Finance Agreements - daft questions

ellecav

Hello

I have had a look at the forum posts and the website and can't find the answer to my question, and feel car dealers are trying to bamboozle me a bit with this.

I have a car on a finance agreement (peugeot passport agreement - monthly payments, final large payment to keep car if wished). I was too quick and too eager to have a car when I decided to do this. I'm now a few months away from my final payment, and don't want to do as the dealer suggests, part exchange for another car on the same finance agreement. It's a better option for me to use some savings and a loan for the car I want. I want to know -

Can I part exchange, or trade the car in, towards another car, at another dealer, and what are the risks of this?
Or do I have to hand the car back, and start an entirely different process with another dealer?
And which is the better, lower risk, option?

Again sincere apologies for the potential simple-ness of the question. I can't see anything in my contract and I'm not getting any straight answers from dealers (shockingly enough!) and I'm not able to find information online that I can be sure applies to this type of finance deal.

Thank you in advance. I'm on a steep money saving learning curve. There's a wider issue here about young people and lack of financial information they receive but that's for another post...

DUTR

In effect you are renting the car, so taking it to another dealer isn't really an option as it's not your car.

facade

Firstly, the car is not actually yours to sell until you have paid the final "balloon" payment.
It is still possible to sell it, or trade it in though, if the finance will allow someone else to pay the outstanding balance. (Usually they will)

If the car sells for more than the outstanding finance, then you would keep the difference. If it sells for less, then you would have to top up the difference (negative equity) at the moment of sale.

What this actually means is that if you go to a dealer they will take your car, and sell you another on finance no problem.
However, they will "lend" you any negative equity as apart of the finance, so you will be "borrowing" even more and paying out even more.

The only way to break the negative equity cycle is to finish paying for the car.

The best advice seems to be to then get a car on finance with a hefty manufacturer "contribution" and settle the finance as soon as possible afterwards with your loan. At the present time, you don't have to return the "contribution" (This "contribution" seems to have replaced the "discounts" as there is a lot of profit on the finance that makes up for it)



Do the sums, you might just be better off trading it in against a new one on finance.
Also see what WBAC offer for the car now, if it is more than you owe take it to them, as you don't want the hassle of trying to sell it for more than you had to pay to clear the finance.

neilmcl

The first thing you need to do is find out whether you have any equity in the car, ie, is/will the car be worth more than the final payment. If there's no equity then there's very little point trading it in, just hand it back and finance your next car with your savings and/or loan.

neilmcl

DUTR wrote: »

In effect you are renting the car, so taking it to another dealer isn't really an option as it's not your car.

Not true, any dealer will be able to settle the finance on the car.

Cornucopia

facade wrote: »

Firstly, the car is not actually yours to sell until you have paid the final "balloon" payment.
It is still possible to sell it, or trade it in though, if the finance will allow someone else to pay the outstanding balance. (Usually they will)

In my experience, getting a Dealer to pay off the finance on your trade-in is straightforward, automatic even. The only issue will be if there is a significant trade-down.

What this actually means is that if you go to a dealer they will take your car, and sell you another on finance no problem.
However, they will "lend" you any negative equity as apart of the finance, so you will be "borrowing" even more and paying out even more.

You do not HAVE to do this. The outstanding balance is owed to the existing finance company - you can pay it however you want.

The only way to break the negative equity cycle is to finish paying for the car.

Not true. As long as the outstanding balance is paid at or before the end of the term, it doesn't matter how or when.

facade

Cornucopia wrote: »

You do not HAVE to do this. The outstanding balance is owed to the existing finance company - you can pay it however you want.

Not true. As long as the outstanding balance is paid at or before the end of the term, it doesn't matter how or when.

You are quite correct. However, be careful that any "deposit" that is put into the deal is first of all paying off any negative equity. What I was referring to is the relatively common practice of "rolling the negative equity into the deal" in perpetuity. Yes it works, but is the car buying equivalent of a payday loan.

Frozen_up_north

The issue with these “final balloon payment” packages is when you reach the end of the payments, you have no value in the car to trade in against a new one. It’s especially painful on your pocket if you put a deposit down too. They seem attractive at the start of the first car purchase, but less so at the end.

If the car is a diesel it may have dropped in value significantly- in which case you could hand the keys over and walk away.

debtdebt

Why is everyone going on about negative equity in this case? The OP has said he is only a few months away from making a final payment. If he gets to that stage and is up to date with his payments, he can just hand the car back. He's completed his part of the agreement if he doesn't want to keep the car. If the car is worth less than the Guaranteed Future Value, it's not his problem. The finance company will have to swallow the loss as penance for miscalculating what the car is worth at the end of the term.

If the car is worth more than the GFV, the OP is free to sell it, pay the GFV off and then pocket the difference.

bigadaj

debtdebt wrote: »

Why is everyone going on about negative equity in this case? The OP has said he is only a few months away from making a final payment. If he gets to that stage and is up to date with his payments, he can just hand the car back. He's completed his part of the agreement if he doesn't want to keep the car. If the car is worth less than the Guaranteed Future Value, it's not his problem. The finance company will have to swallow the loss as penance for miscalculating what the car is worth at the end of the term.

If the car is worth more than the GFV, the OP is free to sell it, pay the GFV off and then pocket the difference.

Think he's a she.

lopsyfa

You can take the car to any dealer to use as part exchange for your new car but you need to check if the part exchange value is less than the final balloon payment. If yes, hand the car back to the original finance company and start again. If not, use as part of your new deal.