PCP Equity

thomas812

Coming on from my old thread about PCP finance, I have another question.
I am new to financing stuff and quite young, so finance isn't quite my strong point. Please be nice and make sure everything is clear.

My question is, am I in positive or negative equity? I will put some numbers below.

Car loan is £16,851 and I put a £2500 deposit when I got it.
I have paid 8 months worth of £230 = £1840
Car is estimated to be worth £14,500 - £15,000 (guaranteed)
Car is a 19 plate (brand new essentially and in GOOD condition)

Now, PLEASE correct me if I am wrong and PLEASE let me know what the hell I need to know as I am new to PCP finance and don't really understand it.

Anyway;
As I believe, equity is calculated as initial loan - cars value
So, £16,851 - £15,000 = £1,851 of positive equity?

So;
If I went into another garage to get another car on PCP, would they take that as a £1,851 deposit or how would that work into terms? I'm assuming they'd probably just workout my new monthly payments?

Many thanks!

motorguy

thomas812 wrote: »

Coming on from my old thread about PCP finance, I have another question.
I am new to financing stuff and quite young, so finance isn't quite my strong point. Please be nice and make sure everything is clear.

My question is, am I in positive or negative equity? I will put some numbers below.

Car loan is £16,851 and I put a £2500 deposit when I got it.
I have paid 8 months worth of £230 = £1840
Car is estimated to be worth £14,500 - £15,000 (guaranteed)
Car is a 19 plate (brand new essentially and in GOOD condition)

Now, PLEASE correct me if I am wrong and PLEASE let me know what the hell I need to know as I am new to PCP finance and don't really understand it.

Anyway;
As I believe, equity is calculated as initial loan - cars value
So, £16,851 - £15,000 = £1,851 of positive equity?

So;
If I went into another garage to get another car on PCP, would they take that as a £1,851 deposit or how would that work into terms? I'm assuming they'd probably just workout my new monthly payments?

Many thanks!

No equity is :-

Value of car - amount owed to the finance company (settlement figure).

If your car is worth £15,000 and you have a settlement figure of £13,000 then you have £2,000 of equity.

If your car is worth £15,000 and you have a settlement figure of £17,000 then you have £2,000 of negative equity (ie, you owe £2,000 more than the car is worth)

motorguy

thomas812 wrote: »

Coming on from my old thread about PCP finance, I have another question.
I am new to financing stuff and quite young, so finance isn't quite my strong point. Please be nice and make sure everything is clear.

My question is, am I in positive or negative equity? I will put some numbers below.

Car loan is £16,851 and I put a £2500 deposit when I got it.
I have paid 8 months worth of £230 = £1840
Car is estimated to be worth £14,500 - £15,000 (guaranteed)
Car is a 19 plate (brand new essentially and in GOOD condition)

Now, PLEASE correct me if I am wrong and PLEASE let me know what the hell I need to know as I am new to PCP finance and don't really understand it.

Anyway;
As I believe, equity is calculated as initial loan - cars value
So, £16,851 - £15,000 = £1,851 of positive equity?

So;
If I went into another garage to get another car on PCP, would they take that as a £1,851 deposit or how would that work into terms? I'm assuming they'd probably just workout my new monthly payments?

Many thanks!

Who's guaranteeing it to be worth £15,000 by the way?

If you gave £19,351 for it 8 months ago, where does a valuation of £15,000 leave room for dealer profit and a saving for someone buying used not new?

thomas812

motorguy wrote: »

No equity is :-

Value of car - amount owed to the finance company (settlement figure).

If your car is worth £15,000 and you have a settlement figure of £13,000 then you have £2,000 of equity.

If your car is worth £15,000 and you have a settlement figure of £17,000 then you have £2,000 of negative equity (ie, you owe £2,000 more than the car is worth)

Thanks for the reply.

Isnt the settlement figure £16,851? That is how much I owe them (or the loan)
So surely I owe them £16,851 - £1,840 = £15,011

motorguy

You are very very likely to be in negative equity at this point in your deal, so unless you really really have an absolute must change my car now reason you'd be as well to hold on to it for the forseeable future.

thomas812

motorguy wrote: »

You are very very likely to be in negative equity at this point in your deal, so unless you really really have an absolute must change my car now reason you'd be as well to hold on to it for the forseeable future.

I see. But surely I'm not because we just calculated it?

But yeah, I will most likely stick out until the end of the PCP contract and just wait. Just curious to be honest :j

thomas812

motorguy wrote: »

Who's guaranteeing it to be worth £15,000 by the way?

If you gave £16,851 for it 8 months ago, where does a valuation of £15,000 leave room for dealer profit and a saving for someone buying used not new?

I went into my local BMW dealership to get a valuation

motorguy

thomas812 wrote: »

Thanks for the reply.

Isnt the settlement figure £16,851? That is how much I owe them (or the loan)
So surely I owe them £16,851 - £1,840 = £15,011

I take it car was £19,351 minus your £2,500 deposit = £16,851 loan?

You'll almost certainly have paid interest on the loan (unless it was explicitly 0% APR) at say 5% APR so probably a couple of thousand of interest charges (off the top of my head). So your payments so far might only have covered the interest.

The car will have depreciated also.

DrEskimo

You won't have paid off £1,840 from the loan, as a large proportion of your monthly payment is currently going towards paying interest, unless you have 0% APR? What's the APR?

I suspect your settlement is closer to £16k, so if you can get £15k for it as a trade in, then you are ~£1k in negative equity.

I take it the invoice price was £19,351 (£16,851 + £2,500) when you bought the car new. After just 8months you have lost £4,351 in depreciation, and paid ~£1,000 in interest on the loan.....

New cars on PCP are expensive aren't they....

motorguy

thomas812 wrote: »

I went into my local BMW dealership to get a valuation

Be careful of a valuation against another car. A dealer can cover a multitude of sins with discount from the car you're buying.

Whats the exact model of car and miles?

If you plug the details in to webuyanycar they'll give you a raw auction price figure. A dealer will probably be really giving you maybe £500 more than that.

It might well be that he is, but a valuation of £15,000 against a new price 8 months ago of £19,351 seems a little high, given he'll want maybe £2,500 to £3,000 of a markup.

motorguy

DrEskimo wrote: »

You won't have paid off £1,840 from the loan, as a large proportion of your monthly payment is currently going towards paying interest, unless you have 0% APR? What's the APR?

I suspect your settlement is closer to £16k, so if you can get £15k for it as a trade in, then you are ~£1k in negative equity.

I take it the invoice price was £19,351 (£16,851 + £2,500) when you bought the car new. After just 8months you have lost £4,351 in depreciation, and paid ~£1,000 in interest on the loan.....

New cars on PCP are expensive aren't they....

Only when you try to bail this early in to an agreement. Its hardly a surprise at this point in a 36 or 48 month agreement if you try to get out its going to cost you money.

Keep the car for the term committed to and it will cost precisely what the O/P signed up to - deposit + monthly payments and he'll have the option to purchase, trade it in or hand it back at the end of the term.