Car prices are dropping fast and many of us are paying unrealistic prices for vehicles on hire purchase. Here is how to cut yourself free – and save serious money in the process.
Here’s the scenario – you got yourself a 2007, €35,000 car on hire purchase during the boom time, but it has since become a major drain on your finances. To make things worse, the bottoming out of the second-hand car market means the very same vehicle you’re paying top dollar for can now be had for €10,000.
Happily, all is not lost – your statutory rights allow you to get out of a hire purchase agreement (HPA) such as the above. The first option open to you is to buy the car earlier than planned. Paying the difference between the amount paid and the total hire purchase price means you can walk away with the car while cutting your interest. Problem is, you need a massive lump sum – and if you had access to that then you probably would have bought the car outright anyway. So, we’ll call that plan B.
There is a better alternative. If you want to opt out of a HPA, you are entitled to do so once you have paid half the amount of the total HP price and you are willing to hand the item back. If your installments have already reached the half-way point then you don’t have to pay anything further. If they haven’t, then you just have to pay the difference.
Although this won’t suit everyone, it is worth a second thought for many. Take the example of the €35,000 2007 car that’s now worth €10,000. Let’s say our man has already paid off €15,000 and faces paying the other €20,000. In this situation he only has to pay off €2,500 before he’s reached the magical half-way point.
If he pays off that €2,500 he can hand back the car and wash his hands of the €20,000 debt without doing any harm to his credit rating. Because car prices have dropped, he can now go off and pick up the same type of car again at today’s devalued price of €10,000. On hire purchase again, if he so chooses.
Shrewd
If our shrewd consumer goes for this option, he has got himself out of paying a €20,000 bill by paying €12,500, a nifty €7,500 saving while still having the same type of car. And possibly in a nicer colour.
All our man needed for this particular course of action was the money required to tip him over the 50 per cent repayment point.
There are, however, a few issues to keep in mind if you opt for this course of action. For a start, if the car (read TV, motorbike, computer or whatever else you may have got on tick), is damaged in any way, the consumer will be liable to pay for repairs. Certain finance houses have been known to issue a notice of costs in this regard, but consumers should try to get their own estimate in such cases in order to make sure they are paying a realistic price.
You should also be aware that the finance house can attempt to apply various other financial penalties when you end the hire purchase contract before its normal completion date. If you think they are taking the piss, contact the Consumers’ Association of Ireland – they will fill you in on your requirements as per the specifics of your case. It also doesn’t hurt to mention that the Consumers’ Association is assisting you when dealing with your creditor.
Click here for more info on hire purchase agreements.
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