Warning on car finance

Thu, 10 Jul 2008



The creator of the best-selling UK car price guide, Parker’s Car Guides, has warned car buyers not to increase their mortgage for car finance purposes. The company warn that with rising food, fuel and energy costs, remortgages to purchase cars could leave consumers in financial strife.

For those borrowers that remortgage to afford a new car, devaluation of the vehicle alongside higher loan repayments could end up costing a lot. The Editor of Parker’s Guides, Kieren Puffett, reportedly commented:

"As house prices continue to fall and repayment rates start to rise, some car owners will find that it wasn’t such a good idea to pay for a new car with the equity of their home. In the most extreme cases, home owners who financed their lifestyle – including new cars – with this money, could find themselves a serious repayment headache that selling their existing car won’t solve – thanks to depreciation. It’s an incredibly expensive and inefficient way of borrowing money ."

He reportedly concluded: "The trouble with paying for a car by re-mortgaging is that unlike your house, a car does not appreciate in value over time. Many owners will find that they are still paying for a car that was scrapped many years ago by the time their mortgage comes to an end."
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