Hire Purchase v Bank Loan

[Ian_Mac]

Evening all

Having just spent most of the afternoon in the dealers negotiating the price and trade in value on my new car I'm left with a decision to make with regard to the balance of the payment.

Basically a personal loan from the bank works out at £200.78 per month and the dealer quoted me just over £205 on HP which also includes 2 free services.

What I'm wondering is are there any pro's or con's of either method? I'll probably pay off the loan or HP before the end of the term if that makes any difference.

Unfortunately I wasn't in a Mercedes dealership at the time but I am still very pleased with my forthcoming new arrival.

Thanks

 

[davidjpowell]

Is the term the same? Obviously HP is secured on the car, but if you have enough deposit that you are never in negative equity, on the face of it it's a no brainer.

Where is the free service? a dealer or a local garage? Could be a loss leader with the opportunity to up-sell brakes etc.

 

[iscaboy]

With a bank loan you own the car the instant you buy it.

With HP you own it only after the last payment has been made, and the HP can demand full settlement at any time.

No brainer really.

 

[Will]

Do you perhaps get any additional consumer protection by buying on HP? Never have bought a car on finance myself but I seem to recall something about being able to hand the vehicle back after 50% of the payments have been made (even if the value is slightly less than the outstanding finance?)

Just a thought. Also the 2 free services - probably worth a bit more than the £60 PA saving by going for a bank loan instead of the HP?

 

[Palmball]

Unfortunately I wasn't in a Mercedes dealership at the time but I am still very pleased with my forthcoming new arrival.
:

It's not unfortunate...in my experience with most MB dealerships, you're better off out of them! What is unfortunate is that only a very few franchise dealers are in any way pleasurable to deal with

 

[davidjpowell]

Do you perhaps get any additional consumer protection by buying on HP? Never have bought a car on finance myself but I seem to recall something about being able to hand the vehicle back after 50% of the payments have been made (even if the value is slightly less than the outstanding finance?)

Just a thought. Also the 2 free services - probably worth a bit more than the £60 PA saving by going for a bank loan instead of the HP?

Yes you can. If there are early problems with a car I think the finance company can also have some clout.

 

[Ian_Mac]

Is the term the same? Obviously HP is secured on the car, but if you have enough deposit that you are never in negative equity, on the face of it it's a no brainer.

Where is the free service? a dealer or a local garage? Could be a loss leader with the opportunity to up-sell brakes etc.

I doubt I'll ever be in negative equity as the finance will be for less than 50% of the value. I was in a VW dealers at the time, it's an offer they have if you take out VW finance you get 2 free services.

Do you perhaps get any additional consumer protection by buying on HP? Never have bought a car on finance myself but I seem to recall something about being able to hand the vehicle back after 50% of the payments have been made (even if the value is slightly less than the outstanding finance?)

Just a thought. Also the 2 free services - probably worth a bit more than the £60 PA saving by going for a bank loan instead of the HP?

I did ask about the cost of servicing and you're quite right they do work out far more expensive than the £60pa it would cost.

I realise that the car is still owned by VW finance until the last payment is made however I'm not sure in real terms what difference it would make.

Here's a little pic of what's coming my way

It's the 170bhp diesel with DSG box and almost every box ticked on the optional extra list. Only thing I think it's missing is power fold mirrors which I can live without.

It was a pleasant surprise turning up at the dealers as they'd missed off the following items on their description: Nav, bluetooth, parking sensors, dynaudio upgrade and electric seat adjustment

 

[Smarties]

Thats very nice. The case used to be, and you'd need to check, With HP on the car, if you have 'issues' with it, you can ask/get the finance company to moan on your behalf, also when you have paid back 2/3 (I think), you can hand the car back and walk away, with no penalties.

 

[Ian_Mac]

Thanks for the reply Smarties, the salesman did say that once half was repaid I could walk away although as I'm putting in a large wedge of cash myself I can't see me wanting to do that.

I must admit I am wavering towards the HP side of things at the moment given the lure of the free servicing for a small increase in monthly payment.

I'll have to make my mind up by Sunday morning as I'm taking my other half up to view the car so she can cast her eye over it and I said the paperwork would be taken care of then.

There's also the small chance that she'll absolutely hate the car in which case we agreed I'd get my £500 deposit back! Can't see that happening though.

 

[jonnyboy]

I suggest getting exact clarification in writing of what the servicing actually entails. Could exclude all sorts like brakes etc

 

[grober]

Have you shopped around bank loan wise? Cheap Loans: Borrow at 7.8% for £7.5k+...

 

[st4]

I'd go the HP route as the 2 free services are worth more than the £60pa saving. Plus there is the 50% rule worst case.

 

[Deleted member 6183]

Thanks for the reply Smarties, the salesman did say that once half was repaid I could walk away although as I'm putting in a large wedge of cash myself I can't see me wanting to do that.

I must admit I am wavering towards the HP side of things at the moment given the lure of the free servicing for a small increase in monthly payment.

I'll have to make my mind up by Sunday morning as I'm taking my other half up to view the car so she can cast her eye over it and I said the paperwork would be taken care of then.

There's also the small chance that she'll absolutely hate the car in which case we agreed I'd get my £500 deposit back! Can't see that happening though.

Please check in the 'half paid' rule. As I recall it you need to have paid either a third or two thirds.

It's not the garage or finance house that decide this, it's the consumer credit act and I'm a bit rusty.

 

[Ian_Mac]

Have you shopped around bank loan wise? Cheap Loans: Borrow at 7.8% for £7.5k+...

Thanks Grober, that's very similar to the figure I was looking at. Sainsburys were doing 7.9% plus double points on Nectar card for 2 years.

I'm taking the good lady to view the car in the morning so will try and clarify points re what's included in the service etc.

Hopefully come tomorrow afternoon I'll have a date to pick the car up and everything will be sorted one way or another.