Car finance question- any advice welcome

[JK90]

2 years ago I took out finance to buy a car. It was a two seater which suited me at the time but I've since had a baby so obviously this isn't ideal. Unfortunately the settlement figure for the finance agreement is twice the value of my current car so even if I sold it I wouldn't be able to pay off the finance to enable me to buy another. I've still got 3 years left on the agreement.

Does anyone know if it's possible to refinance a car loan? As in, extend the loan, continue my current payments and buy another car.

Any advice appreciated as I'm totally clueless when it comes to these things!

It really depends on the type of financing you took so look at that first.

If it’s HP you may be best to do a hand-back where if you’ve paid 50% of the total amount payable you can hand it back and walk away.

If you took an unsecured loan then it won’t need paying back if you don’t still have the car.

Loom at your original paperwork first and see what type of financing you have

Sorry my wording wasn’t the best there: a PL doesn’t need to be IMMEDIATELY paid back if you don’t have the car

Sorry, I should have clarified that. It's a personal loan

I had this problem with the car I had on finance - nice sports type car (not overly flashy or expensive I would have said but a grown ups car) which was a treat to myself when I was promoted and started getting a car allowance......then I fell pregnant.....DH finally learnt to drive when he had a 9 month deadline but did pass about 3 months before the birth......rang to get him on the insurance ready in case I went into labour and the insurance guy actually laughed at me down the phone and said no way in a million years would they put him on the insurance! Cue massive panic - I had 3 years left on a 5 year finance deal and would have had to pay to get out of the deal - I looked at transferring the finance to another car of the same manufacturer but they said no as I was effectively in negative equity. We basically had to see it out. I decided after that I'd never have another car on finance as if circumstances change in life it's just not flexible enough

@JK90

Sorry, I should have clarified that. It's a personal loan

I'm confused how you have a settlement figure if you took out a personal loan???

Either the car cost say £15k and you took out a 5 year personal loan with repayments of say £250 a month OR it's a Hire Purchase agreement where you own the car at the end or it's the other type where at the end of the term you can either hand the car back or pay the final balloon payment 🤷‍♀️

If it's a personal loan you would just sell the car and use that as a deposit on a new one BUT you'd have the bank loan to pay off AND the repayments on the new car???

I was told it was a personal loan but it must be a HP agreement as it does have the settlement figure.

Weird thing is when I spoke to a car dealership recently the guy said he couldn't see any outstanding finance on it which in my mind made sense as I thought it was a loan!

@ivfdreaming totally agree with not getting a car on finance again! Only because I'm in desperate need a of a bigger car I'm considering it at the minute.

It sounds like a HP agreement - you'd know if it was a personal loan as you would have needed to apply via a bank, receive the monies and then pay the car dealership and your payments would go to the bank.

They usually do have a break clause in it when it gets to around 50% left on the term as they calculate at this point what you've paid in repayments equals the depreciation value of the car so you can return it with no penalty

Eg if you bought it for £10,000 and have paid £5,000 you have £5,000 remaining to pay but the car at this point is worth £5,000 so you return the car and the balance is £0

Compared to what is more like your situation where you aren't far enough into the term

bought car for £10,000 paid so far in repayments £2,500 so £7,500 left to pay but car is only now worth £6,500 so you'd have to pay £1,000 to settle early and leave the agreement

It's complicated and I wish I'd known more about it when I took mine out

Of course a loan can have a settlement figure!

I took out a personal loan to pay for my car, when i wanted to pay it off early they told me how much was left, minus the interest i was saving paying it off early.

Advice wise I'd say stick it out another 6 months to get to half way through the term and ask the car dealership what is the earliest you can return with no penalty? It might be 50% or I think mine was at year 3 out of 5

It's going to cost you a lot of money to get out of this early- it would be cheaper to hire a hire car for the odd day you might need to go out as a family or use it as an excuse to leave the husband at home and have a mummy and baby day 🤣