Lease Purchase Finance Problem - £7k negative equity

aman_1977

I brought a discovery3 back in March 07, paid £28,500 with a £2k deposit. It was a Lease purchase agreement for 4 yrs with a balloon of £13K at the end of the term. In Oct07 I requested a 'transfer of hire' to my mum's name (basically shifting the loan in her name). I thought that had happened (i.e. same terms, finance payments etc.. just in a different name), however it turns out the finance company settled the original loan and started up a new loan, based on the settlement. Its now August 08 and yesterdays settlement figure showed £26,000 remains owed...

So in 19 months paying £468.00 per month we have only managed to pay off £2.5K, I am livid and so is my mother given they finance just isn't shifting and we seemed to be paying out double.

The loan seems to be front loaded interest (i.e. you pay off the interest first, before repaying the loan).

The car is only valued at £19k MAX which means we have negative equity of £7,000.

Can you offer advise? (APR is 9.2% over 4 yrs term)

markelock

get a statement from them, or call and ask? if you paid £28.5, minus a deposit of £2k, then you've paid off £500, not £2.5k, so something is wrong.

£22500 is paid over the 4 years, of which you should have almost paid off £8k.

Plus your £2k deposit, plus the £13k final payment £37.5k total, blimey!

Conor_3

That's what happens when you don't read the smallprint on finance agreements. You can end up owing virtually as much as you borrowed if you settle in the first year or so.

standupguy

With the advance being over 25k - the agreement was unregulated.

This means that the Finance company are not bound by regulated settlement calculations and can load on as much interest as they want to the settlement figure - you do not get the same percentage of charges rebate that regulated cutomers get.

To add insult to injury they have taken the inflated settlement figure at that time, opened a new agreement and added further charges.

Now, when you ask for a new settlement figure, the rebate of charges will again not be as generous as regulated agreements.

Out of interest this 25k limit has just been lifted so any amount of advance for a private individual is now regulated.

What can you do?

I would request a full statement of account for both accounts so that you can see exactly what has transpired and what charges have been made.

You will need to see a copy of the agreement that your mother has signed.

If what they have done is mislead you then you can make a formal complaint to the Finance company.

In hindsight, the better thing to do at the time was just to leave the agreement in your name and let your mum pay the payments by standing order