Negative Equity- is voluntary termination a good idea

f.castle

Hello,

firstly I accept this is my own fault for being indecisive with my car choice and having buyers remorse. I'd like some pragmatic suggestions please, one of which is to keep the car but it is my least preferred option. I am looking for the options that are the least painful financially in order of financial pain. Need some help working it please.

I have a car worth approx £13,000  (Mavbe £14,000 if I sell privately) but I have £16420 left on hire purchase finance, so I am in negative equity of about £3,400. It is almost 5 years old (I bought it used recently), and is in really good condition (alloys are fine, no body work dents/scratches, interior is clean). Don't ask how I ended up in this position ..eeek...

I am in position to pay off the car. If I pay off 50% of the value now, and give the car back to the finance company, is that a good way to get out of the negative equity and get into the car I want? Is this the most financially painful option?

Or do I pay down monthly of about £420 a month until half the value is paid and then give the car back?

Or do I pay off the 50% now and give the car back.

Or do I wait until I break even, which will probably be early next year, and then trade the car in?

Let me know if I need to be clearer anywhere and I shall edit this main post.

kind regards,
FC

TadleyBaggie

Is the £16420 the actual settlement figure or just your remaining payments? If the latter get a proper settlement figure, as it will almost certainly be less.

DrEskimo

Depends what it will cost you to get to the 50% VT mark. Is it a PCP or straight HP?

If you really don’t want to keep it, work out the best price you can sell the car for and and the settlement (you anticipate about £2,500) and compare that cost with the cost to reach the 50% VT mark (plus any additional wear and year or mileage costs you may have to pay). 

ontheroad1970

Bear in mind if you are indeed out shopping for a new car, that if you are using finance to pay for it, that you will always be in negative equity for a period of time - a larger proportion of time on PCP, which is usually a very bad idea to do on a used car as the rates are terrible.

facade

If you are more than £3400 from the VT point, and you want a new car right now, this absolute second, then the cheapest option will be to trade it against the new one, and bung in the £3400 negative equity.

If you are less than £3400 from VT, VT it and pay the difference.

f.castle

TadleyBaggie said:

Is the £16420 the actual settlement figure or just your remaining payments? If the latter get a proper settlement figure, as it will almost certainly be less.

It is the settlement figure.