Hire Purchase nightmare - Please Help!

moneysaver69

Hi all,

I am 6 months into a five year Hire Purchase agreement on a Toyota GT86. I initially bought it used, so it won't have depreciated much from the value that i paid since i purchased it

My initial cost of insurance was 1.2k. The cost for renewal with recent endorsements will be more than double - combined with some subtle financial changes in my life and decision to prioritize saving for my future over having a nice car far exceeds the amount that i could afford to pay per year. Therefore i simply cannot afford to keep this car (my pride and joy) This is incredibly devastating and upsetting, and now i have further fears that are turning devastation into nightmare. Incredibly stressful and causing me a great deal of anxiety, unless someone can tell me that i have been given the wrong impression..

It is to my understanding that i have the option to VT. However, i am reading that in order to do so i will end up being liable for the remaining outstanding balance up to 50% of the cost of the vehicle, this is figure likely to be roughly £7000.

Now here's what i simply don't understand. Obviously the car will be sent to an auction of some kind, and given the fact that it won't have depreciated much in value it will sell fairly close to the initial cost that i paid. Here is my main question.. Does the amount the finance company receive for the vehicle get taken off this 50% that i am liable to pay? Ie does any money made during the sale of the vehicle past the 50% that i am exempt from paying then go towards the final 50 that i am liable for? Or do i still get billed this amount regardless? Essentially making me pay a huge sum of money for the next 2.25 years for absolutely nothing ???

I pray that somebody could shed light on this, because if that IS the case, then i literally feel as if i've been stolen from. Bearing in mind that 7000 is far larger than any amount of money that i've ever saved in my life. And it will cripple my life to the point of preventing me ever owning another car in the near future, or being able to save for a mortgage? (im in my mid 20s). Furthermore, this 290pcm for the next 2.25 years would be the cost of fuel and insurance on a cheap bottom-end used car that would better suit my needs

Somebody relieve me of my fears, or suggest a feasible option/way out that will enable me to get out of paying for absolutely nothing for the foreseeable future.. please tell me that i have the wrong end of the stick. And not paying for 2.25 years worth of car that i wont be getting 2.25 years of use out of!

If that's the case i am shocked that it's legal for a creditor to do this to a customer. Essentially i'd be restricted of doing something that would be easily done if the vehicle was legally allowed to be sold by myself??

BrassicWoman

you have the wrong end of the stick

but, you're going to have a shortfall; there's always a shortfall

So, see what the dealer will offer you for it; and try an internet "we buy cars" site for comparative pricing; then compare to the settlement figure. You then need to work out how to cover the gap.

VT is almost aways the most expensive way of doing it, not to mention you can't do it for a couple of years yet. You need to be halfway through, not have the funds to be halfway through.

moneysaver69

Thanks for your reply. Well that makes me feel a little more at ease here.

So what your essentially saying is that the finance company (alphera) will allow me to sell the car back to the dealer that i bought it from?

Also, you mention me comparing the settlement figure to a purchase quote from another party. However, how would this be of use to me? As i assume that the lender won't allow me to just sell the car myself?

moneysaver69

BrassicWoman wrote: »

there's always a shortfall

I believe this is referred to as 'sod's law' _pale_

BrassicWoman

As long as the finance gets settled, you can sell it. A professional purchasing company is more likley to be used to this than a private buyer.

BrassicWoman

moneysaver69 wrote: »

I believe this is referred to as 'sod's law' _pale_

It's the nature of a depreciating asset. We've all done it. Try and only need the lesson once and you'll be doing better than most.

~Brock~

To answer the specific question - the amount the finance company gets for the car at auction after you have VT'd makes absolutely no difference to your outstanding liability. You are still liable for 50% of the total amount payable, plus any arrears or costs of damage to the vehicle.

Also, to correct another poster, you do not have to wait until you have reached the 50% mark - you can VT at any time, however you will at the point of termination be immediately liable for the difference between what you have already paid and the 50% figure.

poppasmurf_bewdley

And don't be under the wrong impression about the value of your car. Even though it was bought used and had suffered the major depreciation already, you will still have a shortfall.

The dealer will have added his profit margin to the price he bought the car for, probably at auction. That's probably about 30%. That's the gap you will in all probability be looking at between your purchase price and what you will be offered now.

MEM62

moneysaver69 wrote: »

Hi all,

I am 6 months into a five year Hire Purchase agreement on a Toyota GT86. I initially bought it used, so it won't have depreciated much from the value that i paid since i purchased it No such car. With very few exceptions (collectable cars etc) The value of any car will fall immediately after you purchase it.

My initial cost of insurance was 1.2k. The cost for renewal with recent endorsements will be more than double - combined with some subtle financial changes in my life and decision to prioritize saving for my future over having a nice car far exceeds the amount that i could afford to pay per year. You will have to compromise your saving and other financial priorities until you have settled the car loan. Therefore i simply cannot afford to keep this car (my pride and joy) This is incredibly devastating and upsetting, and now i have further fears that are turning devastation into nightmare. Incredibly stressful and causing me a great deal of anxiety, unless someone can tell me that i have been given the wrong impression..

It is to my understanding that i have the option to VT. However, i am reading that in order to do so i will end up being liable for the remaining outstanding balance up to 50% of the cost of the vehicle, this is figure likely to be roughly £7000. Subject to the type of loan that you have, some agreements will allow this on the basis that 50% of the original loan is paid.

Now here's what i simply don't understand. Obviously the car will be sent to an auction of some kind, and given the fact that it won't have depreciated much in value it will sell fairly close to the initial cost that i paid. Here is my main question.. Does the amount the finance company receive for the vehicle get taken off this 50% that i am liable to pay? Ie does any money made during the sale of the vehicle past the 50% that i am exempt from paying then go towards the final 50 that i am liable for? Or do i still get billed this amount regardless? Essentially making me pay a huge sum of money for the next 2.25 years for absolutely nothing ???


At auction the car will realise much less than you paid for it. No, you are not paying for nothing - you are paying for the loss on the car, which is the difference between the retail price you purchase it for and what it will sell for at auction. There will also be the finance companies admin charges etc. Check you agreement to see what these will be.
I pray that somebody could shed light on this, because if that IS the case, then i literally feel as if i've been stolen from. Bearing in mind that 7000 is far larger than any amount of money that i've ever saved in my life. And it will cripple my life to the point of preventing me ever owning another car in the near future, or being able to save for a mortgage? (im in my mid 20s). Furthermore, this 290pcm for the next 2.25 years would be the cost of fuel and insurance on a cheap bottom-end used car that would better suit my needs


Sorry if it sounds harsh but these are exactly the considerations that you should have made before buying the car. The trouble is you saw a desirable car and what you considered to be affordable payments at the time and probably didn't look past that.

Somebody relieve me of my fears, or suggest a feasible option/way out that will enable me to get out of paying for absolutely nothing for the foreseeable future.. please tell me that i have the wrong end of the stick. And not paying for 2.25 years worth of car that i wont be getting 2.25 years of use out of!

If that's the case i am shocked that it's legal for a creditor to do this to a customer. Essentially i'd be restricted of doing something that would be easily done if the vehicle was legally allowed to be sold by myself??

You either need to keep the car and adjust your finances so that you can meet the repayments and running costs until you have paid 50% of the balance or accept that you will need some way to deal with the shortfall.

andyfromotley

If the car hasn't depreciated much why don't you just sell it and pay off the finance?

molerat

You need to get a realistic valuation (not how much you see it for on a forecourt) as to how much you will get for the car, either px or private sale, and get a settlement figure from the finance company. You can then figure out your options. VT is not normally a financially viable option so early in the contract.