Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • ellecav
    • By ellecav 6th Oct 17, 6:09 PM
    • 2Posts
    • 0Thanks
    ellecav
    Finance Agreements - daft questions
    • #1
    • 6th Oct 17, 6:09 PM
    Finance Agreements - daft questions 6th Oct 17 at 6:09 PM
    Hello

    I have had a look at the forum posts and the website and can't find the answer to my question, and feel car dealers are trying to bamboozle me a bit with this.

    I have a car on a finance agreement (peugeot passport agreement - monthly payments, final large payment to keep car if wished). I was too quick and too eager to have a car when I decided to do this. I'm now a few months away from my final payment, and don't want to do as the dealer suggests, part exchange for another car on the same finance agreement. It's a better option for me to use some savings and a loan for the car I want. I want to know -

    Can I part exchange, or trade the car in, towards another car, at another dealer, and what are the risks of this?
    Or do I have to hand the car back, and start an entirely different process with another dealer?
    And which is the better, lower risk, option?

    Again sincere apologies for the potential simple-ness of the question. I can't see anything in my contract and I'm not getting any straight answers from dealers (shockingly enough!) and I'm not able to find information online that I can be sure applies to this type of finance deal.

    Thank you in advance. I'm on a steep money saving learning curve. There's a wider issue here about young people and lack of financial information they receive but that's for another post...
Page 1
    • DUTR
    • By DUTR 6th Oct 17, 6:42 PM
    • 11,061 Posts
    • 6,280 Thanks
    DUTR
    • #2
    • 6th Oct 17, 6:42 PM
    • #2
    • 6th Oct 17, 6:42 PM
    In effect you are renting the car, so taking it to another dealer isn't really an option as it's not your car.
    • facade
    • By facade 6th Oct 17, 6:46 PM
    • 2,936 Posts
    • 1,497 Thanks
    facade
    • #3
    • 6th Oct 17, 6:46 PM
    • #3
    • 6th Oct 17, 6:46 PM
    Firstly, the car is not actually yours to sell until you have paid the final "balloon" payment.
    It is still possible to sell it, or trade it in though, if the finance will allow someone else to pay the outstanding balance. (Usually they will)

    If the car sells for more than the outstanding finance, then you would keep the difference. If it sells for less, then you would have to top up the difference (negative equity) at the moment of sale.

    What this actually means is that if you go to a dealer they will take your car, and sell you another on finance no problem.
    However, they will "lend" you any negative equity as apart of the finance, so you will be "borrowing" even more and paying out even more.

    The only way to break the negative equity cycle is to finish paying for the car.

    The best advice seems to be to then get a car on finance with a hefty manufacturer "contribution" and settle the finance as soon as possible afterwards with your loan. At the present time, you don't have to return the "contribution" (This "contribution" seems to have replaced the "discounts" as there is a lot of profit on the finance that makes up for it)



    Do the sums, you might just be better off trading it in against a new one on finance.
    Also see what WBAC offer for the car now, if it is more than you owe take it to them, as you don't want the hassle of trying to sell it for more than you had to pay to clear the finance.
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • neilmcl
    • By neilmcl 6th Oct 17, 6:47 PM
    • 10,300 Posts
    • 7,224 Thanks
    neilmcl
    • #4
    • 6th Oct 17, 6:47 PM
    • #4
    • 6th Oct 17, 6:47 PM
    The first thing you need to do is find out whether you have any equity in the car, ie, is/will the car be worth more than the final payment. If there's no equity then there's very little point trading it in, just hand it back and finance your next car with your savings and/or loan.
    • neilmcl
    • By neilmcl 6th Oct 17, 6:48 PM
    • 10,300 Posts
    • 7,224 Thanks
    neilmcl
    • #5
    • 6th Oct 17, 6:48 PM
    • #5
    • 6th Oct 17, 6:48 PM
    In effect you are renting the car, so taking it to another dealer isn't really an option as it's not your car.
    Originally posted by DUTR
    Not true, any dealer will be able to settle the finance on the car.
    • Cornucopia
    • By Cornucopia 6th Oct 17, 7:07 PM
    • 9,522 Posts
    • 9,112 Thanks
    Cornucopia
    • #6
    • 6th Oct 17, 7:07 PM
    • #6
    • 6th Oct 17, 7:07 PM
    Firstly, the car is not actually yours to sell until you have paid the final "balloon" payment.
    It is still possible to sell it, or trade it in though, if the finance will allow someone else to pay the outstanding balance. (Usually they will)
    Originally posted by facade
    In my experience, getting a Dealer to pay off the finance on your trade-in is straightforward, automatic even. The only issue will be if there is a significant trade-down.

    What this actually means is that if you go to a dealer they will take your car, and sell you another on finance no problem.
    However, they will "lend" you any negative equity as apart of the finance, so you will be "borrowing" even more and paying out even more.
    You do not HAVE to do this. The outstanding balance is owed to the existing finance company - you can pay it however you want.

