Paying off Finance on a Credit Card; Possible?
Discussion
I know this sounds odd but please bear with me.
I have a car on a PCP agreement which I took out this time last year. Circumstances have changed drastically; when I bought it all was well with my other half, and the job I had meant that I was better off with my own car on a PCP deal than getting a company car as you sacrificed a chunk of salary AND got taxed on it (not sure how they got away with that!). Since then, the relationship went down the pan, so I'm now living on my own. My new job has a company car available to me, which I initially didn't take because of my own car, but I've been weighing up the options on going for it and getting shot of my car.
Here lies the problem. I'm in £5000 of negative equity (before anyone asks, it's a Jeep Renegade) so simply selling the car and using the money to pay off the finance company isn't quite going to cut it. My original thought, which is looking most likely right now, is take out a bank loan for the £5k (most banks will do this at 4.9%) which will save me £200 per month. A colleague reminded me though that on £7.5k loans the rate drops quite significantly, and suggested taking the £7.5k, then after a month or so pay £2500 off, if this can be done then bonus, £5k at an even lower rate!
My dad mentioned 0% credit cards. In theory this sounds great, as it would greatly reduce my outgoing and could be paid off in less than 2 years, but would a finance company accept a credit card payment? Would like to know what PH thinks of this.
I have a car on a PCP agreement which I took out this time last year. Circumstances have changed drastically; when I bought it all was well with my other half, and the job I had meant that I was better off with my own car on a PCP deal than getting a company car as you sacrificed a chunk of salary AND got taxed on it (not sure how they got away with that!). Since then, the relationship went down the pan, so I'm now living on my own. My new job has a company car available to me, which I initially didn't take because of my own car, but I've been weighing up the options on going for it and getting shot of my car.
Here lies the problem. I'm in £5000 of negative equity (before anyone asks, it's a Jeep Renegade) so simply selling the car and using the money to pay off the finance company isn't quite going to cut it. My original thought, which is looking most likely right now, is take out a bank loan for the £5k (most banks will do this at 4.9%) which will save me £200 per month. A colleague reminded me though that on £7.5k loans the rate drops quite significantly, and suggested taking the £7.5k, then after a month or so pay £2500 off, if this can be done then bonus, £5k at an even lower rate!
My dad mentioned 0% credit cards. In theory this sounds great, as it would greatly reduce my outgoing and could be paid off in less than 2 years, but would a finance company accept a credit card payment? Would like to know what PH thinks of this.
Welshbeef said:
Hold on a second - the current situation can continue can it not? Cash4car instead of company car - given the £5k you flag as outstanding on most cash4csr payments you should clear that between 12-24months depending on how much they pay you.
You can of course look into the cheapest way to finance it while you are at it too.
Not really, I owe £19k on the Jeep, which I could realistically sell for £14-15k. With my new job, there is no salary sacrifice for a company car and I'd only pay CC tax, which would be about £50 per month (it'd be a 208 as I work for Peugeot). Whereas at my last job, I lost £200 per month just for having a company car, then paid another £50 per month for private use insurance, and then company car tax on top, which meant I was paying £380 odd for a pretty basic Kia. My Jeep is £350 per month, and at the time this worked out perfectly as the now ex Mrs DanB was sharing the Jeep and contributing towards it.You can of course look into the cheapest way to finance it while you are at it too.
I've had a look at personal loans online, and Santander comes in at £149 per month over 3 years borrowing £5k. I'd still be paying for the same amount of time as my finance agreement (I'm 1 year into a 4 year PCP), but without the £9k GFV to pay off at the end, plus I'd be saving £200 a month over my current situation.
