Exercising VT option due to negative equity

Herzlos

Do you actually want a new car or just looking at writing off the £15k hole? Because if the latter it's going to be the finance company taking the hit when the deal runs out anyway.

If the former, have a look at what the monthly payments will be - if you VT you're not going to have any deposit to put in, cars have gotten more expensive and as mentioned the interest rates will be higher so you may find your payment will go up significantly for a like-for-like replacement.

regency_man

Thanks all.  I didn't put any deposit in so I'm in quite a fortunate situation in terms of the finance company taking the hit on the depreciation, as people have said, the upside of a PCP.

I don't *need* a new car however it seems I can get the same car as I have today but through a salary sacrifice scheme my employer is offering which means I will overall pay a lot less for the same car (taking the tax into account). So exiting early is in my favour, except for the potential bad credit marker.

motorguy

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.

No because the car would be handed back to BMW FS, not to the dealer.  

Also, its common practice for sales people in dealerships to ring customers "near" the end of their PCP term and try and get them in to a new car.

motorguy

Okell said:

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?

Not at all.

Its very good advice actually.  It would be in the O/Ps interests.

Its not definitely something the salesman shouldnt have told him - its common knowledge in the public domain if you go look

motorguy

BEBELUCA2017 said:

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?!?!

+1

I would concur with this.

motorguy

Nobbie1967 said:

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.

+1

............

motorguy

regency_man said:

Thanks all.  I didn't put any deposit in so I'm in quite a fortunate situation in terms of the finance company taking the hit on the depreciation, as people have said, the upside of a PCP.

I don't *need* a new car however it seems I can get the same car as I have today but through a salary sacrifice scheme my employer is offering which means I will overall pay a lot less for the same car (taking the tax into account). So exiting early is in my favour, except for the potential bad credit marker.

Do you really get a bad credit marker?

You're exercising your legal rights under the agreement after all.

We did it some years ago and got a letter from BMW FS thanking us for the custom and to contact them if we wanted to do take another car on PCP.

EDIT:  Just had a google and found this - Car finance voluntary termination will not usually affect your credit score, but it will show up on your credit report. Terminating car finance isn't usually seen as a marker of a bad borrower and shouldn't highlight you as a risk to future lenders.

born_again

motorguy said:

EDIT:  Just had a google and found this - Car finance voluntary termination will not usually affect your credit score, but it will show up on your credit report. Terminating car finance isn't usually seen as a marker of a bad borrower and shouldn't highlight you as a risk to future lenders.

Credit score is a meaningless figure made up by CRA & never seen by lenders.

Terminating finance early, can be seen as not being able to pay (depends on how exactly it is marked) As apposed to settling the finance in full.
Each lender will then make their own judgement on the risk involved.

Goudy

I think the term future is important.
I wouldn't VT if I was considering a mortgage or other large loan anytime soon.

I wouldn't take any notice of the "usually's" and "shouldn't's". I just wouldn't want to risk it.

motorguy

born_again said:

motorguy said:

EDIT:  Just had a google and found this - Car finance voluntary termination will not usually affect your credit score, but it will show up on your credit report. Terminating car finance isn't usually seen as a marker of a bad borrower and shouldn't highlight you as a risk to future lenders.

Credit score is a meaningless figure made up by CRA & never seen by lenders.

Terminating finance early, can be seen as not being able to pay (depends on how exactly it is marked) As apposed to settling the finance in full.
Each lender will then make their own judgement on the risk involved.

Correct.  That was an online reference, from Cazoo i think.  They are right though - it wont affect your credit score, which is a made up number anyway.

A VT is a legal right.  It is not an indication of inability to pay.

I've never heard of anyone subsequently being penalised for doing it (myself included).