    The only way to break the negative equity cycle is to finish paying for the car.
    Not true. As long as the outstanding balance is paid at or before the end of the term, it doesn't matter how or when.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • facade
    • By facade 6th Oct 17, 7:16 PM
    • 2,936 Posts
    • 1,497 Thanks
    facade
    • #7
    • 6th Oct 17, 7:16 PM
    • #7
    • 6th Oct 17, 7:16 PM

    You do not HAVE to do this. The outstanding balance is owed to the existing finance company - you can pay it however you want.

    Not true. As long as the outstanding balance is paid at or before the end of the term, it doesn't matter how or when.
    Originally posted by Cornucopia
    You are quite correct. However, be careful that any "deposit" that is put into the deal is first of all paying off any negative equity. What I was referring to is the relatively common practice of "rolling the negative equity into the deal" in perpetuity. Yes it works, but is the car buying equivalent of a payday loan.
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • Frozen_up_north
    • By Frozen_up_north 6th Oct 17, 9:27 PM
    • 1,303 Posts
    • 619 Thanks
    Frozen_up_north
    • #8
    • 6th Oct 17, 9:27 PM
    • #8
    • 6th Oct 17, 9:27 PM
    The issue with these “final balloon payment” packages is when you reach the end of the payments, you have no value in the car to trade in against a new one. It’s especially painful on your pocket if you put a deposit down too. They seem attractive at the start of the first car purchase, but less so at the end.

    If the car is a diesel it may have dropped in value significantly- in which case you could hand the keys over and walk away.
    • debtdebt
    • By debtdebt 7th Oct 17, 2:26 AM
    • 329 Posts
    • 210 Thanks
    debtdebt
    • #9
    • 7th Oct 17, 2:26 AM
    • #9
    • 7th Oct 17, 2:26 AM
    Why is everyone going on about negative equity in this case? The OP has said he is only a few months away from making a final payment. If he gets to that stage and is up to date with his payments, he can just hand the car back. He's completed his part of the agreement if he doesn't want to keep the car. If the car is worth less than the Guaranteed Future Value, it's not his problem. The finance company will have to swallow the loss as penance for miscalculating what the car is worth at the end of the term.

    If the car is worth more than the GFV, the OP is free to sell it, pay the GFV off and then pocket the difference.
    • bigadaj
    • By bigadaj 7th Oct 17, 6:24 AM
    • 10,803 Posts
    • 7,100 Thanks
    bigadaj
    Why is everyone going on about negative equity in this case? The OP has said he is only a few months away from making a final payment. If he gets to that stage and is up to date with his payments, he can just hand the car back. He's completed his part of the agreement if he doesn't want to keep the car. If the car is worth less than the Guaranteed Future Value, it's not his problem. The finance company will have to swallow the loss as penance for miscalculating what the car is worth at the end of the term.

    If the car is worth more than the GFV, the OP is free to sell it, pay the GFV off and then pocket the difference.
    Originally posted by debtdebt
    Think he's a she.
    • lopsyfa
    • By lopsyfa 7th Oct 17, 8:00 AM
    • 52 Posts
    • 30 Thanks
    lopsyfa
    You can take the car to any dealer to use as part exchange for your new car but you need to check if the part exchange value is less than the final balloon payment. If yes, hand the car back to the original finance company and start again. If not, use as part of your new deal.
    • Cornucopia
    • By Cornucopia 7th Oct 17, 8:33 AM
    • 9,522 Posts
    • 9,112 Thanks
    Cornucopia
    The issue with these “final balloon payment” packages is when you reach the end of the payments, you have no value in the car to trade in against a new one.
    Originally posted by Frozen_up_north
    There's no mystery or magic here. If you have equity in your vehicle, it's only there because you originally paid to put it there. If you didn't pay, and you didn't get equity, that's not automatically a problem.

    It’s especially painful on your pocket if you put a deposit down too. They seem attractive at the start of the first car purchase, but less so at the end.
    Personally, I don't like the word "deposit" in this context, as some people may think that it's an amount that you get back if/when you return the car. I think "initial payment" is more accurate.

    If the car is a diesel it may have dropped in value significantly...
    All new cars, and indeed most used cars drop in value, often significantly. The mistake that people make in judging car finance schemes is to assume that depreciation is most obvious in those schemes where it is made transparent, whereas the truth is that the depreciation on the same car will be the same, irrespective of the way in which it is financed.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • ellecav
    • By ellecav 12th Oct 17, 4:07 PM
    • 2 Posts
    • 0 Thanks
    ellecav
    Thank you everyone - your replies have been really helpful. I haven't made a final decision on what I'm going to do next but I feel much better informed and more confident going in to speak to dealers about it now.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

216Posts Today

1,356Users online

Martin's Twitter
  • RT @bearface83: @MartinSLewis check out the @Missguided new 60% off offer. Upping the cost of items almost double to make us think it?s a?

  • RT @efitzpat: Thank you SO SO much @MartinSLewis for your Student Loans refund advice! I just got a grand refunded right before Xmas! Whoop?

  • Have a lovely weekend folks. Don't do anything (fiscally) that I wouldn't do!

  • Follow Martin