Advice on my PCP and negative equity

motorguy

domgreenslade wrote: »

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??

At the end of the term, the finance company will expect immediate payment of the balloon.

You may well be able to get a further HP agreement with them to cover that amount.

What about taking a personal loan over say 3 years now to cover the current settlement figure? If you were to put in the £1700 you are proposing putting towards a new car, you'd be borrowing £5800 and have repayments of probably £185 a month. If you keep that car serviced it should easily be fine for that extra mileage (still less than 100K).

At the end of it you'd have a car worth a couple of thousand ish.

If you go down the route of another PCP deal and rolling in all that negative equity you're simply moving the problem further down the line and have a big monthly payment to deal while you do it.

motorguy

rich13348 wrote: »

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.

+1

Either do this, or as i proposed get a loan for the settlement figure now and pay it off in equal payments over 36 months or so.

Crazy to change a 2.5 year old car for "the facelift model"

motorguy

AdrianC wrote: »

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...

Those figures just dont stack up - i'd be looking to see the detail but theres no way the car dealer or the finance company are absorbing the difference.

EDIT : In fact with just a cursory look, the O/P is being asked to put in an extra £1700 cash too and without doubt somewhere in the detail, the O/P is paying for the remaining difference (+ interest).

Cornucopia

domgreenslade wrote: »

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.

I'm in a slightly similar (not as bad regarding mileage) situation.

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 had a somewhat similar conversation with my Renault dealer recently, at their instigation, too. It took them an hour and a half to value my car and come up with a ridiculously high quote for a new PCP. It also involved something like 10 trips by the Salesman to his "manager", which is just plain annoying. Overall, I was not impressed.

One thing that I realised after researching the figures later was that PCPs are arranged in such a way that they are very likely to involve negative equity around the middle of the term. That's because the payments are equal (therefore linear) and the depreciation is exponential (curved). As the agreement period starts, the depreciation hares away faster than the payments can keep up, and the two meet up again at the end of the term.

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.

One of the things (good & bad) about PCPs is that they act to hide the inconvenient truth of new car payments. When they break down, they can reveal some nasty big numbers.

... I pay a LOT more than i could afford for the new car.

If there is any question of affordability, then do not buy a new car.

Apparently this is only available on a new car, with Renault as they understand my predicament??

Nonsense. Any dealer will "understand" it, and they will all be able to run the numbers on a new deal to possibly help you buy yourself out of it. The nature of PCPs is that people are coming to the end of those agreements all the time, and dealers can expect in some circumstances for people to want to trade a smallish, newish car for a larger, older one, and there's nothing intrinsically bad for them in helping you with that kind of deal (as long as your trade-in suits their forecourt, or they can get another dealer to take it from them).

I just don't know what my actual options are at this time.

What were your original intentions prior to the issue with the higher mileage?

rich13348

motorguy wrote: »

+1

Either do this, or as i proposed get a loan for the settlement figure now and pay it off in equal payments over 36 months or so.

Crazy to change a 2.5 year old car for "the facelift model"

I agree with this as well. Get a loan either for the amount owed to pay off the rest or get a loan later to pay the lump sum when due.

MobileSaver

domgreenslade wrote: »

• 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,

As others have said your best option is simply to keep the car and somehow finance the balloon payment when the time comes.

However should you decide to Voluntary Terminate your agreement then, to confirm what others have already stated, you would not have to pay any excess mileage charges nor pay for any minor damage. In a nutshell if you have paid 50% of the original amount due then UK Statute overrides any other agreement terms and conditions and your only obligation is to take reasonable care of the car; you cannot be charged for mileage, damage, vehicle collection, admin fees or anything else for that matter.

bazzyb

If the car was brand new 2.5 years ago then is there really such a need to change it for another slightly newer car?

The most sensible option would be to keep the car and pay the balloon payment. This doesn't necessarily mean that you need to find a big pot of cash, as you can refinance the balloon payment. It can be refinanced with a personal loan or even through a Hire Purchase agreement, so you wouldn't need to find a deposit (unless you wanted to) and the repayments could be the same or less than what you are paying now, depending on the term.


Oh and, by the way:

domgreenslade wrote: »

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??

Do not believe a word of this for a minute. They may understand your predicament but they are not a charity and they certainly will not be trying to do you a favour. You can carry negative equity over on to new agreements on either new or used cars with many lenders. Having said that it would be bonkers as you'd be paying interest on the neg eq for even longer and it would be silly to part exchange a used car for one of a similar age and carry over a lot of neg eq.

rtho782

Having just bought a new car from Nissan, who are affiliated with Renault and both use RCI for finance, I can tell you that while the excess mileage charge is 8p/mile, adding more miles on to the contract works out as 4p/mile.

I would phone RCI and ask if you can up the mileage. This might be cheaper.

Realistically I'd be looking to hand back the car in your circumstance.

purpleparrotuk

rtho782 wrote: »

Having just bought a new car from Nissan, who are affiliated with Renault and both use RCI for finance, I can tell you that while the excess mileage charge is 8p/mile, adding more miles on to the contract works out as 4p/mile.

I would phone RCI and ask if you can up the mileage. This might be cheaper.

Realistically I'd be looking to hand back the car in your circumstance.

Are you sure this is PCP and not PCH? PCP agreeements dont normally let you add miles on but not sure about RCI.

neilmcl

purpleparrotuk wrote: »

Are you sure this is PCP and not PCH? PCP agreeements dont normally let you add miles on but not sure about RCI.

Most main dealer/manufacturer finance companies will allow you to increase/alter your annual mileage allowance on a PCP deal, most at a cost, sometimes for no extra charge at all.