Exercising VT option due to negative equity

regency_man

I was contacted by BMW sales last week regarding replacing my 2021 BMW for a new one.  After lots of sales chat we got down to numbers and the even the salesman was shocked to find my current finance agreement (with BMW FS) is currently 'upside down' to the tune of about £15,000 negative equity and in fact the car is already worth less than the 'Gauranteed Future Value' or Final Payment value.

He said he shouldn't really tell me this, but advised I look into the option of Voluntary Terminating my current agreement ('halves' option).  It turns out I am just a couple of months away from being able to do this, which means I will hand the car back for free (or there-abouts, it is in pristine condition well under the contract mileage) and BMW FS will take the ~£15k loss.

Seems too good to be true?  As such I did some Googling on VT and it seems this is a viable option but also that Credit agencies seem to treat VT as a 'bad credit' marker?  Does anyone know how badly this is considered on a credit report?  If it affects my ability to take out the new finance agreement it will obviously be a bit of an own-goal!

Cheers

Brie

You were contact by BMW sales?  Is that normal to have them do that?? 

Are you sure that it's not a case of he has someone wanting a car like yours and he's trying to get a quick turn around on you handing it in?  Have you checked what your car might be worth if you were trying to sell it.  (obviously you may not be able to do that yourself but it may be a way to negotiate a higher return)

Sorry I get suspicious as soon as someone says "I really shouldn't be telling you this but...."  They should know what they are allowed to say and what they can't and to break that is likely to get them in to trouble so I suspect this is just a way to gain your confidence.

regency_man

It was a routine sales call from my BMW dealership, they seem to do them once a year.  I have got a valuation on the car from WBAC and it confirms his estimate, the car is massively in negative equity against the finance.

Perhaps confidence trick, but also seems like good advice given the equity situation. If I exercise the VT with BMW FS I'm under no obligation to them buy a car from him, I could go with any dealership or even a different brand, so I don't see what he has to gain, other than a potential new sale.

Goudy

How long was your original PCP deal?
If you are nearly at the 50% mark I would say you are probably getting near the end of it anyway.
If that's the case you can hand it back to the finance company then and have none of the issues that might arise from VTing it.
They would still take the hit of all that depreciation 

In fact between now and then, if you kept it it's pretty much depreciationless (to you) motoring.
If your contract is for another 12 months, it doesn't matter how much more it loses, the finance company take the sting.

If you got a new one now, that will start depreciating the moment it was registered. Why not get some benefit out of the one that's already down £15k and that £15k is someone else's problem, not yours.

I would keep it until the GFV is due, hand it back to the finance company and then look for a better brand of car that didn't depreciate like the Titanic on it's maiden voyage.

born_again

regency_man said:

I was contacted by BMW sales last week regarding replacing my 2021 BMW for a new one.  After lots of sales chat we got down to numbers and the even the salesman was shocked to find my current finance agreement (with BMW FS) is currently 'upside down' to the tune of about £15,000 negative equity and in fact the car is already worth less than the 'Gauranteed Future Value' or Final Payment value.

He said he shouldn't really tell me this, but advised I look into the option of Voluntary Terminating my current agreement ('halves' option).  It turns out I am just a couple of months away from being able to do this, which means I will hand the car back for free (or there-abouts, it is in pristine condition well under the contract mileage) and BMW FS will take the ~£15k loss.

Seems too good to be true?  As such I did some Googling on VT and it seems this is a viable option but also that Credit agencies seem to treat VT as a 'bad credit' marker?  Does anyone know how badly this is considered on a credit report?  If it affects my ability to take out the new finance agreement it will obviously be a bit of an own-goal!

Cheers

Nope.
That is one of the up sides of PCP.
High value cars have been taking a massive hit deprecation wise.
How long left on PCP deal? As VT point is usually near the end. So might be worth waiting till time to hand back & avoid the credit marker.
Especially if you are looking for credit at some point in the next few years.

Ayr_Rage

Do you actually need to change your vehicle?

How many more payments are due on the contract?

Edit : Removed bad advice.

Okell

I don't know anything about voluntary termination but is the consensus here that the BMW salesman has given the OP "advice" that might not necessarily be in the OP's best interests?

In fact definitely something that he shouldn't have told him?

BEBELUCA2017

What does the value of the vehicle even concern you?  Your monthly payments are the same regardless.  With talk of GFV and balloon payment, I'm presuming you're in a PCP arrangement.  Therefore, the value at the end of the term is of no consequence to you.  Just hand the car back at the end of the term and let the finance company deal with it.  Why do you want to end the agreement now just because you've received a call from BMW?!?!

DullGreyGuy

Is it a PCP? Will you get to a VT?

With ours the balloon was more than half the value anyway so never going to get to VT but could still just walk away at the end and not pay the balloon. A VT is therefore only really of interest if you want to exit earlier 

Nasqueron

Brie said:

You were contact by BMW sales?  Is that normal to have them do that?? 

Are you sure that it's not a case of he has someone wanting a car like yours and he's trying to get a quick turn around on you handing it in?  Have you checked what your car might be worth if you were trying to sell it.  (obviously you may not be able to do that yourself but it may be a way to negotiate a higher return)

Sorry I get suspicious as soon as someone says "I really shouldn't be telling you this but...."  They should know what they are allowed to say and what they can't and to break that is likely to get them in to trouble so I suspect this is just a way to gain your confidence.

I get routine emails from Mazda trying to get me to sell/trade in my car I got from them nearly 10 years ago, had one just today about a hybrid Mazda 2. I doubt my car is worth more than a few thousand now, but I see no reason to get rid of it when it works fine and is low use!

Nobbie1967

When you took out the PCP interest rates were at an all time low and residuals were strong, so your monthly payments would have been quite reasonable. Try getting quotes for a similar PCP now and I think you’ll find the cost has rocketed, so probably best just continuing with the current agreement and brace yourself for when it comes to an end. No point in bringing that date forward by VT.