If I was to take a 0% credit card, and paid £200 per month back, it'd be clear in 2 years, if it was OK to pay the negative equity off on a credit card. Plus, if my sister's advice is correct, then I could potentially get a decent mortgage (according to her mortgage advisor, any loans under £10k aren't taken into consideration when applying, whereas the situation with my Jeep means I can get a mortgage for £20k rather than the £100k I could potentially get without it (and would need for the house I'm eyeing up). I know taking on more credit isn't the greatest idea, but at the moment it seems to be the best of a bad situation. The only other way to get out of it would involve the Jeep being written off, and claiming on the GAP insurance, which would actually leave me with an extra £2k in my pocket. I have learnt my lesson though; never buy a brand new Jeep!
Unfortunately i can only hand it back once half the payments have been made, which is December 2018 with the PCP running till August 2019 when the GFV is due.
I've got a settlement figure of £19k, actual amount outstanding including interest is £22k. Car was £23k when I bought it. Looking back I shouldn't have done it, especially as I work in car sales, but as I drove them on a daily basis as I worked for Jeep at the time I really wanted one and it worked out favourable compared to having one as a demonstrator due to the way my previous employers company car scheme worked. I went to the boss and he sorted out the deal, but another year in the trade has helped me realise what a bad decision it was.
I've only just paid the insurance (at £835 for the year!) so will get a fair chunk of this back. I know by taking on a loan I'll have nothing to show for it once it's paid, as the Jeep will be off to its new owner and I'll be in company cars. But as pointed out earlier, I'll be £200 a month better off, and will easily offset the CC tax if I sell just one more car per month, which is getting easier now I'm settled in at Peugeot. Also, while I have a 2 year service plan already paid for (cost £100 and was a no brainer) the 3rd and 4th year services won't be cheap, and I've got a year of no warranty if I keep the Jeep, which, given recent issues with the electronic parking brake, won't be great.
I'm talking to the bank tomorrow to go through my options. Again, I know it isn't great, just trying to make the best of a bad situation
I've got a settlement figure of £19k, actual amount outstanding including interest is £22k. Car was £23k when I bought it. Looking back I shouldn't have done it, especially as I work in car sales, but as I drove them on a daily basis as I worked for Jeep at the time I really wanted one and it worked out favourable compared to having one as a demonstrator due to the way my previous employers company car scheme worked. I went to the boss and he sorted out the deal, but another year in the trade has helped me realise what a bad decision it was.
I've only just paid the insurance (at £835 for the year!) so will get a fair chunk of this back. I know by taking on a loan I'll have nothing to show for it once it's paid, as the Jeep will be off to its new owner and I'll be in company cars. But as pointed out earlier, I'll be £200 a month better off, and will easily offset the CC tax if I sell just one more car per month, which is getting easier now I'm settled in at Peugeot. Also, while I have a 2 year service plan already paid for (cost £100 and was a no brainer) the 3rd and 4th year services won't be cheap, and I've got a year of no warranty if I keep the Jeep, which, given recent issues with the electronic parking brake, won't be great.
I'm talking to the bank tomorrow to go through my options. Again, I know it isn't great, just trying to make the best of a bad situation
Allow me to clarify the numbers.
Car was £22k. On a 4 year PCP. Interest was indeed £3k (staff deal as I worked for Jeep at the time)
£350 deposit paid, £350 per month x48 with a GFV of £8985. From what I've read, the GFV is included when calculating how much I need to pay before VTing the agreement.
I've made 12 payments, which means £4200. So total amount outstanding (including interest) is c£21k. Have got settlement which rebates interest and gives £19.5k.
I've got some values on my car which are around £14.5k. Meaning I could sell the car and give Jeep Finance the money, but I'd still have an outstanding balance of £5k.
The two options for getting rid of the car are:
1) bank loan for £5k at 4.9%, paying off over 3 years (same amount of time as I would be paying if I kept the Jeep) is £150 a month. When I have a particularly good month, I could pay more of a chunk off. However, a colleague has informed me that most banks will drop the interest rate when you borrow £7.5k, so it could be worth taking that amount, then straightaway paying off £2.5k. This in theory will give me the £5k at c3%.
