Buying a new (old) car with negative equity

Trentham

Good afternoon,

I'm posting on behalf of a family member. They currently a year into a finance agreement on a new vehicle, which they are struggling to afford. They are looking to downgrade to a much cheaper car but the valuation on the current car would put them in a position of negative equity (around £5000)

The original finance agreement was for £30,000. If they significantly downgrade, and part exchange their current car to purchase an old car for around £5000, could the negative equity be transferred to the new finance agreement (meaning that they would be paying back around £10,000 instead of £30,000 in total)

If the above is possible, is this something that can be arranged at one of the major car dealerships?

Thank you in advance for any help.

cw8825

in theory it is possible but its unlikely the finance company or dealer would want to do this.

if they are struggling so much, i would suggest speaking to the finance company and looking at the options available to them.
is financing another car really a good choice? can they get a loan for say £7000 and then pay off the equity and use £2000 on a car

Mildly_Miffed

You'd need to speak to the financier, but I'd suggest it unlikely.

Right now, they have a <for the sake of argument> £20k they owe £25k on. As they continue to pay off, and the car continues to depreciate, it'll all balance out by the end of the term.

Your relative wants to restructure so they owe £10k against a £5k car. A car that's one big bill away from being thrown away.

born_again

What sort of finance agreement?

motorguy

Trentham said:

Good afternoon,

I'm posting on behalf of a family member. They currently a year into a finance agreement on a new vehicle, which they are struggling to afford. They are looking to downgrade to a much cheaper car but the valuation on the current car would put them in a position of negative equity (around £5000)

The original finance agreement was for £30,000. If they significantly downgrade, and part exchange their current car to purchase an old car for around £5000, could the negative equity be transferred to the new finance agreement (meaning that they would be paying back around £10,000 instead of £30,000 in total)

If the above is possible, is this something that can be arranged at one of the major car dealerships?

Thank you in advance for any help.

a finance company wont want to do that, as they'd have £10,000 of debt on an asset with a retail value of £5,000.

They could get a bank loan for £10,000 (invariably cheaper than dealer finance on a used car) - they could do a soft check to see who would accept them and at what rate.

Assuming either HP or PCP HP, how far away would they be from paying 50% of the total loan including interest charges and deposit.  If they've reached that point, they can return the car with nothing further to pay.  In fact if its notably less than £5,000 to that point, that may be the cheaper option - hand it back and pay the difference.