Car stolen - help

SallyDucati

I've never done a PCP deal but have looked at a few. If you can trade in a previous car/pay a significant deposit and not have any of that covered by insurance (as sounds like a few here think) it

a) sounds completely unreasonable to me
b) would reiterate my thoughts of never going for PCP, and put a lot of other people off.

or are you saying that the depreciation is all covered by the trade in/deposit?


Just an example I've looked at recently -

Cost of car - £17,500
Cash Deposit - £7,000 (40%)
PCP Finance - £10,500.
(Balloon payment of £6,600 after 4 years - APR ridiculous so not considering)

So if I bought this car and it was stolen the month after - I would lose ALL the £7k?

foxy-stoat

SallyDucati wrote: »

I've never done a PCP deal but have looked at a few. If you can trade in a previous car/pay a significant deposit and not have any of that covered by insurance (as sounds like a few here think) it

a) sounds completely unreasonable to me
b) would reiterate my thoughts of never going for PCP, and put a lot of other people off.

or are you saying that the depreciation is all covered by the trade in/deposit?


Just an example I've looked at recently -

Cost of car - £17,500
Cash Deposit - £7,000 (40%)
PCP Finance - £10,500.
(Balloon payment of £6,600 after 4 years - APR ridiculous so not considering)

So if I bought this car and it was stolen the month after - I would lose ALL the £7k?

From what other people believe and say - as long as the market value of the car at the time of theft is more than the settlement figure on the finance at that time you will walk away with nothing.
If the market value is less than the settlement figure you will walk away with nothing, LESS the difference that you will have to find.

I think this is unfair and, if you read the policy booklet, it is also incorrect.

AdrianC

What insurable interest does the OP have in the car?

Herzlos

foxy-stoat wrote: »

1. Hire purchase, leasing and other agreements
We will make payment under your policy to the legal owner if we know that your car or any part thereof, is owned by someone other than you. We will only pay you the balance that is left after we have paid the legal owner all that they are entitled to. In the event that we decide that your car is a total loss we may make a claim payment to any party that has a financial interest in your car. We will only pay you the balance that is left after we have paid the interested parties all they are entitled to.

To me the insurers will pay the outstanding finance to the legal owner and the balance of the market value to the policy holder.

If you hired a car from a rental company I would see your point.

Yeah, the wording implies that they should be taking the market value (£30k), settling the outstanding finance (£20k) and giving the remainder (£10k) back. Seems fairer considering there could have been a huge deposit.


However, if there's some additional clause specifically for PCP that would take precedence. Though it's still a purchase and not a lease, even though people seem to view it as a leasing deal with option to buy.

foxy-stoat

AdrianC wrote: »

What insurable interest does the OP have in the car?

Deposit, over payments, monthly contracted capital payments.

I dunno.

AdrianC

I think you're misunderstanding what a PCP is...

The "deposit" isn't a deposit like a rental deposit - it's an advance payment that reduces the amount you borrow. If the car is handed back, either through VT or at the end of the PCP, it doesn't get returned. It simply reduces the amount you borrow, so the amount you pay interest on.

There is no "capital" payment as part of a PCP, balloon excepted, so you can't overpay. Monthly payments are solely interest on the amount borrowed - which is the full original purchase price less the advance payment. The balloon, the residual value at the end of the term, is within that borrowed money, so you pay interest on them.

The balloon is optional at the end - it's buying the car from the financier. GMFV = Guaranteed Minimum Future Value. If the car has depreciated more than expected, you simply hand it back and walk away. If you want to buy the car from the financier, that's the amount you will pay.

Let's say you PCP'd a £50k new car.
You put £10k advance payment/"deposit" in. You finance the remaining £40k. There's a £20k GMFV/balloon.
Over the term, you pay interest on the £40k - but we'll ignore that amount here, because it's not relevant.
At the end of the term it's expected to be worth £20k, an amount written into the contract at the start.
It has depreciated by £30k, and you have financed that £30k (£10k of it up front, £20k borrowed) plus the £20k retained value.

At the end of the term, you have a choice.
You hand it back, and the finance company can do as they will their car. You do not get the £10k advance payment back.
You hand them £20k, and you can do as you will with your car. Including selling it for £30k, if you can.

But, alas, the car is written off before the end of the agreement.
The finance company get the £20k contracted value. They are in the same position as if you'd paid the balloon to buy it from them.
You get £0.00. You are in the same position as if you'd handed it back.
Everybody walks away equitably.

tasticz

AdrianC wrote: »

But, alas, the car is written off before the end of the agreement.
The finance company get the £20k contracted value. They are in the same position as if you'd paid the balloon to buy it from them.
You get £0.00. You are in the same position as if you'd handed it back.
Everybody walks away equitably.

Hi, do I understand your post correctly?

you are saying if the car is written off before end of contract the insurer will just pay the GFV and leave the driver with negative equity (not pay for the remaining finance) even if the car was worth more?

Say

If car is written off before end of agreement and you have £35k balance remaining out of £50k (e.g. 10k deposit + 5k paid + 15k finance remaining + 20k GFV) the driver has to find 15k from somewhere as the insurer would only pay the 20k out of the 35k remaining even if the car was worth say 36k?

AdrianC

tasticz wrote: »

Hi, do I understand your post correctly?

you are saying if the car is written off before end of contract the insurer will just pay the GFV and leave the driver with negative equity (not pay for the remaining finance) even if the car was worth more?

They're paying the settlement value. That's the amount that the financier want to close it all now without returning the car. It's based on the balloon plus any losses from the remaining contract - not necessarily the remaining interest, because the account is being closed off and the debt settled.

The OP has no -ve equity. Equally, the OP has no +ve equity, no matter how much they want to.

If the market value was less than the settlement, then the OP would have -ve equity, and that's what a gap policy is for.

tasticz

AdrianC wrote: »

They're paying the settlement value. That's the amount that the financier want to close it all now without returning the car. It's based on the balloon plus any losses from the remaining contract - not necessarily the remaining interest, because the account is being closed off and the debt settled.

The OP has no -ve equity. Equally, the OP has no +ve equity, no matter how much they want to.

If the market value was less than the settlement, then the OP would have -ve equity, and that's what a gap policy is for.

OK, I understand then in that case what's stopping OP from paying 20k as settlement figure to his finance company and demanding 30k to his insurance company as the car now belongs to OP and it is worth 30k?

Either way I have never seen this approach before. My friend had the excess amount paid to him after the finance was settled directly.

AdrianC

tasticz wrote: »

OK, I understand then in that case what's stopping OP from paying 20k as settlement figure to his finance company

Nothing.

While the car still exists. But now the claim's gone in...