Overestimated mileage on PCP -> Trade-in value?

C05T1N

Hi all,

Apologies if this has been asked before (I am sure it has been). I am finding it difficult to understand certain aspects of PCP, trade-in values, equity, etc., so please bear with me.

Long story short:
Just over 2 year Fiesta, 16000 miles (about 2,000 fewer than I expected initially). Estimated to reach about 18-19,000 by the end of the contract (well under the 27,000 in the PCP deal)

• £2,000 left to pay until the end of the contract
• £4,800 MGFV
• £6,100 current guide sell value/5,300 current trade-in value, according to AutoTrader

Would really like to trade it in early for something better, however I have no idea what the risks are.
A few questions for all of you who've already been through this already:

- If I just let it run out, will the car be worth more because I overestimated the mileage? And if so, how much more? (is it a negotiation or is it based on a formula); What would the difference be used for?
- If I go to another dealer and trade it in, is it likely they'll try and rip me off and offer way less than the numbers above? What should I be aiming for?
- Is there a relation between that GMFV and the value for trade-in value? E.g. future value is £4,800, I should not accept anything less than x, etc.?

Thank you.

flashg67

It may be worth more with less mileage. Try putting different mileages in an online price guide like Parkers.co.uk. There's no magic formula, it depends on the market at the time, and to some extent, the dealer's selling skills but you'll only ever likely be offered 'trade' value, and anything a dealer offers over that is likely to be instead of a discount on the new car. A dealer is there to make as much money as possible, so do some research on a 'target price' with, say, WhatCar for the new car you want .

IMHO, it's not a good idea to early terminate a PCP, they're designed to make the payments as cheap as possible but you're actually not paying a huge amount off the total debt, because the GMFV is still left at the end to pay. The idea is to leave some equity at the end towards a new car, or no-one would do these deals more than once.
You might find you'll break even with say 6 months to go, with a lower mileage. Before that point, you'll probably be in negative equity and have to 'roll up' any shortfall into a new deal.
You could always stick the reg in webuyanycar etc for a guide, then request a current settlement figure from your finance company to see where you're at.
Unless you need to, or the figures are currently in your favour, I'd ride it out until the end of the deal!

C05T1N

Thanks for the answer. Sorry for the confusing post, I was hoping I'd get an idea if current value is the most I can hope for or if it's the least I should be looking to get.

6 months in advance is actually what I was thinking of - which would leave me a bit of time to look at what cars are out there.

How would I really find out if I am still in negative equity? I was under the impression it's after 2/3 of a PCP deal that it all flattens out - I guess my understanding is as bad as I assumed it is

flashg67

I think you understand it fine, well as well as most of us do!
I'd suggest that the current value should be a minimum you accept, but don't expect a huge amount over that. The reason webuyanycar etc have become popular is that they offer a (fairly) no-nonsense approach and often give you towards the top end of 'trade' price leaving you to concentrate on negotiating the price of a new car with no trade in. Bear in mind they are all buying to sell on again so you need to be realistic. The only way to get a decent price is to sell privately and all the hassle that can entail.

The only way I can think of finding out if you're in negative equity is by finding out what you owe (call for a settlement figure from your finance company) and then getting a current valuation for your car either online (or at a dealer if you dare), then obviously compare the two amounts. Even if this is only an estimate, it will give you an idea of where you're at.
Depreciation does level off after the first 2-3 years. On a 'standard' hire purchase deal you can 'get ahead' sooner as you're paying off more of the balance (via higher repayments though).
I think you'll find that with a PCP, because there is a balloon left that isn't being paid off, the remaining finance balance will remain higher for longer into the agreement, meaning you wont have any equity until quite near the end of the agreement. This does depend on other factors like whether you put a big deposit down initially etc.
The dealer and finance companies sometimes walk a fine line between keeping repayments down to make it look good up front, and ensuring there's just enough equity at the end to use towards the next car, to tie you in.
The problem is that trade-in values can fluctuate over the term, based on the state of the market, popularity of the model, even the colour etc etc and whether that goes in your favour or not when it's time to change is luck of the draw!

EDIT - Sorry, just seen your figures in your post - are you sure there's only 2k left to pay off - is this your figure or the finance companys - you don't seem to have factored in the balloon payment at the end? Looking at the figures, you could actually owe about £6800 so you're in negative equity. The MGFV only kicks in at the end of the agreement as is only relevant if you decide to give the car back and walk away (it's the safety net built in to PCP & of course you'd only do this if the car is worth less than the MGFV at the end)