Negative Equity on my car

dibraggio

hello.

i have been in the background for a while now but have registered as i need help.

i have a car that is in negative equity. value of the car is circa £6500 in a private sale with around £9000 owing.

now, i have been offered a company vehicle which will no longer see me have the need for my car, so i wish to sell it. however, no one will buy a car with finance owing on it, and i dont think anyone is going to give me £9k for it.

so......how do i sell it??

is it best to take a loan for £9k, then sell the car and but that money in towards paying off the loan, and then just pay the remaining £2500 (i could probably pay this off in 4 months from the savings in finance and insurance/fuel i would normally have been paying).

or is there another way?

all help is of course appreciated, and i thank you in advance.

darren.

marshallka

dibraggio wrote: »

hello.

i have been in the background for a while now but have registered as i need help.

i have a car that is in negative equity. value of the car is circa £6500 in a private sale with around £9000 owing.

now, i have been offered a company vehicle which will no longer see me have the need for my car, so i wish to sell it. however, no one will buy a car with finance owing on it, and i dont think anyone is going to give me £9k for it.

so......how do i sell it??

is it best to take a loan for £9k, then sell the car and but that money in towards paying off the loan, and then just pay the remaining £2500 (i could probably pay this off in 4 months from the savings in finance and insurance/fuel i would normally have been paying).

or is there another way?

all help is of course appreciated, and i thank you in advance.

darren.

What about settlement fees on a loan even if its over a short period...??

Using 0% on credit cards too their would also be transfer fees ?

I wish you luck in this and perhaps someone with some more experience in this type of thing may be of better help.

okay_now

Hi Darren,

With the majority of car finance arrangements you can simply hand the car back to the finance company if you have made a certain number of payments - the motor trade 'slang' for this is known as 'halfs and thirds'...

How long was the original agreement over, and how many payments have you made to date?

dibraggio

okay_now wrote: »

Hi Darren,

With the majority of car finance arrangements you can simply hand the car back to the finance company if you have made a certain number of payments - the motor trade 'slang' for this is known as 'halfs and thirds'...

How long was the original agreement over, and how many payments have you made to date?

ha, it was over 48 months, and the payments only started in march of this year.

andystanley

If you were to sell the car to a dealer, then they usually have facilities to settle finance for you (ie. give them the car and a cheque). You will get much more selling privately (if you can find a buyer at the moment), so how about taking a loan/card for the £2500, then be up front with the sale that the car is financed, and instead of taking £6500 cash for the car, get the buyer to write a cheque for the finance company, you do the same with your 2.5k, then you and the buyer send them both off to the finance company?

standupguy

If you have a loan agreement as above really.

But if it is a Hire Purchase agreement then you need to do the sums to see if a voluntary termination will cost you less.

If HP - find the figure on the agreement that shows the half HP price.
Then add up your deposit and payments made to date.
the difference is the amount you have to pay to return the car to the finance company.

It may amount to less than the £2500 negative equity?

dibraggio

thanks for all the help guys.

yes, when advertising privately i would be up front, and get the buyer to make the cheque out to the finance company.

i will be caling them over the weekend and getting the ball rolling.

thank you for all your help.

TighterThanTwoCoatsOfPain

ignore... misread a post above...

Sterling

Hi Darren

If I understand your above posts correctly you entered a finance agreement of some kind for £9000 when you purchased your car (I assume from a dealer), to be repaid over 48 payments starting in March 08; in other words over four years.

I also assume this finance agreement was provided by the dealer who sold you the vehicle; and that the loan agreement (hire purchase or otherwise) was duly registered against that vehicle by the finance company.

At this point I should say that the predicament you now find yourself in is so common that I am astonished that Martin Lewis hasn’t done an article on this very topic, or at least I have been unable to find one on this site thus far.

The golden rule in my opinion is NEVER sign up for the finance offered to you by a car dealer; not even when he is smiling at you with wall-to-wall sincerity while proffering you a gold nibbed Parker pen. Whatever your credit rating you should always be able to get a better deal on finance elsewhere. Do this before you go to the showrooms. Dealers usually make more in hefty commissions on their finance agreements than they make on the vehicles themselves. Why pay more than you should?

While this advice may have come too late for you on this occasion, it may come in handy for you in future; and it may benefit other readers of this thread.

As you have found, the big problem with linked finance is that when you have such finance attached to your car, you are hamstrung if you wish to sell it before the end of the loan term. Any self-respecting buyer will make the usual search against the car and discover the finance registered against it. The loan therefore has to be cleared off at or before the time of sale.

But if you had taken out a general loan (not tied to your car) you could have sold it with no such problems, and continued to drip feed the monthly loan payments for the remainder of the term, and used the cash from the car sale for whatever you like.

It is also in my opinion never a good idea to pay off a fixed term loan early. Why? Because even if you settle the loan early, the loan companies usually charge you all the interest you would have paid if the loan had run its full course. True they will give you a modest rebate or similar, but it will seem like peanuts.

So, I fear that in your case the early settlement figure on your four year loan may well shock you by being well over the £9000 you mention. I would advise you to enquire about this with your finance company before proceeding any further. Stress that this is merely for information and not a request to terminate the loan just yet. You need all the information you can get before deciding what to do.

The idea proposed by andystanley in #5 worries me for at least two reasons. First, supposing your buyer turns out to be dishonest and that the cheque he writes in favour of the finance company is worthless. You will still be liable for the loan, and you will have handed over the car and keys to a crook. Second, I don’t think motor insurance covers this type of loss. So then you would really be taking a risk of a much greater financial loss if you chose this course of action.

Returning the car back to the dealer or finance company on the best terms you can get is some sort of option, but somehow I think when you tot up all your losses, including what you have paid so far and the drop in value, I think this won’t look all that promising either, but its worth finding out the detail, and - except as mentioned below - it may be your only sensible choice.

Bearing in mind you have already taken a drop of around £2500 on your car’s value I would suggest you consider keeping the car. This might be feasible if you explain to your firm the predicament you are in and ask if your firm would be willing to increase your pay in lieu of a company car. They might for example still pay for your business petrol, your motor insurance and your breakdown cover – and even perhaps the service bills. There should be plenty of room to negotiate here.

Also one must remember that company cars belong to the company and must be returned if you leave that job for whatever reason. It would be a shame if you parted with your own car (especially at a heavy loss) in favour of a company car and then for example you were to be made redundant, the firm close or similar, only to find that you then needed to buy another car of your own.

Best of luck.

milliemonster

I don't think the OP said anywhere in his post that the original loan was for £9k just that there is circa £9k owing and the value of the car is circa £6.5k

In your situation, regarding the company car I would ask your emplyer if you could have a monthly allowance instead, some employers do this so you can purchase your own instead of the higher tax you are charged on a company car (my employer does this), then you can just keep your current car but will have more money coming in anyway

nomoneytoday

Sterling wrote: »

stuff

On the other hand, if the loan wasn't secured on the car you can't VT it at the half way stage if required.

Additionally, some cars get manufacturer discounts on the financing, so the APR can be cheaper than a loan. For example my local Toyota franchise have 4.9% APR (no connection etc)