Negative Equity on PCP

alrose

I have changed jobs since starting my PCP car contract and am well over my annual mileage. This leaves me with considerable negative equity on the car. 
What are my best options for solving this?

AdrianC

You don't have equity, because it isn't your car.
If you're planning on terminating early, then the mileage allowance is pro-rata'd.

Some people think that VTing does not allow the mileage to be taken into account, but there is no legal precedent in their favour, and you can bet the financier will issue an invoice.

When the contract finishes, how much will you be over the mileage allowance by? What's the per-mile penalty?
Alternatively, pay the balloon and buy the car, if you want to keep it, or trade it in (with the dealership paying the balloon).

DrEskimo

alrose said:

I have changed jobs since starting my PCP car contract and am well over my annual mileage. This leaves me with considerable negative equity on the car. 
What are my best options for solving this?

What's the settlement figure for the PCP finance and what's the trade value you've been offered?
What's the exact details of the PCP finance deal?
How far are you into the term?
What is the excess mileage charge?

Kattekwaad

One option.

If you are going well over your mileage run until the end and just pay the balloon then mileage does not become an issue.

rs65

alrose said:

I have changed jobs since starting my PCP car contract and am well over my annual mileage. 

You could ask the finance company to adjust mileage and monthly payments

motorguy

Various options depending on what you plan on doing -

If you plan on handing the car back at the end of the term
Contact the finance company and get a revised monthly payment with the new estimated miles.
Or set aside extra money yourself each month to pay the excess mileage charge

If you plan on trading the car in
Depending on the miles, the value allowed for the car might not be that different to the residual value and just pay the difference

If you want to own the car at the end of the term
Just pay the residual value at the time, no need to worry about the miles (you could get a loan for the residual value)

Sell the car privately
Have the person pay the finance co the amount they give you for the car and you pay the balance to the finance company at that time too

alrose

I am 2.5 years in to a 4 year deal with 8000miles a year.
I have done over 40000 miles in this time.
The cost is £80 per 1000 miles over.
 
The finance will  not adjust the payments for the mileage. 
My worry is that I will struggle to save enough to buy the car at the end of the term, or wont have enough to pay the mileage fee if I upgrade the car early.

AdrianC

So you're currently covering about twice the contracted mileage, and at the end of the four years, you'll be about 32k over - so about £2,500?

That's not that expensive, given that you've got another 18mo to put money aside for it. It's about £53/mo over the term of the PCP...

motorguy

alrose said:

I am 2.5 years in to a 4 year deal with 8000miles a year.
I have done over 40000 miles in this time.
The cost is £80 per 1000 miles over.
 
The finance will  not adjust the payments for the mileage. 
My worry is that I will struggle to save enough to buy the car at the end of the term, or wont have enough to pay the mileage fee if I upgrade the car early.

As per Adrians response - the easiest way to mitigate it is to set aside £53 a month (say even £60 a month so you've a bit extra for wiggle room) for the extra 18 months and your problem is resolved.

Also, the absolute mileage cost only comes in to effect if you hand the car back.  If you trade the car in it might be worth less than the residual value because of the miles, but unlikely to be be £2,500 less.  But personally, i'd stick £60 a month away and then you've no risk.

You can just take out a cheap personal loan for the residual value and keep the car, if you're otherwise happy with it.  No need to "upgrade".

AdrianC

To clarify - it would have been £53/mo over the entire 48mo contract. With 18mo to go, it's £142/mo.

Kattekwaad

The car will be worth more to you at the end of the deal than anyone else.  Start saving now and pay the balloon even if you need to take a small loan (for the shortest duration you can afford).  Otherwise no doubt you will be rolling over into another expensive PCP deal.