2) Put the £5k on a 0% credit card. Looking at Halifax's online calculator, if I paid £200 per month off it (so still £150 up compared to if I keep the Jeep), it's 24 months 0% which is £4800. The final month would incur interest to a grand total of £3. Again, if I was to have a very good month at work, I could pay off more. This is the cheaper option, if it is possible to clear the £5k of outstanding finance on a CC.
So, I can be £150-200 a month better off if I get rid of the car. Company car tax would be around £50 per month, but like I said, one extra sale per month will cancel this out.
I'm speaking to the bank today to see what my options are. Will report back.
Car was £22k. On a 4 year PCP. Interest was indeed £3k (staff deal as I worked for Jeep at the time)
£350 deposit paid, £350 per month x48 with a GFV of £8985. From what I've read, the GFV is included when calculating how much I need to pay before VTing the agreement.
I've made 12 payments, which means £4200. So total amount outstanding (including interest) is c£21k. Have got settlement which rebates interest and gives £19.5k.
I've got some values on my car which are around £14.5k. Meaning I could sell the car and give Jeep Finance the money, but I'd still have an outstanding balance of £5k.
The two options for getting rid of the car are:
1) bank loan for £5k at 4.9%, paying off over 3 years (same amount of time as I would be paying if I kept the Jeep) is £150 a month. When I have a particularly good month, I could pay more of a chunk off. However, a colleague has informed me that most banks will drop the interest rate when you borrow £7.5k, so it could be worth taking that amount, then straightaway paying off £2.5k. This in theory will give me the £5k at c3%.
2) Put the £5k on a 0% credit card. Looking at Halifax's online calculator, if I paid £200 per month off it (so still £150 up compared to if I keep the Jeep), it's 24 months 0% which is £4800. The final month would incur interest to a grand total of £3. Again, if I was to have a very good month at work, I could pay off more. This is the cheaper option, if it is possible to clear the £5k of outstanding finance on a CC.
So, I can be £150-200 a month better off if I get rid of the car. Company car tax would be around £50 per month, but like I said, one extra sale per month will cancel this out.
I'm speaking to the bank today to see what my options are. Will report back.
Thought I'd give an update. Been in to see about getting a loan today, and it's not happening.
I was honest about the whole situation, but from the bank's point of view, the loan is in addition to the outstanding finance on the Jeep, and due to that balance being £19k, they wouldn't loan me the money. Kind of annoying, but I can see where they are coming from. I now have three options:
1) Don't bother with a company car, keep the Jeep. I've ran it through my balance sheets, and I can afford to do this comfortably. Would have been nice to have got rid of it and made the outgoings even smaller, but hey ho.
2) Use £5k of the £8k in my ISA to help get rid. This isn't a preferred option as this money is earmarked for the house deposit. I could after a few good months replenish the money but I'd rather not dip into it.
3) Smash car up, claim on GAP insurance. Probably end up sharing morning showers with a 7ft, 20 stone chap called Sweetums. And require some rather nasty bumhole repair surgery. Not great.
Back in the real world, it looks like I'll be taking option 1. I do love the car, and the payments aren't an issue, but the possibility of saving more money was quite appealing.
I was honest about the whole situation, but from the bank's point of view, the loan is in addition to the outstanding finance on the Jeep, and due to that balance being £19k, they wouldn't loan me the money. Kind of annoying, but I can see where they are coming from. I now have three options:
1) Don't bother with a company car, keep the Jeep. I've ran it through my balance sheets, and I can afford to do this comfortably. Would have been nice to have got rid of it and made the outgoings even smaller, but hey ho.
2) Use £5k of the £8k in my ISA to help get rid. This isn't a preferred option as this money is earmarked for the house deposit. I could after a few good months replenish the money but I'd rather not dip into it.
3) Smash car up, claim on GAP insurance. Probably end up sharing morning showers with a 7ft, 20 stone chap called Sweetums. And require some rather nasty bumhole repair surgery. Not great.
Back in the real world, it looks like I'll be taking option 1. I do love the car, and the payments aren't an issue, but the possibility of saving more money was quite appealing.
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