Car finance

Cheryl2010

Hi, hoping to get some advice for my sister. 

She has been in a relationship with h an absolute loser for a while and he has convinced her to get a big, fancy car on finance that is completely over the top for their needs. 

The relationship looks to be coming to an end but she cannot afford her rent on her own salary due to the car payment fees - approx £430 per month due to high APR (30.2%).

She has gotten herself into so much debt with this relationship as her partner goes from job to job and has quit a few jobs without telling her - until his wage doesn't appear in the bank account.

What are her options with the car - she was hoping to trade it in and get something much smaller and have smaller monthly payments. However, the money she would get for the car would not cover the outstanding finance.

Or is her only option to hand the car back and walk away completely? She has only had the car since Feb this year and she has made every payment towards the car finance but has not paid her credit cards etc for a while due to lack of finances.

She knows she is in trouble with money but she can afford the rent etc if it wasn't for the car payments. 

Sorry for the extremely long post - I just don't know how to advise her on this situation 

baser999

I suppose it’s all down to how the finance was arranged - loan from bank or through a loan company? or PCP leasing arrangement. Probably best to give the lender or leasing company a call, explain what’s happened and take it from there. It may be down to ‘ownership’ as I’m not sure she’ll be deemed to be the owner under a leasing contract whereas she probably will be if it’s a loan. This might make a difference? No doubt there’ll be someone better versed in these matters that’ll offer more precise advice.

fatbelly

Assuming it's HP she has a right to terminate under the Consumer Credit Act.

https://nationaldebtline.org/fact-sheet-library/hire-purchase-debt-ew/

She'll still owe money but it's limited by the voluntary termination.

She'll then need to get advice on her collection of debts.

Needless to say her rent payments are a priority

Brie

Any possibility that she shouldn't have been given the credit?  Whether it's a loan or PCP there should be due diligence from the individual who signed her up.  Obviously it may have been a case of her (because of the BF) lying or otherwise not knowing the full details to enable her to give the true situation.  But if she was completely truthful it sounds like she couldn't afford this and the loan shouldn't have been authorised.  

(not saying your sister lied, per se, just that she may have been manipulated into saying something that wasn't in the end correct)

sourcrates

She may have a case for being manipulated into signing an agreement she was not comfortable with, a controlling partner can be very, very difficult to say no too.

She needs to ditch matey boy first of all, then look for a solution to deal with her debts as a whole.

As others have said, it does depend how the car was financed, as to the course of action needed.

Cheryl2010

Completely agreed that the partner needs to go - she knows this herself but he has a way of digging in his hooks when he senses she is pulling away. He then gets his act together for enough time for her to believe he has changed, then the lies start all over again.

It was a standard HP agreement, I believe she was fully honest when applying for the car finance but her salary was only around 22k per year and she was also paying rent etc at the time of application so have no idea how it was approved! 

DrEskimo

There are two options:

1. Trade the car in and pay the difference between the amount owed and the trade-in value of the car (get as many quotes as you can from dealers/independent garages and online brokers like WBAC to get the best price and minimise the cost),
2. Pay at least 50% of the total amount payable and voluntarily terminate the agreement.

How long is the agreement? As it's a standard HP agreement (i.e. no large final payment as per PCP), 50% payable point is achieved exactly half way through the term, so given she's only around 8-months in, if it's a 4/5yr agreement she is someway off that.

For me, I don't see 2 as a viable option as she might as well just keep paying monthly and keep the car until she reaches half way through the agreement. Will pay the same amount either way, may as well spread the payments on the existing agreement and have use of the car.

Likewise, option 1 is not viable if the shortfall is larger than the amount needed to reach the 50% VT point.

Unfortunately there is no option of just handing back.

EssexHebridean

As far as I can see this hasn't been mentioned yet, but the car IS registered in her name isn't it? We've seen cases like this before where a party has been manipulated into coughing up the money for big ticket purchases like that and it has then transpired that although they are paying for it, they're not actually the owner. It worries me that if the BF is willing to push her into signing up for something way outside her financial comfort zone like this, he's also capable of exploiting her still further. 

Cheryl2010

Hi, thank you for all the comments and help. 

She has contacted the finance company and they are unable to offer any assistance or help. 

She is now looking towards an IVA so she can stay in the house (otherwise she would need to move back home with our mother).

If she is successful in getting an IVA - what happens? Would she be allowed to keep the car but pay back at a lower amount or would they sell the car off and she would be on a payment plan for the outstanding finance?

She really cannot be without a car preferably but could potentially save up for a much smaller runabout car if she is only making 1 payment to creditors.

She is aware that an IVA would destroy her credit rating, but its already in tatters as she has not been able to afford to pay credit cards etc for months.

Can anyone advise? 

Grumpelstiltskin

If she doesn't own a house then an IVA is NOT the way to go. They are only suitable for people with equity in a house and large debts.

Do not let her fall into the trap of social media advertising.

RAS

Do not sign up for an IVA; totally inappropriate for anyone renting.

Not least as estate agents can check the Insolvency Register easily and she'll struggle to get further rentals.

She's got a number of other issues that need dealing with; like is it a joint or sole tenancy, when does the tenancy end and can she get shot of the BF. Will he co-operate in ending the tenancy?

You've focussed on the car but how much other debt does she have?

If she kept the car until she can legally surrender, can she afford the rent if she stops paying other debt? 

Could she move into a shared house/flat to reduce the rental cost?