This debt advice applies to individuals in the UK with personal debts.
If you can barely cope up in paying for your car loans and finance, your rights differ depending on the type of vehicle finance. When obtaining a vehicle or car through HPA or hire purchase agreement, your car still belongs to the lender unless you have sufficed your obligation under the agreement. Thus, you cannot sell the vehicle but can eventually take a payment holiday.
Some of the other alternatives to obtain a vehicle are as follows:
- Conditional Sale or through an HP or Hire Purchase
- Logbook Loans
- PCP or Personal Contract Purchase
- Getting a Personal Loan
- Lease or Hire Agreements
Dealing With Car Finance Payments During Coronavirus Pandemic
If you are thinking of you can freeze payments on your car finance due to the impact of coronavirus pandemic on your finances, it actually depends on the type of your finance. However, FCA or the Financial Conduct Authority allows temporary payment breaks for certain types of credit. However, interest and charges still apply. These include the following:
- personal loans
- logbook loans
- car finance agreements
If you’re living in Scotland, there is a moratorium period imposed by the government that allows further extension of payments for those in debt from 6 weeks to 6 months. So, your car can’t be seized yet your creditor can apply for a decree. You can take advantage of the moratorium at any time you wish, but you should seek free debt advice to see whether your decision suits you best.
Also, we recommend reading our guide for Financial Help During The Coronavirus Pandemic.
Buying A Car Through Hire Purchase or Conditional Sale
When getting a vehicle or car with a conditional sale or hire purchase agreement, you do not own the vehicle outright. Until you comply with the agreed payments, the vehicle belongs to your lender. Normally, car finance is given by a company that is not associated with the garage or dealership.
If you’re unable to manage payments, you are obliged to return the car. The payments you initially made will not be refunded, but if you have complied more than half of the payments agreed, it turns out you’ll hold nothing else to pay.
Besides, you cannot sell a vehicle under an HPA or conditional sale because this is not considered as your property unless you have paid the agreement in full. If you’re behind with your payments, the finance firm has the authority to repossess your car. The finance company can do this without involving court actions if you have paid not more than one-third of the agreement.
Buying A Car Using A Personal Loan
Obtaining a car by getting an unsecured loan, allows you to own the car straight away. The loan is provided by a finance company, which is not associated with the garage or dealership. You will have to repay this loan to the said finance company.
Since you own the car outright, you can sell the car if you wish to. In fact, you won’t be restricted in terms of mileage. Moreover, if you are delayed with your payments, the company where you bought the car cannot repossess it since you paid in full using your personal loan. However, you don’t have the right to end the agreement and return the car early. This means, once you consider getting a car loan, you must suffice the payments in full.
Car Leasing or Hire Agreements
When leasing or hiring a vehicle, he ownership belongs to the finance company. This works by paying monthly payments on a fixed duration and return the car on the agreed date.
These agreements include restrictions on the use and you can also get a penalty for excessive mileage. If you are delayed with payments the finance company can repossess your car.
Buying A Car Using Personal Contract Purchase or PCP
In getting a car using a PCP or personal contract purchase, the car is owned by the finance provider unless you have completed the stipulations under the agreement. This contract usually works for over three years. There is a guaranteed future value with the dealer, depending on the type and worth of your car as well as the estimated mileage. Every time you make payments, it cushions the value of the car throughout the duration of the PCP agreement.
If you get a car valued at £20,000, the dealership will estimate its worth in three years to drop at £15,000. This means the amount you repay in 3 years is £5,000 plus interest. If you’re buying the same car in an instant, you’d be paying the full amount around five years. This can mean that PCP can be much cheaper rather than getting it outright.
Moreover, in three years, you can return the car as long as you haven’t exceeded the mileage or did not incur any damage. If you do, it comes with extra charges or costs. Additionally, you can buy the car by means of paying the amount left to own it.
You can’t sell a car on PCP since it is entitled under the finance company as the owner. So, when you are behind your payments they can repossess it. Besides, if you change your mind, you cant return the car early.
Taking Out Logbook Loan To Buy A Car
When utilizing a logbook loan, the owner is entitled under the finance company unless you have completed the payment on your loan. Sometimes, logbook loans are being utilized to get a car, but mostly it is used to secure a car that you possess through the loan.
We suggest not taking logbook loans considering the amount of money that you need to repay. It is much expensive and miss payments can lead to the lender repossessing your car without any court order. Also, you cannot end the logbook loan early, you are also not permitted to sell the car when the loan has not been paid yet.
Help and Advice With Car Finance
If you are in the tailspin of giving up on your car finance payments, you need to consider FREE DEBT HELP. Our finance experts can give you the best debt management plan to get rid of your debt in no time. Should you wish to speak via phone, call us on 0800 193 1024.