Negative PCP Equity :-/

masterlovejoy

Hi there,
I’m 18 months into a 4 year PCP on a Ford Galaxy. I have approx 12.5k settlement figure. When I approached the dealer they told my car is now worth 8k... (Arnold Clark). They say that’s the book price on it (ridiculous I know).
So my issue is: is my problem going to get worse? Given the depreciation? Or should I just sit tight. I could hand it back halfway through but would I be subject to an excess mileage charge?
As it stands I have a 4.5k deficit. I bought the car for 15k😣
Help!

motorguy

masterlovejoy wrote: »

Hi there,
I’m 18 months into a 4 year PCP on a Ford Galaxy. I have approx 12.5k settlement figure. When I approached the dealer they told my car is now worth 8k... (Arnold Clark). They say that’s the book price on it (ridiculous I know).
So my issue is: is my problem going to get worse? Given the depreciation? Or should I just sit tight. I could hand it back halfway through but would I be subject to an excess mileage charge?
As it stands I have a 4.5k deficit. I bought the car for 15k😣
Help!

A four year PCP deal is designed these days to pretty much not get to a break even point to almost the end of the agreement so its no surprise you are in negative equity.

Why are you remotely concerned? You made a four year agreement to drive the car and hand it back (subject to mileage / condition constraints) - its value in the meantime matters not one jot.

I take it you did actually put your actual predicted mileage on the agreement?

Also, for clarity, the hand back / voluntary termination point is once you've paid 50% of the total agreement cost including deposit, admin fees, interest and residual value - NOT when you're made 50% of the payments.

Herzlos

It depends on what you care about. You're comparing forecourt prices with trade in for a start - so you'll have easily lost £2k from that, plus the car is now 18 months older, so that could account for a chunk of the rest. Arnold Clark seem to offer pretty lousy trade in figures too, since I think they are fairly competitive on sale price. Stick the cars details into webuyanycar.com for a slightly better idea of what it'd fetch at the low end.

Depreciation decreases kind of logarythmically - in that the drop will decline over time, and you've already taken the hit of transferring. So I'd ignore the outstanding balance and trade-in value until either:
1. The 4 year PCP ends and you're figuring out what you want to do. Car will probably be worth under £4k by then.
2. You need to change the car for some reason.

IamNotAllowedToUseMyName

motorguy wrote: »

Why are you remotely concerned?

Presumably because he believed the sales guff about magically being able to get better and better cars simply by taking out new PCP deals rather than seeing it to the end, or they picked up on an idea that a PCP balloon payment could be so much less than the actual value of the car that they could pick it up for a song at the end of it and make a tidy profit (rather than it would be so over the top that they just want to hand the car back).

motorguy

IanMSpencer wrote: »

Presumably because he believed the sales guff about magically being able to get better and better cars simply by taking out new PCP deals rather than seeing it to the end, or they picked up on an idea that a PCP balloon payment could be so much less than the actual value of the car that they could pick it up for a song at the end of it and make a tidy profit (rather than it would be so over the top that they just want to hand the car back).

A cursory look at the paperwork and a minimal amount of due dilligence would of course have told him otherwise.

£15K Galaxy on 4 years used car PCP and then trying to bail after 18 months = :eek:

daveyjp

On a 4 year PCP most vehicles will depreciate faster than the debt is paid off, that’s why GAP insurance exists.

With cars borrow as little as possible and pay off as quickly as possible.

TheMoonandBack

masterlovejoy wrote: »

Hi there,
I’m 18 months into a 4 year PCP on a Ford Galaxy. I have approx 12.5k settlement figure. When I approached the dealer they told my car is now worth 8k... (Arnold Clark). They say that’s the book price on it (ridiculous I know).
So my issue is: is my problem going to get worse? Given the depreciation? Or should I just sit tight. I could hand it back halfway through but would I be subject to an excess mileage charge?
As it stands I have a 4.5k deficit. I bought the car for 15k😣
Help!

Hi, financially it’s not going to get better, but what is it that you want do ?
Unless you keep it for several years you are going to take a hit at some point. Your options are to bail out and take the hit now, bail out at the 50% total paid point and get stung for mileage and damage charges and have no car having paid thousands to effectively rent the Galaxy, or keep it until the end of the pcp and then pay the ballon and keep it, or trade it.
If you still like the car, and can afford the payments why not just keep it ? It obviously seemed like a good idea 18 months ago, so what has changed ?

motorguy

TheMoonandBack wrote: »

Hi, financially it’s not going to get better, but what is it that you want do ?
Unless you keep it for several years you are going to take a hit at some point. Your options are to bail out and take the hit now, bail out at the 50% total paid point and get stung for mileage and damage charges and have no car having paid thousands to effectively rent the Galaxy, or keep it until the end of the pcp and then pay the ballon and keep it, or trade it.
If you still like the car, and can afford the payments why not just keep it ? It obviously seemed like a good idea 18 months ago, so what has changed ?

Thats whats confusing me - i can understand someone needing a bigger car or more flexibility, perhaps unexpectedly, but they're in a Galaxy now?

debtdebt

The negative equity only crystallises when you decide to break the deal. Surely when you entered into the agreement, you knew that it would last 4 years. You knew that at the end of that term, you could hand the car back or pay a balloon. I don't see what your problem is. If you want to break the agreement early, you'll have to swallow the losses.

motorguy

debtdebt wrote: »

The negative equity only crystallises when you decide to break the deal. Surely when you entered into the agreement, you knew that it would last 4 years. You knew that at the end of that term, you could hand the car back or pay a balloon. I don't see what your problem is. If you want to break the agreement early, you'll have to swallow the losses.

Thats exactly it. Any 4 year PCP deal is going to be in negative equity just 18 months in - nothing to worry about and nothing unusual.