Q. My car is giving up the ghost and I’m looking at something newer. I have some finance outstanding on my car, but have some savings set aside to help. Someone said recently that it would be very difficult for me to step away from my current finance arrangement if I want to buy privately. Is that true? What are my options? Any help would be appreciated.
Dear Reader,
The steps you can take are dependent on what type of car finance you have.
The first option is where you have a straightforward lease on the vehicle, i.e. where you simply rent the car for the duration of the lease, which is usually between two and five years. The option to terminate this type of lease is dependent on the particular agreement. There is usually a termination fee, which can sometimes be quite large. If the lease is coming to an end, it might simply be easier to wait for the lease to expire.
If you have current car is on a hire purchase agreement, the consideration is different. If you want to get out of the agreement, you can pay off the balance due on the car and own it outright. You can also hand the car back to the garage but will have to pay up to half of the value of the hire purchase, together with any costs of repair to bring the car back to ‘reasonable’ condition.
What option is best for you will depend on the value of the vehicle and the cost of repairs etc.
You might also have the vehicle on a personal contract purchase (PCP). You will pay a deposit, usually relatively high, along with monthly payments. At the end of the term, you will be able to pay a large ‘balloon’ payment to buy the car, hand the car back, or simply start with a new PCP. Like hire purchase, if you have paid half the car price, you can simply hand the car back. There may also be an option to buy the car outright. Again, what steps you take depend on the value of your car and other matters set out above.
If you simply have a personal loan which you used to purchase the vehicle, you are tied into paying same in full.
You should try and get an idea as of the current value of your vehicle, what work needs to be done to it, and figure out what kind of finance you currently hold. You should carefully consider the position prior to taking any steps, and if you are concerned you should discuss your options with your bank/finance company or the garage from which you purchased the car initially as they would have all the details.
