Advice on my PCP and negative equity

domgreenslade

Hi there, first time poster so I apologise if this has kind of been answered before.

I am 2.5 years into my 4 year PCP deal with Renault. Through the fault of no one but my own really, my PCP allows for only 6000 a year, however, I have drastically gone over this. My mileage is currently at 55000 miles. The car has general wear and tear, but no major damage. I pay 8p for every mile over the 6000 a year allowance.

Basically, I had a call from my local Renault to discuss upgrading my current Clio to the new facelift model. Amongst this conversation, several things were discussed, mainly that the car is currently only worth £4000 with the finance left at about £7500 on it to pay. So the salesman advised that there would be £3500 of negative equity to roll over onto the next car, basically telling me that my car is almost worthless to continue driving.

I roughly do 16-18k miles a year, so with the increase in miles in the new PCP, with the roll over of negative equity, and the new car, my monthly payments on my PCP shoot up £100 a month, alongside fronting a £1700 deposit on top.

My question is, what are my options, from an unbiased point of view. The salesman explained that I can either:

• Front a deposit and roll the negative equity onto a new car, thus meaning that I pay a LOT more than i could afford for the new car. Apparently this is only available on a new car, with Renault as they understand my predicament??
• Terminate the finance with the finance company as i have paid over half, which would apparently mean I would get charged for the mileage and any damage to the vehicle, which would (according to the salesman) be more hassle to return the car, along with would end up paying more money for the miles and damage than the negative equity currently is.
• Pay the balloon payment after the 4 years and keep the car to sell privately (which is more than the negative equity)

I just don't know what my actual options are at this time. With 18 months remaining on my PCP, I was under no illusion that the mileage wouldn't catch up with me. But the idea of finding nearly £2k for a deposit and paying £100 a month extra (for the same car, just the facelift model) is really quite depressing and not to mention, something I couldn't afford. So am I stuck and is what the salesman saying correct, or is there a salesman bias here?

Any help would really be appreciated.

facade

The only realistic options are 2) & 3) otherwise you are digging an even deeper hole.

You can VT it when you have paid half of the total amount financed (the cost of the car minus any deposit plus the interest all divided by 2) but this is usually over 40 months into a 48 month deal. By all accounts on here, VTing it means they cannot hold you to the mileage agreement, if this is true, it is your best option I think- (just keep on paying until you reach the 50% point) as you can lose the high mileage millstone, but you will be left with nothing, not a penny, and dealers won't be falling over themselves to give you another PCP the next day.

Option 3), just keep on paying and at the end find the balloon payment, then you have a 90,000 mile Clio which might just about do as the deposit for the next PCP if it is still running.

If you really did sign for 8p every mile over 24,000, then you will owe 66,000 x 8p, which is £5280 if you don't pay the balloon and buy the car!!!

neilmcl

A few things. Firstly you say you pay 8p per mile excess but you're not actually paying that at all unless you hand the car back. Also there's a huge discrepancy between 6K and 18K miles per year, you've obviously tried to get a better deal by misrepresenting the sort of miles you'll be covering, no?

Second, and quite importantly, you say you've "paid over half", are you sure about this? Being over half way through your agreement is not the same as paying over 50% of your total finance amount and unless you paid a sizeable deposit I'd very much doubt you're in a position to VT and walk away.

Finally, take anything the dealer tells you with a pinch of salt, they'll say anything for you to upgrade and get you in to another deal. If I were you I'd hold onto the car and sell it if you really need to at the end of the agreement.

domgreenslade

So, originally 6k miles was plenty. I was walking to work, and really only using my car around town on weekends. But my circumstances changed quite dramatically so the 6000 a year was all of a sudden no where near enough.

Ah ok, so it's paid half of my PCP not halfway through, which makes a lot more sense to me.

Opinions so far seem to be that getting a new car is the worst option to go for. Are there any other options available to me. What actually happens at the end of the 48 months? Do I continue paying the monthly amount or will the finance company expect the balloon payment straight away etc??

Penelopa.Pitstop

Regarding option 2, read this thread:
http://forums.moneysavingexpert.com/showthread.php?t=5604150 post 9.

There's a chance they won't charge you for extra miles, at least some of it. Assuming that average mileage in UK is 10-12K per year, your car should be fine with 30K at the moment, so you're "only" 25K miles over the limit.

Another option would be to call finance company and ask if you can buy extra miles during the contract. VWFS allows this and sells extra miles at half price. 8p per mile is ridiculous high cost for Clio but it's your fault for not checking it or declaring more miles up front when taking finance.

Avoid option 1 as it only serves finance company and salesman.

After 48 months you return the car and pay for any unreasonable damage and excess miles or buy it by paying off settlement figure which is stated in your documentation.

Jonesya

I might have missed it, but what's the final balloon payment needed for you to buy the car at the end of your PCP deal?

AdrianC

Your current deal includes 500 miles/month, but you're doing 1,500 miles/month. So that's 1,000 miles/month over the agreement, at 8p/mile = £80/month.

And you're complaining that your finance will rise by £100/month - even though you're actually rolling £3,500 negative equity into it as well? Effectively, that's £20/month to clear £3,500 over four years - sounds like a bloody good deal to me. 48 x £20 = £960...

thescouselander

I'm confused. Changing the car this early into a PCP is likely to be expensive under any arrangement and as you say it's only an upgrade to the facelift version so the benefits will be minimal.

Do you really want to change your car? What would you have done if the salesman hadn't contacted you? Sounds like you're only considering this after pressure from the salesman who's trying to push you into spending money you don't have when sticking with what you've got would be a perfectly reasonable option.

facade

Do the exact sums.
As Adrian points out, it you don't pay the balloon at the end, you are currently overspending on mileage at £80 a month anyway (that you will need to fund as cash at the end), so a brand new car to suit your mileage for £1700 cash plus effectively £20 a month extra doesn't seem like a bad deal if you must have a new car.

(But you will be tied into a PCP for a further 40 months or so, rather than the 12 months or so that you have left.

System

Just to add to the above, the salesman is trying to pull your pants down with the valuation.

rich13348

Is there an reason you can't keep the car and pay the balloon payment in 1.5 years. Can you put a little away every month for the lump sum?

There is no reason to get rid of a 2.5 year old car if it runs fine. Your mot will be due in 6 months but that's not a big deal.