PCP and car already worth less than final payment

xorsyst

A couple of years ago I decided to get an EV on PCP, this being the first time I've ever bought a brand new car. Even though there's about 15 months left on the agreement, already the car value (according to autotrader) is about £5k *less* than the final PCP payment due at the end.

Obviously I can just keep paying my current monthly payments and then hand the car back, but I actually like the car and would prefer to keep it, rather than having to deal with the hassle of trying to get a replacement; especially as it's our only car so we'd either have to own 2 or be without a car temporarily.

Is it possible or even standard to be able to negotiate a finance buy-out at less than the final value, so I can just own the car now or at the end of the 4 year period? If so, how would I go about doing that?

Keep_pedalling

Unlikely,  why not just hand it back and go out and buy one of a similar age and milage?

xorsyst

Keep_pedalling said:

Unlikely,  why not just hand it back and go out and buy one of a similar age and milage?

Two reasons:
1. It's not *our* car. I know that's kinda irrelevant, but I know the history of our car.
2. As I said in the post, the hassle of trying to dovetail the events so I'm not without a car or paying for two cars for too long.

MyRealNameToo

Why'd you be paying for two cars? You can pretty much know to the day when the car is going back, just be proactive and arrange the return in good time. Just need to ensure the replacement is delivered around the same time. Bit of a punt if you are buying brand new but not so if it's not brand new. 

Generally no, the balloon is the balloon. Our last PCP the balloon was almost £10k over the sticker price at the dealerships and so even more over sale price and whilst I didnt try hard there was no interest from them on negotiating. You could in theory go to the auction and try to buy it there, did see ours on the auction website but had moved on by that point so didnt go or register to see how much it sold for. 

poppasmurf_bewdley

Why not ask the Company concerned?  In all likelihood, if you hand the car back it will be sold on either at auction or through their own retail outlet if they have one.  You can ask what happens and where it would be likely to end up.  

Nasqueron

The balloon is the payment to complete the finance, linked to the GMV (the trade-in price if you return the car).

When you took the PCP out you agreed to pay the full value of the finance comprising of deposit + repayments + interest + balloon. 

At the end

you pay deposit + repayments + interest + balloon to keep the car

or 

you pay deposit + repayments + interest and use the GMV to put towards a new car as a trade-in 

While it sounds like I am being blunt - the car value you can see is irrelevant now, just because the car is worth less now than the balloon doesn't mean you can pay less for it, you agreed to repay X sum, not X- £5k or whatever

xorsyst

I get that, but from the lender's perspective they are going to get a car back that's worth much less than the balloon payment would have been, so will lose money. It would make sense to me for them to allow me to pay the auction value of the car (plus a bit) to save them the hassle of taking it back and selling it.

Nasqueron

xorsyst said:

I get that, but from the lender's perspective they are going to get a car back that's worth much less than the balloon payment would have been, so will lose money. 

The GMV is not necessarily what they will get at auction (and in a decent condition, they may well resell it instead) and, unless you're on 0% finance, the interest + whatever they can sell it for will make them plenty of money on top of what you paid already. They only really could lose money on a VT after 50% 

The point of the GMV is to encourage you to trade-in the car for another round of PCP

xorsyst said:

. It would make sense to me for them to allow me to pay the auction value of the car (plus a bit) to save them the hassle of taking it back and selling it.

It makes sense to you but there is literally no upside for them to accept this lesser amount

Either
You pay the balloon - they get full payment
You do another PCP deal - they get the car + interest you paid + a new finance package
You hand it back for the GMV - they get the car + interest you paid

Any of the 3 they win so there is zero reason for them to accept your offer of a lesser amount where they could lose money. 

Worst case if you didn't pay in full they seize the car back and sell it anyway and give you any credit balance or chase any debt

retiredbanker1

Have a look on You tube for 'The Macmaster' and his stories about the financing and re-financing of his EV.

xorsyst

Nasqueron said:

It makes sense to you but there is literally no upside for them to accept this lesser amount

Either
You pay the balloon - they get full payment
You do another PCP deal - they get the car + interest you paid + a new finance package
You hand it back for the GMV - they get the car + interest you paid

Any of the 3 they win so there is zero reason for them to accept your offer of a lesser amount where they could lose money. 

I'm not sure I follow with option 3. If they get the car and the interest I've paid, they still end up loosing money overall due to the GMV being much higher than the value they'll get at auction for the car.

Also with option 2, I don't have any equity, right, given the car is worth so much less than the GMV?

MyRealNameToo

Nasqueron said:

xorsyst said:

. It would make sense to me for them to allow me to pay the auction value of the car (plus a bit) to save them the hassle of taking it back and selling it.

It makes sense to you but there is literally no upside for them to accept this lesser amount

Either
You pay the balloon - they get full payment
You do another PCP deal - they get the car + interest you paid + a new finance package
You hand it back for the GMV - they get the car + interest you paid

Any of the 3 they win so there is zero reason for them to accept your offer of a lesser amount where they could lose money. 

Worst case if you didn't pay in full they seize the car back and sell it anyway and give you any credit balance or chase any debt

Don't follow your logic @Nasqueron

In option 3 they get the car, they can then sell it on their forecourt and lets say hopefully achieve £30,000 but will have to pay the sales guys commission, have to pay to collect the car, clean it, test it etc. 

Alternatively they put it to auction where maybe after paying the sellers commission they get £25,000 if they're lucky, still have to pay for collection etc but dont bother with cleaning/fixing it up, testing etc. 

The OP could offer them £31,000 rather than the balloon of £35,000 and in principle the finance company is in a better financial position than had they gotten the car back and the OP has paid fractionally more for a car that they know and so "trust". In principle it would be a win win.

Now I know they generally won't entertain the idea, I know why with lease cars they cannot due to the VAT consideration but dont know why they wouldnt consider it on PCP