have an aversion to finance and I'd like to avoid any possible negative affect on my credit rating...

If you have an aversion to finance, why worry about your credit rating?

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 Fri 16 Apr 10 20:28 
 Paying off car finance - midlifecrisis
>> ...I have an aversion to finance and I'd like to avoid any possible negative affect
>> on my credit rating...
>>
>> If you have an aversion to finance why worry about your credit rating?

Because one day, I might want a bigger mortgage! Now back to topic!
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 Fri 16 Apr 10 21:30 
 Paying off car finance - teabelly
Having some finance is beneficial to your credit score! I'd look at the finance (assuming it is low rate) as an opportunity to use the cash you have to work harder. If you then want the bigger mortgage then see how lenders are with the loan. If they don't like it then pay it off. If they're not bothered then keep your capital sweating/for a rainy day.

Or just keep the car you have :-)
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 Fri 16 Apr 10 23:30 
 Paying off car finance - Iffy
...Because one day, I might want a bigger mortgage...

You'll get a bigger mortgage right enough provided you keep paying the smaller one.

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 Fri 16 Apr 10 19:58 
 Paying off car finance - PeteW

>>let me know your bank please, I would love to get that rate

For the purposes of offsetting against finance, you have to assume something like an ISA not a regular bank account
Last edited by: Everest Pete on Fri 16 Apr 10 at 19:59
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 Fri 16 Apr 10 21:43 
 Paying off car finance - Woodster
Midlife - is it really 2 free services or is there a time/mileage limit? Some manufacturers offer 2 years/30k free servicing. For many people with, say, a VW on long life servicing, they'll get £30 worth of oil and filter at best. Just a thought when you check the T & C's.
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 Fri 16 Apr 10 23:16 
 Paying off car finance - bathtub tom
Would you really like it to be serviced by a company on which you 'pulled a flanker'?

How would you treat a 'customer' that although not technically breaking the law, was stretching the envelope?

I've been there and treated with all the respect I deserved (I suppose I had it coming). ;>)
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 Fri 16 Apr 10 23:26 
 Paying off car finance - Zero
Taking on a 7k car loan wont have any negative effect on your credit rating.

However, as a matter of principal and simplicity I wouldnt take an inducement (the servicing deal) if it had any strings (requirement of finance) At the end of the day, you are paying for it somewhere.
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 Fri 16 Apr 10 23:49 
 Paying off car finance - rtj70
I am finding this talk of finance, credit ratings, etc very interesting. Having sold a house in December and buying another soon (without mortgage) I wonder if this is good or bad.

At some point we aim to buy a property overseas (and maybe rent the UK house)... I thought no mortgage/finance was good. But what if we wanted to borrow a bit later on?

Someone once said to me now was a good time for a mortgage. Maybe we ought to take out an ultra cheap mortgage and buy some gold :-)

EDIT/PS: We have had a bit of cash in the bank since December so may be good for credit rating. Has prompted a credit card company I have a card from to double my limit... I pay it off at month end. It's now about £14k! Scarey how easy it is to get credit.
Last edited by: rtj70 on Fri 16 Apr 10 at 23:52
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 Sat 17 Apr 10 08:23 
 Paying off car finance - Zero
If you dont have loans, use (thats use not just have) a credit card or have a mortgage, you have no credit history.

I have, (and intend to keep) a 5k mortgage on the house. Maintains your credit rating nicely.
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 Sat 17 Apr 10 09:02 
 Paying off car finance - teabelly
Also if you keep a small mortgage then the lender stores the deeds and other gubbins for you. Might be worth checking out something like the oneaccount which is a flexible mortgage. It works like a conventional current account so you can pay off or draw down as you want. Brilliant if you want to keep your mortgage low but if you suddenly need money for something eg roof blows off then you can get it straight away.
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 Sat 17 Apr 10 16:04 
 Paying off car finance - midlifecrisis
They knocked another £400 off in the end, so I'm happy.
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 Sat 17 Apr 10 18:19 
 Paying off car finance - Zero
And the new car is......?
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 Sat 17 Apr 10 19:37 
 Paying off car finance - midlifecrisis
Another Audi!

The A3 proved a bit small and I'm clearly getting old because I just couldn't live with the S Line suspension.

I've gone for A5 Sportback (SE this time). It's a pre-reg and I got £200 more for my A3 than I paid for it in January (Bought at mates rates). Ended up with a fairly low price to change.
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 Sat 17 Apr 10 21:32 
 Paying off car finance - rtj70
Do report on what it is like as a car - I would like one next year.
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 Sat 17 Apr 10 22:00 
 Paying off car finance - Runfer D'Hills
Proper car that MLC. Pleased for you. As Rob says, we will all be interested to hear how you get along with it. Good move in my opinion.
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 Sun 18 Apr 10 06:00 
 Paying off car finance - midlifecrisis
Will do chaps. I had one for an (extensive) test drive and It was clearly a generation ahead of the A3. It's got lots of (expensive) optional extras, which I'm glad I didn't have to pay the new price for. So I'm getting back my heated leather seats....just in time for summer! :)
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 Sun 25 Apr 10 09:28 
 Paying off car finance - midlifecrisis
Picked up the Sportback a few days ago and I'm very pleased with it. I had to travel 130 miles to get it and every mile on the m/way reminded me why I wanted to change the A3. I felt every single dip, bump and imperfection on the road. The return journey was very different. Super smooth and relaxing. Nice to have cruise control back and it has a very user friendly system with excellent dash display.

The car is very imposing in the metal, with lots of room in the front and back. One of my biggest concerns was that it wasn't fitted with a 'premium'stereo. The A3 had BOSE and the Pug Coupe had a JBL system. Both were excellent. However, I was pleasantly surprised to find the stereo is very good. I've downloaded loads of albums onto an SD card and slotted it in and it works very well.

I returned 53mpg over the 130 mile return journey, which is pretty impressive considering the size of the car. The only slight reservation I have at he moment is the start/stop system. It works very well, but gets a bit annoying in heavy traffic. You can switch it off, which I may well do in the future.

So, only a few days in, but positive vibes so far. The wife always thought the A3 'ordinary' (she was a big fan of the Pug) and she has given a satisfactory nod. The kids think it's 'cool'. I did say to them it's that that a 40 something dad can be cool, to which they replied "not you dad, the car"
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 Sun 25 Apr 10 15:03 
 Paying off car finance - Iffy
Bigger isn't always better, but it usually means a better ride.

I keep moaning about the square wheels on the CC3 and there's probably a lessen for me here - buy a Mondeo.

Those big Audis certainly have road presence, so mlc should feel right at home.
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 Mon 26 Apr 10 00:09 
 Paying off car finance - Auntie Lockbrakes
Crikey, the OP is the second "backroomer" (oops, erm, what should we be called these days?!) to change his car twice in barely 3 months!! But car dealers love enthusiasts like us!

I'm also 40, and also can't stand the overly-firm Germanic ride of the X3. Won't be changing cars yet though. Do we need softer springs as we get older?!
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 Mon 26 Apr 10 06:07 
 Paying off car finance - midlifecrisis
I think it was more a case of the solid springs fitted to the A3 rather than my desperate need for softer ones.

Fortunately, I didn't lose any money on the A3 (thank to the original 'mates rate' deal I got). Not something I'd do routinely though!
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