The sharp rise in gasoline and diesel prices caused by the war in Ukraine has affected more car buyers.Electric vehicles have become very popular, especially at the point where you can find a free ESB ev charger!
For company owners, the first €50,000 of benefits in kind are tax-free if they opt for a company car, but from 2023 this will change and its complexities will be discussed in a separate article.
Meanwhile, John Lowe of Financial Physician.i.e. ask you the difference between a personal loan, installment purchase and a personal contract plan (PCP) when it comes to buying a car (whether gasoline, diesel or electric)?
Confusing to say the least.In the case of a personal loan, you own the car from day one, but your loan is unsecured, the lender takes the risk, and they repay your loan.To deal with this risk, they charge high interest rates.
Hire Purchase Agreement
If you have an installment purchase agreement, you only own the car when the last "bullet" pays off the loan.If you want to terminate the contract and keep the car before the termination date, you must pay the full instalment payment (including the cost of the car plus interest and other charges).
If you terminate the agreement early, you may receive a discount on some interest.However, this does not necessarily have to do with personal loans.
For PCPs, there are normal deposits and the usual 36-month loan.However, after three years the fun begins because you have a lot of options:
Keep the car, pay the final payment, or fund it for the next few years, either way, the car becomes yours when the final payment is made.Now you can do whatever you want with the car.
Give me the car back and stop paying.This will depend on the condition and service history of the car, and if you've looked at it, it shouldn't be a problem.If all goes well, you can hand the car keys back and walk away without owing anything, but remember you also don't own a car as this will go back to the dealership.As long as you make your payments on time, your credit rating won't be affected.
Trade this car for a new one.If the car is in good condition, it can serve as a trade-in for another car, thereby starting the whole deal again.The upside is you'll get a new car, the downside is you'll be back on another three-year agreement and have to come up with a deposit.Maybe your "old" car deposit is enough? At this stage, you may be upgrading the car to a larger model, but keep in mind that you are entering a new deal, so read the fine print again.
In the case of installment payments, if you find it difficult to keep up with your payments, or you have missed a payment, contact your bank or finance company as soon as possible.They will usually agree to amend your agreement to make it easier for you to pay.
If you agree with them:
The bank or finance company may be entitled to charge you for rescheduling,
The bank or finance company will extend the term of the agreement, so you will have to pay extra interest to pay for a longer period of time,
The weekly or monthly installments you pay may be lower, but it will take longer to own the car because the agreement is extended.But it will help your cash flow - remember that income is your first asset.
Even with these additional costs, changing your installment purchase agreement will usually cost less than ignoring the issue and possible car recycling.Changing the agreement also means you can keep using the car.You can terminate the installment agreement at any time if you are unable to pay.However, you must:
Written notice and return of the car
Pay half the installment price, minus your total payment to date (including the deposit you paid).This is sometimes called a "semi-rule"
Pay for any repairs if you have not properly maintained the car.
If your car needs repairs...
Under an installment purchase agreement, you are responsible for the reasonable care of the car.When you return your car, you will usually receive a repair bill if the car is damaged.When it comes to car repairs, you might consider getting a mechanic to inspect the car and pay for any necessary repairs before you return the car to the bank or finance company.
You should contact your lender and tell them that you want to end the "half rule" of the installment purchase agreement.Once you pay half the installment price, they have to accept the decision.
When you leave the car, make sure you don't sign the voluntary surrender form or you'll have to repay the balance of the installment purchase agreement.If you sign the Voluntary Surrender Form, you waive your right to terminate the agreement on a semi-principle.
Most lenders will send your repayment details to a credit reference agency when you sign an installment agreement.This information builds your credit history (or history) and CCR keeps repayment details (such as any payments you miss or don't pay on time) five years after the agreement expires.
You can get a free copy of your credit history from CCR and it takes 4/5 days.You cannot get information about your credit history over the phone because credit counseling agencies must keep your information private.If you end your installment agreement early, return the car and pay off the money you owe, your credit history won't be affected.The agreement will show complete.
