"Negative equity" at the end of a PCP deal

helsmet1

Hi all,
I'm about to come to the end of a PCP deal with a certain car manufacturer. I was led to believe when I took out the deal that my car would be worth at least the amount of the final balloon payment, and would probably be worth more if the car was in good condition/had not reached the agreed mileage limit. The manufacturer even have a video on their website stating that the balloon payment represents the guaranteed future value.
When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe, despite being in good condition and not having exceeded the mileage limit. I made a complaint which has been investigated by the manufacturer, and they are claiming that they would never say that the final payment represents the guaranteed value of the car.
I'm planning to escalate by raising a complaint with the financial ombudsman, but would appreciate any advice from anyone with a similar experience. Many thanks in advance!

verityboo

They don't have a crystal ball so have to estimate the future value of the car and in your case it is worth less so just hand it back

You should be glad because you won't have to pay the full cost of the depreciation on the car. By buying on a PCP you are protected against the car depreciating more than expected (such as with diesel cars now which are suddenly less sort after)

Just hand it back and let the car company take the hit.

GunJack

get a copy of the video you refer to, and note where/when you grabbed it. It may help if you can show them their advert stating this....however beware of the small print...

facade

helsmet1 wrote: »

When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe

You don't "exchange for a new one" you return your car at the end of the PCP deal (or now if you want to VT it) , and then start another PCP if you want a new one, putting down the deposit yourself.

marlot

helsmet1 wrote: »

...they told me the car was worth less than I owe...

You just hand it back. The negative equity isn't your problem, and you don't have to pay it.

You will have to find the down payment for the next car though.

neilmcl

helsmet1 wrote: »

Hi all,
I'm about to come to the end of a PCP deal with a certain car manufacturer. I was led to believe when I took out the deal that my car would be worth at least the amount of the final balloon payment, and would probably be worth more if the car was in good condition/had not reached the agreed mileage limit. The manufacturer even have a video on their website stating that the balloon payment represents the guaranteed future value.
When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe, despite being in good condition and not having exceeded the mileage limit. I made a complaint which has been investigated by the manufacturer, and they are claiming that they would never say that the final payment represents the guaranteed value of the car.
I'm planning to escalate by raising a complaint with the financial ombudsman, but would appreciate any advice from anyone with a similar experience. Many thanks in advance!

Who is the manufacturer?

The balloon payment IS the Guaranteed Future Value, always has been.

You've totally misunderstood what the GFV means. The GFV is the best guess that the finance company makes about the value of the car at the end of the term, and you essentially pay the difference (plus interest) between this and the sale price, ie, the depreciation. It's an estimate nothing more, if the finance co. get their sums right there'll be little or no equity left in the car. What it doesn't mean is if the GFV turns out be higher than the actual value you get to keep the difference. If the actual value is higher though you can have this as equity toward a new car should you wish.

IamNotAllowedToUseMyName

neilmcl wrote: »

Who is the manufacturer?

The balloon payment IS the Guaranteed Future Value, always has been.

You've totally misunderstood what the GFV means. The GFV is the best guess that the finance company makes about the value of the car at the end of the term, and you essentially pay the difference (plus interest) between this and the sale price, ie, the depreciation. It's an estimate nothing more, if the finance co. get their sums right there'll be little or no equity left in the car. What it doesn't mean is if the GFV turns out be higher than the actual value you get to keep the difference. If the actual value is higher though you can have this as equity toward a new car should you wish.

I suspect the OP has been bamboozled by a salesman trying to suggest that as the value is low, they need to do something to avoid a problem, whereas the idea should be to go to term and hand the car back.

I'd make a complaint any which way as instead of being properly advised, the OP is being baffled with the misleading offers of getting them out of a problem that they don't have.

AdrianC

I think the confusion arises from the OP trying - perhaps inadvertantly - to hand the car back before the end of term in an exchange for another car, rather than letting the deal expire.

helsmet1

Thanks - I do understand all that - I wasn’t very clear with my language. I went to the dealer to discuss starting a new PCP deal when mine came to an end on the understanding that I would hand the car back and start again - hopefully with a little equity if my car was worth more than the balloon payment (I realise I wouldn’t get any money back if I just handed the car back).
What they were essentially saying was that I owed approx £11,000 on the car, but they were only valuing it at £10,000, meaning that if I started a new PCP deal, I would owe them £1,000 on top of the cost of the new car

verityboo

helsmet1 wrote: »

Thanks - I do understand all that - I wasn’t very clear with my language. I went to the dealer to discuss starting a new PCP deal when mine came to an end on the understanding that I would hand the car back and start again - hopefully with a little equity if my car was worth more than the balloon payment (I realise I wouldn’t get any money back if I just handed the car back).
What they were essentially saying was that I owed approx £11,000 on the car, but they were only valuing it at £10,000, meaning that if I started a new PCP deal, I would owe them £1,000 on top of the cost of the new car

No but you don’t understand. There are normally 3 options with a pcp. 1 Pay the balloon payment and own the car. 2 Trade it in and any equity can be used towards the deposit on a new car or 3 simply hand it back to the finance company (and you don’t need to pay any negative equity)

If your in negative equity go for option 3 and at the end of the term hand it back. You don’t need to pay the £1000

helsmet1

Yes I realise I can just hand it back too - but I can get more for the car by paying for the remainder and part exchanging elsewhere so I!!!8217;m not considering that as an option