Car Finance - 50% mark

Herzlos

What rate is the finance at? The website seems to indicate that it's going to be pretty high, like 30-50% which is crippling.  If that's the case it's maybe worth looking to see if you can borrow the settlement figure at a better rate.

For example, £12k @ 50% APR is going to be about £500/month in interest. But if you can get a £12k loan at 10% it's only £100/month interest.

After that you can decide if you want to keep the car or sell it to WBAC and then put the money towards the new loan though a lot of lenders will use it to reduce the term and not the repayment amount.

Goudy

Herzlos said:

What rate is the finance at? The website seems to indicate that it's going to be pretty high, like 30-50% which is crippling.  If that's the case it's maybe worth looking to see if you can borrow the settlement figure at a better rate.

For example, £12k @ 50% APR is going to be about £500/month in interest. But if you can get a £12k loan at 10% it's only £100/month interest.

After that you can decide if you want to keep the car or sell it to WBAC and then put the money towards the new loan though a lot of lenders will use it to reduce the term and not the repayment amount.

It could be they have signed up to this high rate of interest as they might not have been accepted for any lower rate loans to start with.

There might be chance of being accepted for some lower rate loans now if they have been making regular payments on the original loan. That might have improved their credit rating a little but it's hard to say.
There's a large outstanding and their income to borrowing ratio will most likely be already stretched for someone to loan them more money.

Yes, you should be able to VT (Voluntary Terminate) a car on HP, but you have a very high loan to value ratio that is going to make this incredibly difficult and no doubt expensive.

The cheapest way out will almost certainly not involve another agreement of any kind with this finance company, but I guess there might not be another option.

I think any attempt to make an arrangement with them yourself is going to leave you in financial knots for years.

They are going to want to make lots more money out of the arrangement on top of what you already owe at a similar or possibly higher rate so I would advise to get some debt advise first.

I would advise to contact Citizens Advise or someone like Stepchange (or both) first and see if they can help you find a reasonable solution out of this.

On another point, they aren't going to be happy you have invoked your right to VT and I would be amazed if they didn't inspect the returned car with a fine comb for excess wear and tear and damage that would be chargeable at a possibly inflated rate. 

Most finance companies will follow BVRLA's "fair wear and tear" guidelines for this, a search will help you with what that should mean, but that doesn't mean everyone will follow them or interpret them in the same way.
I would be amazed it they costed out any damage or excess wear the same way as well.

stu12345_2

you can do voluntary termination or voluntary surrender, here's a link at bottom of page

 you are planning on voluntary surrender , not voluntary  termination.
where the car is sold at auction by the finance company, not by you, probably for peanuts, and then you repay the finance company the difference , perhaps over installments. not a wise idea  overall imo.

but if you do voluntary termination, it doesn't matter what the car is worth, cos you really need to continue to the 50% mark., before you do  correctly in your favour. and then let finance company take the hit., by simply handing it back.

this wins for you if  you have owned a heavily deprecated car, and then let the finance company take the hit cos you are simply exercising your legal right to return it at 50% of total owed.

it is your legal right, I know it frustrates the finance company , cos they are stuck with a heavily deprecated car that they have to get rid off, but once you hit that magic 50% mark, you can laugh at them and they can't do a thing back, as long as car isn't full of bangs, dents, rust or scrapes.

they need an MOT and in reasonable condition.
but they can do it without an MOT, but they charge you a collection fee.

here's a link
https://glensidefinance.co.uk/voluntary-termination-or-voluntary-surrender/

Andyjflet

Herzlos said:

What rate is the finance at? The website seems to indicate that it's going to be pretty high, like 30-50% which is crippling.  If that's the case it's maybe worth looking to see if you can borrow the settlement figure at a better rate.

For example, £12k @ 50% APR is going to be about £500/month in interest. But if you can get a £12k loan at 10% it's only £100/month interest.

After that you can decide if you want to keep the car or sell it to WBAC and then put the money towards the new loan though a lot of lenders will use it to reduce the term and not the repayment amount.

Rate is 39%, I wonder even if it would be better to get the official settlement and try and get a loan for this, but seeing as the OP took this loan in the first place sounds unlikely. 

happy2017

thank you for the advice above.  tbh I'm not too fussed about owing money for the car that i wont have i just need to hand it back to save me some money.

so if i was to voluntary surrender the car how would that impact on the figures below?

if the finance company sold the car at auction for £3,000 for example would that £3,000 come off the £12,600 or the £3,000?

£12,600 settlement amount

£5,300 Value - webuyanycar
£6,000 to pay until 50% paid off

thanks.

ontheroad1970

It would come off  the settlement figure at the time of sale.

Goudy

If you voluntary surrendered, as already written, they would sell your car at auction and then you would have to repay the difference to what you owe.

So with your example.
If it made £3000 at auction, that £3000 would come off the £12,600.

The finance company would likely incur some costs with this, like transportation. I would presume that would come off the £3000.

You would then need arrange a new loan for the outstanding £9600 (plus costs).

Where that loan comes from is down to you, it would likely be a unsecured personal loan of some sort, as the new loan would not be secured on anything.
There is no longer a car in the mix for a finance company to use as security and because of this the interest rate  on this new loan could be pretty nasty.
 
If the interest rate on the new finance was similar to what we believe the original loan was at, at 39%.
A rough example of what you are looking at to cover this £9600, would be around £365 a month over 4 years and a total repayable would be over £17,500.

If you were able to get a loan at 10%.
The figures changes to £241 a month and £11,600 in total.


Same goes for Voluntary Termination.
You need to pay up the 50% and you are short by around £6000.

Borrow that £6000 at 39% and you pay £242 over 48 months with a total payable of £11,000
Borrow that £6000 at 10% and you pay £150 over 48 months with a total payable of £7250.

(obviously if take these loans out over a longer period the monthlies will fall a little but total interest payable goes up)

I will repeat my advise from earlier.
Get some debt advise, it's free and could save you thousands.

If you aren't fussed about that, then I swear you really are in the wrong place for advise.

Whatever you do, you will end up owing a large amount, but if you or a debt charity can make an arrangement with a lower rate of interest, you can see that will help massively.

born_again

Further to the above.
Given the situation.
Post here with a SofA

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

lcc86

I worked in car finance - albeit about 10 years ago now so this advice may not be completely up to date. You have a few options, sell the car either privately or back to a dealer, but the finance has to be settled so you'd have to have the means to clear it in full at the time of sale. Or request a VT and ask if you can set up a payment plan/look into a cheaper loan if possible to pay what you need to pay to get you up to the 50%.

What the finance company gets at auction should not be relevant - it works both ways, on some cars they make losses, on others they make profit, neither of these are generally passed on to the customer. You pay what you are quoted. 

The car will be inspected and depending on what finance company it is you could be on the hook for any damage charges. The company I worked for always expected a pretty much show room condition car back which I always found unfair but it was in their T's and C's. As others have mentioned there is BVRLA guidance but in my anecdotal experience this can be either really strictly enforced or they could give a little leeway. Any damage usually results in a hefty bill, so you need to factor that in too. You will be asked to sign post-inspection to confirm any damage but may not be given costings at the time of collection. Please also check any mileage limits per annum that you may have as if you've gone over that the excess can be crippling. It's worth going through all your T's and C's with a fine tooth comb before you do anything.

It may also be worth speaking to their collections/debt management department to see if there's an alternative solution where you can potentially extend your agreement or come up with a payment plan. Just be aware of any potential impact on your credit file.