Settling PCP early / Negative equity

motorguy

Borders2017 wrote: »

I believe most cars that get handed back on VT from large dealers just go to Auction. As the dealer will still get back most of the value as you have overpaid/covered the depreciation for them.

They dont go back to the dealer, they go to the finance company.

motorguy

Nasqueron wrote: »

I did the maths on this a while back and pretty much into the third year before you get 50% of the total amount depending on deposit and balloon size on a 0% deal

Yes, it tends to be around months 30-33 of a 36 month PCP agreement.

motorguy

Borders2017 wrote: »

Possibly someone with more knowledge will correct me but as I understand....

VT will allow you to hand the car back (no matter what mileage) but within fair wear and tear (ie you have not crashed it!) as long as 50% of the whole balance has been repaid.

Close.... you can VT a car at ANY time, but the finance company can only pursue you for up to the 50% of the total of the whole balance.

So you could VT when £500 short of the 50% marker and the finance company would then bill you for the £500. Likewise you could VT after month one and they'd bill you for the difference between what you've paid and the 50% marker.

Its designed to protect people who can no longer afford to pay from being pursued for disproportionate amounts by the finance companies.

Also, very excessive mileage could be deemed to fall within fair wear and tear. If you did say 40000 miles a year and handed the car back via a VT after three years they would probably be within their rights to pursue you for monies under fair wear and tear.

Nasqueron

Just to give you an example on real world maths (on 0% finance)

My car retail with extras £24084

Deposit £500
Contribution £4500
Finance = £19584
First payment = £258.95
Monthly payments = £259.05
Final balloon = £8704

50% = £12042

It will take me 28 months (out of a 42 month contract) to get to 50% to VT if I wanted to.

If I had just paid the £500 deposit and say £350 a month it would be 33 months before I'd get to 50%

You can see why getting to the 50% threshold on PCP is difficult