Paying off Car Credit Early

[BreenM]

A couple of years ago I (stupidly) used one of the big car dealerships finance to buy a car from them. I also took it over 5 yrs to keep payments to a minimum. I still have 3 yrs to run on this. Is there any way I can reduce this. I was thinking along the lines of getting a settlement balance form them and then getting a much lower interest loan from the high street and paying it off over 2 yrs. Also then the car would be mine outright to sell if I wished to do so early. Would this method save me money in the long run or does a settlement balance take into account the interest there would have been over 5 years.

Any help would be much appreciated.

[Catso]

First you need to check the terms of your loan (or call them) to see if they do accept early settlement. Some awkward s0ds do not, or make it so difficult so as to be effectively impossible.

The loan agreement may give some idea of the costs of an early settlement, but for an exact amount you'll have to call them for a figure.

Yes, you often get heavily penalised so they can make up the lost interest. The penalty varies with the loan company. Some are perfectly reasonable, others are very mercenary.

Then compare with the new loan you intend to get, and see if you save any money.

Yes, with a personal, unsecured loan and the original agreement paid off, the car would be yours to sell.

[BreenM]

Thanks Catso,

I think I can pay off early but yeah i suspect that it could be so high that it might not be worth my while. I will call and check with them at least.

[ethenj]

If you get a lower rate of interest on a high street loan then you wouldn't pay as much on interest, also if you get a settlement figure then you can work out the difference in how much you would pay off over the 3 years left of paying it, as to what the total would be at the end of the 2 year loan term with a lower rate loan

[JNMann]

I had this problem, once I'd paid half the total amount due (2.5 years out of 5 years) then I handed the car back with no further charges or credit problems, they have since given me further finance.