Car finance......

[CMAC]

When you buy something using a loan/finance it's YOU that takes out the loan/finance and it's YOU that's responsible for paying it back no matter what you spent it on, right?

So why is it when you buy a car the finance is associated to the car and not you?

 

[fundy]

Difference between a secured and unsecured loan, basically its an asset backed loan, so the asset value in this instance the car is in effect the guarantee (security) of the lender being able to recoup some or all of his money, no different to a mortgage on a house whereas most personal loans are unsecured

 

[Smiffy]

It depends whether you buy the car on hire purchase or take out a personal loan.
With a personal loan, the money can be used to purchase anything. It could be a holiday, home improvements, but in your example it would be the car. The finance company would have no "interest" in whatever it was you purchased.
Hire purchase is different. Anything you buy on hire purchase means you are basicially "hiring" the goods until the finance is finished. With something of high value, like a car, if you failed to meet the payments, the finance company "could" repossess it. I say "could", because you have legal rights (halves and thirds) where once a certain amount has been paid, the finance company cannot repossess the vehicle without a court order. If you stopped paying hire purchase payments early into the agreement, the finance company would be able to repossess their property very quickly.
A secured or unsecured loan is different. An unsecured loan is usually a smaller loan that carries very small risk for the finance company. A secured loan would normally be for a larger amount (re-mortgage etc) where you would have to put your property up as a form of security.

 

[CMAC]

thanks guys, makes more sense, however, if you buy from a dealer but take out a loan with a finance company the dealer then gets cash so is the finance still put against the car?

I understand the mortgage example you gave but you can sell your house even though you still owe money on it but car people always ask about finance on a car but no-one asks or cares about finance still owed on a house


I'm beginning to wonder if running my own financial services company is such a good idea

 

[Scottjd1]

I understand the mortgage example you gave but you can sell your house even though you still owe money on it but car people always ask about finance on a car but no-one asks or cares about finance still owed on a house

Thats because the document that says you own the house (deeds) are placed with the lender who will not release them until they are repaid, so the buyer is protected.

With a car the equvalent docuemnt which shows ownershiop (your log book) can be passed on to a buyere without them knowing about finance and in some cases they inherit the debt, hence why its common practice to do finance checks before buying a car.

 

[CMAC]

Thanks

I'm now stepping down as Director of Business finance

 

[Smiffy]

thanks guys, makes more sense, however, if you buy from a dealer but take out a loan with a finance company the dealer then gets cash so is the finance still put against the car?

If you take out a personal loan to pay for the car from a dealer, the finance is not put held against the vehicle so won't show up when somebody carries out an HPI check.

 

[Doon frae Troon]

When I bought my last but one car I led the dealer on that I was 'probably' going to do a finance deal.
At the last moment when I had the best price I 'changed my mind' and paid on my debit card.
The guy was gutted that he had lost all his commission and nearly kicked me out of the showroom.

 

[GreiginFife]

Any "Car Finance" basically any funds drawn down against the value of the car is secured against said car.
Although you take the finance out in your name it is the car that is used as the finance companies guarantee of payment or goods returned.
I would never advise car finance and look at unsecured personal finance instead.

 

[daymond]

This subject is very important and should be taught at frequent intervals in schools.

 

[Foxholer]

When I bought my last but one car I led the dealer on that I was 'probably' going to do a finance deal.
At the last moment when I had the best price I 'changed my mind' and paid on my debit card.
The guy was gutted that he had lost all his commission and nearly kicked me out of the showroom.

Good to see that Scots are continuing their historical talents of screwing each other!

Though that particular one is to be applauded! :clap:

 

[Smiffy]

I would never advise car finance.

Why?

 

[Doon frae Troon]

Aye...remember the days when it was 'discount for cash'.
Just getting my own back.

 

[GreiginFife]

Why?

Apart from being secured against the vehicle. It makes it difficult to sell. If you still have £3k left to pay then you need to pay that off before you can sell. Theoretically you could sell it or trade it in but anyone doing a HPI would probably baulk at it.
In addition, car HP had nototriously high APR in relation to personal finance, there is often ridiculous clauses for early settlement and high late payment fees (I remember one company would charge a one off fee of £80 for a late payment, late came after 24 hours of the due date) and most don't keep the HPI records up to date. Friend of mine paid his off last year and when a HPI was run against in in January it showed as £1200 outstanding.

 

[Smiffy]

In addition, car HP had nototriously high APR in relation to personal finance

Depends on the finance company and how much you are looking to borrow. Most personal loan lenders will advertise a "typical" APR to draw you in. Looks great, and is normally spot on if you are looking to borrow quite a large amount. But if you only want to borrow a few thousand pounds then it's amazing how the APR will creep up and sometimes (not always I'll grant you) can be beaten by a decent finance house on a car loan.
If you set up repayments on a direct debit, you shouldn't incur any late payment charges. Your direct debit guarantee should cover this.
Appreciate what you are saying about an HPI check showing the car is on finance but nobody would baulk at taking that vehicle in part exchange. All they would so is settle the finance themselves for you if you were part exchanging, which is quicker, and less hassle. It only becomes a problem if you are in negative equity, but there are ways around that if you are purchasing another car. Don't forget that you can often get 0% finance, usually on new cars, but sometimes on 2nd hand ones. You can't get a 0% personal loan!
There are "for's and against's" with both types of finance. Weigh up your options carefully before just dismissing one or the other.