Car Finance Agreement

b3ats

Hello,

I bought a car in October last year on an agreement over 5 years. I had to change my previous vehicle as my missus fell pregnant and as a result I was left with a negative equity to transfer over of about £2000.

The purchase price of the new vehicle was £5000 plus the £2000 - so £7000 to finance. I left it to the dealership to sort it out for me.

As I had struggled to get finance in the past (not entirely sure why?) I was presented an agreement by the dealership at 19.76% APR. As I needed a bigger car quite quickly and would be saving over £200 per month on the repayments I agreed - thinking that I was signing up to a Hire Purchase agreement.

I have been paying my agreements on time since then.

Over the last month or so I have been looking at how I can drastically look to reduce my monthly outgoings, as there are some redundancies starting to materialise at work and I do not want to be left in the sh*t and I have just managed to pay off a loan of £2500.

Myself and my partner have been looking at much cheaper vehicles and have decided that we would be ok with a vehicle of the same size, only about £4000 cheaper and a bit older.

I stumbled upon the Voluntary Termination route yesterday whilst browsing the net at work and read that this is applicable for Hire Purchase agreements taken out since ~2008. I thought to myself that this would be an ideal solution to getting out of the debt and it wouldn't take me an overly long time to save up for it, plus I wouldn't have to pay as much as I would with an early settlement - I have obviously already made payments towards the agreement, which helps.

Today, I have rooted out my agreement to look for the information on my rights to terminate only to find that it says "You have no right to cancel this agreement under the Consumer Credit Act, 1974, the Timeshare Act, 1992 or the Financial Services (Distance Marketing) Regulations 2004".

I have looked at the top of the agreement (with Creation) and it says Fixed-Sum Loan Agreement regulated by the Consumer Credit Act 1974.

When I approached the dealer to arrange for the finance he suggested that due to the amount of negative equity that I had a personal loan might have been the better option but I expressly stated that I did not want a personal loan and only wanted Hire Purchase.

As I am quite young I have never really understood car finance a great deal and thought that I was only able to finance a car through PCP, HP or LP. I signed my agreement under the impression that it was a HP agreement. I did look at the finance agreement at the time but was confused as to its content and it looked just as standard as other agreements that I have signed in the past.

I have looked over my agreement again and there is no section that indicates any termination rights - there are only figures that explain how much I would have to pay back if I was borrowing £1000 over 1/4 term, 1/2 term & 3/4 term.

Has the dealer mis-sold me the agreement and is there anything I can do?

Any help that you can offer would be very much appreciated.

Regards,

Dan

[Deleted User]

for someone who in your words"is quite young and never really understood car finance"you seem to know a fair bit about it
Are you just looking for a way out of this agreement?

b3ats

If you tell me what it is that I know so much about I may be able to defend myself about how I know it. The internet is a fabulous resource and I do pride myself on being very good at investigating things that are of interest to me once I get them into my head.

As I have stated above, my intention (since yesterday) is/was to go down the VT route after I found out about it last night browsing the national debt line website. I was there because I was under the impression that I was in a Hire Purchase agreement and was looking for a cheaper way out than to settle early and pay pretty much the full amount outstanding on the loan.

My motivation for this is to try and eradicate the larger monthly outgoings and leave myself in a good position should the worst happen at work. I have one 15 month old daughter and another one due in April - everything I do, I do for them.

I honestly never knew that a dealership could offer an alternative finance arrangement (other than the 3 I mentioned). I have had a couple of cars both on PCP and HP, which is how I know about these, however I had to search the net to find out about the LP.

When I approached the dealer initially I stated that I did not want to go down the loan route, because what I do know is that with a personal loan you have to pay back much more than with an HP agreement. I wish I had know about the voluntary termination route back then - I would have definitely looked out for that clause in the contract!

I purchased a camera through Jessops using their retail finance a couple of months ago, which is what has made me 'click' today on reading this agreement as it is set out very much the same.

I have tried to be as honest as possible.

[Deleted User]

sorry dan i wasnt having a go,just wondering how i could help as you seemed to know what there was to know,why not speak to the finance company/loan provider and talk to them?
Hopefully the worst wont happen and you`ll keep your job and car,btw good luck with the new baby when he/she arrives

Typhoon2000

If the vehicle you bought was valued at £5000, then if you got a HP on it the maximum loan you would have got is £5000, not the extra £2000 you needed to clear off the debt from your old car. The only option would have been a personal or other loan for £7000.

Had you just got a £5000 HP at the time, and found the extra £2000 from somewhere else, you would have been able to VT after half the payment had been made. Of course you would have had to hand back the car and you would have found it harder to get another HP agreement as your VT would be noted on your credit file.

~Brock~

You haven't got a HP, so you can't VT.

However, because of the type of agreement you have got YOU own the car, not the lender, so you are perfectly entitled to sell it and put the money towards repaying the loan.

As another poster has said, it is very doubtful that you owuld have got HP in the first place due to needing to borrow almost half as much again as the car was worth. No lender in their right mind would agree to do that on a HP.

b3ats

Do I actually own the car as it is named on the retail finance agreement?

Had I have realised that this was a loan I wouldn't have bothered because I know that I could have got a Personal Loan from another company at a lot less than 19.76% APR.

I was only going with what I thought was the HP route because it would have cost me less to pay off.

Typhoon2000

b3ats wrote: »

Do I actually own the car as it is named on the retail finance agreement?

Had I have realised that this was a loan I wouldn't have bothered because I know that I could have got a Personal Loan from another company at a lot less than 19.76% APR.

I was only going with what I thought was the HP route because it would have cost me less to pay off.

Yes if you got a personal loan then you own the car.
For me HP on a used car has always been at a higher rate than a personal loan. If it is some special low finance rate from the dealer then , the car would have been over priced to compensate.
If you say you "I had struggled to get finance in the past" then you may not have got a significantly better rate than what was offered.

standupguy

It is good that you are now researching as you are and perhaps this will make you think twice in future about leaving things to salesmen.

As others have said, no lender would have lent you £2000 over retail price on a hp agreement and on the extended 5 year repayment period.

Your balance with interest will be well over 10k and the real current trade value of your car will be about £3500?

If you wanted to settle the agreement the settlement will be over £7500 so you can see you have doubled the negative equity you have with the decision you made. There seems little benefit to selling the car if you cannot add 4k cash and pay off any settlement straight away.

Do I think you have been mis-sold - no, I just think you did not give enough attention to the commitment you have gotten into.

b3ats

I've just realised that I purchased GAP insurance on this vehicle the day I signed for it. Is that agreement now invalid?

Just to reiterate, it is a Retail Finance Agreement with the vehicle named on it. More of a personal loan than HP, PCP or LP.

If the GAP protection is invalid is it possible to claim back that money as I would have effectively been paying off something that I could have never claimed on.

Cheers.

~Brock~

Why do you think you could never have claimed on it?