Car finance after 6 months deferral - options

Errie

Hi,
I would be very grateful for advice please.
Early in April my partner lost his job due to COVID, this meant our household income dropped by 2/3. We are not entitled to any support or benefits. We moved house to reduce costs (we rent) and managed to knock a big chunk off our monthly payments, but not enough. We have gone through all our savings. It looks like my partner may be offered a job soon. He is waiting to hear from 3 roles where he is down to the final 2.

 He has a car on PCP which we had a 6 month payment deferral for. The payments are quite high as when we took out the finance he received a car allowance that covered them. The payments are due to start next month, but until he starts a new job we can’t afford to pay the full amount, especially as they have added £50pm to the original payment. We contacted BMW to discuss options and gave them an expense form, we suggested a reduced payment for two months as if he is offered one of the jobs he is unlikely to start this side of Christmas. 

The person he spoke to said she couldn’t accept this. She said he has two options -

1. sell the car (I don’t see how we can do this as there is finance on it and we can’t pay this off upfront) and then have to pay the difference between the price and the finance amount owed
2. Hand back the car and pay the remainder of the contractual amount - she suggested speaking to a solicitor but we can’t afford one. We are no where near the half way point.

Are these really our only options? None of these options seem to match the tailored support suggested in the article about COVID-19 and finance. We have until Friday before we speak to them again. 

Thank you

Mrsn

You have already had 6 months worth of help from them. Articles like the one you have quoted probably haven’t taken into account the interest and charges that are currently accruing on the arrangement and the finance company aren’t willing to risk any further with yourselves.

I would highly recommend rechecking eligibility for benefits via one of the entitlement calculators such as entitled to or turn2us as your savings levels might not be a barrier to universal credit any longer.

Errie

Thank you Mrsn. Definitely not eligible for any benefits - it wasn’t savings that stopped us. Partner hadn’t paid enough NI in benefit tax year for contributions based JC and I earn too much for us to qualify for UC. 

The problem is that I can’t see how we can get out of it without having to pay the full amount and potentially having to do this without actually having the car. If we can’t afford the payments how can we afford to pay half the contract?

macman

Sell the car to a dealer, they will pay off the finance owing and return to you any equity left in it. You don't have to pay it off upfront before you sell it.
The problem with deferral is that, when they resume, the monthly payments will be much higher due to the deferred interest that has accumulated.

Thrugelmir

You somehow need to offload the expensive PCP that you've committed too. Selling the vehicle before the debt ballons even further must be a priority. 

Potbellypig

It's not going to magically go away with a bailout from some loving government. Option 1 is your real only option and you'll need to accept for a period of time you'll be paying a balance off for a car you won't have.

Errie

Thanks for all your replies. 

I’m not expecting a bailout from anywhere, I just don’t see how we can get out from under this and it looks like our whole life is going to be totally screwed for the foreseeable future. 

silvercar

Errie said:

Thanks for all your replies. 

I’m not expecting a bailout from anywhere, I just don’t see how we can get out from under this and it looks like our whole life is going to be totally screwed for the foreseeable future. 

And breathe.
If the car is worth more than the outstanding payments, sell it to a dealer who will clear the debt and give you the balance.
If you can't balance your outgoings, this really becomes a low priority debt. better to pay your rent/ council tax/ utilities etc Worst case is they take the car back and you still owe an outstanding amount. This is an unsecured debt. Without the car it becomes an even lower priority unsecured debt.

Dr_Crypto

How much do you owe on the car and how much is it worth? If you’re very early into a PCP and/or the amount financed is very high then realistically you’re not going to have any equity in the car. Depending on the sums another option could be to get a dealer to take this car in exchange for a smaller one and add the negative equity (ie what you owe less the value of the car) to another PCP but given your partner is currently unemployed he is unlikely to be creditworthy. 

Option 1 is probably the realistic one. Either they take the car (or you return it) and you work out a repayment plan with them on the outstanding finance.