Car Finance Help and Advice

Mags1953

jimjames said:

Mags1953 said:

sheramber said:

Mags1953 said:

Car_54 said:

Perhaps the OP's "friend" could post and give us the full story? Until then, we will go round in circles.

Thank you I'm only going off what he has told me..I went over this with him emailed him with what I posted this I don't know anything about car finance or leasing. Thanks again 

With finance under PCP , which it sounds is what he has, he agrees to make payments over a certain period of time.  These  payments do not cover the whole amount that has been financed.
At the end of that time there is a balloon payment to be paid  to  make up  the total amount financed at the beginning. 

This payment is set when the agreement is made.

You can either pay the balloon payment in the agreement or hand back the car. 

If your friend does have a PCP agreement then he either pays the balloon payment  and keeps the car. He can do what he likes with it after that.  The balloon payment would appear to £8000

or

He hands back the car to the finance  company but due to the fact that the car is  broken he either has to get it repaired to hand back a running car .

Or he hands back a broken car which will be scrapped but he will still owe the finance company money. 

This should all be detailed in his financed agreement. 

Thank you so much that's very kind of you to help. I did look over his finance agreement I could see the deposit monthly payments interest and total amount however, I couldn't see the balloon payment that's not to say it's not on there *somewhere * he'll have to go through it himself. 

Your post also refers to lease so if that is the type of agreement then that is completely different to PCP and doesn't have a balloon payment at the end, just deposit and monthly amounts so it's possible that is the type. It would be unusual for a lease car to be at least 3 years old at the start of the contract though which presumably it must be if it has had an MOT. It's a nice gesture to help out and your friend might be busy but it will probably be quicker and clearer if they post the details rather than relaying back and forth via you.

Thank you I spoke to him yesterday I asked him did he know what kind of agreement he had ? I don't think he knows I have read the *finance agreement * after scrutinising it I could work out initial price of vehicle the deposit he paid interest monthly payments and total amount of the finance having done the calculations there appears to be a balloon payment of £4693.00  the vehicle at the end of the *lease* must be returned within the mileage stated again this is something he hadn't checked. In my opinion going forward Ithink he's going to have to make the settlement payment and scrap the vehicle himself the vehicle is definitely way above the allowed mileage so therefore the have said it's over use hence the major issue That's up to him if he pays though.  Thank you once again for your help. I don't have the expertise or knowledge of car finance . He is going to speak to CAB again?

paul_c123

Yeah if its not maintained properly or breaks down with an expensive fix (which isn't done) then he's unable to return the car according to the T&Cs, so he can get to keep it (and is liable for the balloon payment). I'd advise try sell it to Copart rather than scrap it, or perhaps list it on Facebook Marketplace as a spares/repair.

It will have some value, probably above its scrap value.

Goudy

Yes it sounds like it's not a lease but a Personal Contract Purchase or PCP.

It's basically a hire purchase agreement but the payments aren't equal.

So as an example a normal HP would be equal payments.
£350 monthly payments for 48 months and that's it.

An example of a PCP would be.
£150 monthly payments of 48 months PLUS a final payment of £4000.

You pay or are given a deposit and then pay monthly payments for X amount of months with a portion of the payments deferred until the end.

The finance company work out what the car will be worth at the end of these monthly payments, that figure is based on normal expected condition and contracted mileage and becomes the deferred payment.

These monthly payments tend to be lower than straight HP as they tend cover the depreciation of the car and all the interest of the whole loan and not the whole invoice due to the deferred payment.

This deferred portion is called the Balloon or GFV (Guaranteed Future Value) that is paid at the end of the agreement.

There is an option at the point the GFV is due where you can hand the car back to the finance company and pay nothing more.
But it must be within the contracts mileage and condition specifications.

Obviously the mileage is set when the contract is signed and extra is chargeable if the option to hand it back is selected, often it's 9 or 10 pence per mile.

The condition specifications are usually based on industry guidelines.
The BVRLA set out these standards (fair wear and tear) and most finance companies will comply with them. They will also use their industry guidance for the prices of repair and current valuations.


It sounds like your friend has got to the point where the GFV is due/passed due and the vehicle isn't in an acceptable condition based on the contract to hand it back and pay nothing else.

They have some options now.
Get it repaired to the standard of the contract, though they will still pay for the excess mileage at X pence per mile.
If the GFV is due/passed due, they has sort of missed that point now.

Hand it back as is and expect the finance company to charge them for the excess mileage and all the damage. The max they will be liable for is the GFV and any outstanding payments.

Pay the GFV.
The car will be totally theirs to do with as they please.
They can get it repaired, scrap it or sell it as is, but it's probably not going to be worth as much as what they paid in GFV.

None of us really know what is wrong with the car, but the last two options does sound like the best solution (ie the solution that will cost them the least).

Mags1953

Goudy said:

Yes it sounds like it's not a lease but a Personal Contract Purchase or PCP.

It's basically a hire purchase agreement but the payments aren't equal.

So as an example a normal HP would be equal payments.
£350 monthly payments for 48 months and that's it.

An example of a PCP would be.
£150 monthly payments of 48 months PLUS a final payment of £4000.

You pay or are given a deposit and then pay monthly payments for X amount of months with a portion of the payments deferred until the end.

The finance company work out what the car will be worth at the end of these monthly payments, that figure is based on normal expected condition and contracted mileage and becomes the deferred payment.

These monthly payments tend to be lower than straight HP as they tend cover the depreciation of the car and all the interest of the whole loan and not the whole invoice due to the deferred payment.

This deferred portion is called the Balloon or GFV (Guaranteed Future Value) that is paid at the end of the agreement.

There is an option at the point the GFV is due where you can hand the car back to the finance company and pay nothing more.
But it must be within the contracts mileage and condition specifications.

Obviously the mileage is set when the contract is signed and extra is chargeable if the option to hand it back is selected, often it's 9 or 10 pence per mile.

The condition specifications are usually based on industry guidelines.
The BVRLA set out these standards (fair wear and tear) and most finance companies will comply with them. They will also use their industry guidance for the prices of repair and current valuations.


It sounds like your friend has got to the point where the GFV is due/passed due and the vehicle isn't in an acceptable condition based on the contract to hand it back and pay nothing else.

They have some options now.
Get it repaired to the standard of the contract, though they will still pay for the excess mileage at X pence per mile.
If the GFV is due/passed due, they has sort of missed that point now.

Hand it back as is and expect the finance company to charge them for the excess mileage and all the damage. The max they will be liable for is the GFV and any outstanding payments.

Pay the GFV.
The car will be totally theirs to do with as they please.
They can get it repaired, scrap it or sell it as is, but it's probably not going to be worth as much as what they paid in GFV.

None of us really know what is wrong with the car, but the last two options does sound like the best solution (ie the solution that will cost them the least).

Thank you for your help it's the engine that's locked moving forward I have been successful in getting some legal advice for him to now communicate with the legal advisor direct. Thank you once again for your help