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Car Loan vs. Hire Purchase

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  • 15-11-2014 10:41pm
    #1
    gerTheGreat
    Registered Users Posts: 871 ✭✭✭


    Hi,
    This topic may have been covered before so links are welcome.

    My existing car is starting to get quite pricey to fix and I bought it with a bank draft some years ago from a brother. So I'm thinking of buying a newer car and would prefer to spend a little more to get a newer higher spec second hand car. I don't think that I'm interested in a new car.

    Is a motor loan preferable from a bank over hire-purchase (or other financing options) from a dealer?

    What sort of percentage of the total cost will the dealer expect to be cash?

    What sort of interest rates should I expect?

    What sort of pay-back periods are the norm?

    Any common gotchas that crop up, that I should be aware of?

    Thanks in advance for any advice,
    Ger


Comments

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    #2
    Bpmull
    Closed Accounts Posts: 5,042 ✭✭✭Bpmull


    Normally hire purchase is normally 2-5 years and anything in between depending on manufacturer. I suppose the benefit is interest rates are normally a lot lower. Bank loan is probably 10% interest vw seat haves deals on for January with sub 2% interest rates some even interest free. Normally 20-30% deposit. I can see no down side with hire purchase provided you pay the loan every month you'll have no issue.


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    #3
    bazz26
    Registered Users Posts: 51,159 ✭✭✭✭bazz26


    Just remember that with a Hire Purchase agreement the car is the property of the finance company until the final payment is made. It is not yours to sell until the agreement is settled. Also the reason the maximum length of a HP agreement tends to be 5 years is that if they need to reposes the car it will still have enough market value to cover or minimise the loss on the debt.

    There are different payment structures to hire purchase too such as lower monthly payments but at the end of the agreement you may have to pay a lump sum final payment which can end up being more than the market value of the car at that time. Others give you the option to hand back the car at the end of the term and take out a HP agreement on another car.

    While car loans have higher interest rates most of them tend not to require the car as security on the loan.


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