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  • FIRST POST
    • helsmet1
    • By helsmet1 12th Mar 18, 4:44 PM
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    helsmet1
    "Negative equity" at the end of a PCP deal
    • #1
    • 12th Mar 18, 4:44 PM
    "Negative equity" at the end of a PCP deal 12th Mar 18 at 4:44 PM
    Hi all,
    I'm about to come to the end of a PCP deal with a certain car manufacturer. I was led to believe when I took out the deal that my car would be worth at least the amount of the final balloon payment, and would probably be worth more if the car was in good condition/had not reached the agreed mileage limit. The manufacturer even have a video on their website stating that the balloon payment represents the guaranteed future value.
    When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe, despite being in good condition and not having exceeded the mileage limit. I made a complaint which has been investigated by the manufacturer, and they are claiming that they would never say that the final payment represents the guaranteed value of the car.
    I'm planning to escalate by raising a complaint with the financial ombudsman, but would appreciate any advice from anyone with a similar experience. Many thanks in advance!
Page 1
    • verityboo
    • By verityboo 12th Mar 18, 4:56 PM
    • 926 Posts
    • 1,152 Thanks
    verityboo
    • #2
    • 12th Mar 18, 4:56 PM
    • #2
    • 12th Mar 18, 4:56 PM
    They don't have a crystal ball so have to estimate the future value of the car and in your case it is worth less so just hand it back

    You should be glad because you won't have to pay the full cost of the depreciation on the car. By buying on a PCP you are protected against the car depreciating more than expected (such as with diesel cars now which are suddenly less sort after)

    Just hand it back and let the car company take the hit.
    • GunJack
    • By GunJack 12th Mar 18, 4:56 PM
    • 10,162 Posts
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    GunJack
    • #3
    • 12th Mar 18, 4:56 PM
    • #3
    • 12th Mar 18, 4:56 PM
    get a copy of the video you refer to, and note where/when you grabbed it. It may help if you can show them their advert stating this....however beware of the small print...
    ......Gettin' There, Wherever There is......
    • facade
    • By facade 12th Mar 18, 5:12 PM
    • 3,200 Posts
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    facade
    • #4
    • 12th Mar 18, 5:12 PM
    • #4
    • 12th Mar 18, 5:12 PM
    When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe
    Originally posted by helsmet1
    You don't "exchange for a new one" you return your car at the end of the PCP deal (or now if you want to VT it) , and then start another PCP if you want a new one, putting down the deposit yourself.
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • marlot
    • By marlot 12th Mar 18, 5:23 PM
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    marlot
    • #5
    • 12th Mar 18, 5:23 PM
    • #5
    • 12th Mar 18, 5:23 PM
    ...they told me the car was worth less than I owe...
    Originally posted by helsmet1
    You just hand it back. The negative equity isn't your problem, and you don't have to pay it.

    You will have to find the down payment for the next car though.
    • neilmcl
    • By neilmcl 12th Mar 18, 5:26 PM
    • 11,088 Posts
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    neilmcl
    • #6
    • 12th Mar 18, 5:26 PM
    • #6
    • 12th Mar 18, 5:26 PM
    Hi all,
    I'm about to come to the end of a PCP deal with a certain car manufacturer. I was led to believe when I took out the deal that my car would be worth at least the amount of the final balloon payment, and would probably be worth more if the car was in good condition/had not reached the agreed mileage limit. The manufacturer even have a video on their website stating that the balloon payment represents the guaranteed future value.
    When I went to discuss exchanging my car for a new one with the dealership, they told me the car was worth less than I owe, despite being in good condition and not having exceeded the mileage limit. I made a complaint which has been investigated by the manufacturer, and they are claiming that they would never say that the final payment represents the guaranteed value of the car.
    I'm planning to escalate by raising a complaint with the financial ombudsman, but would appreciate any advice from anyone with a similar experience. Many thanks in advance!
    Originally posted by helsmet1
    Who is the manufacturer?

    The balloon payment IS the Guaranteed Future Value, always has been.

    You've totally misunderstood what the GFV means. The GFV is the best guess that the finance company makes about the value of the car at the end of the term, and you essentially pay the difference (plus interest) between this and the sale price, ie, the depreciation. It's an estimate nothing more, if the finance co. get their sums right there'll be little or no equity left in the car. What it doesn't mean is if the GFV turns out be higher than the actual value you get to keep the difference. If the actual value is higher though you can have this as equity toward a new car should you wish.
    • IanMSpencer
    • By IanMSpencer 12th Mar 18, 6:21 PM
    • 1,462 Posts
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    IanMSpencer
    • #7
    • 12th Mar 18, 6:21 PM
    • #7
    • 12th Mar 18, 6:21 PM
    Who is the manufacturer?

    The balloon payment IS the Guaranteed Future Value, always has been.

    You've totally misunderstood what the GFV means. The GFV is the best guess that the finance company makes about the value of the car at the end of the term, and you essentially pay the difference (plus interest) between this and the sale price, ie, the depreciation. It's an estimate nothing more, if the finance co. get their sums right there'll be little or no equity left in the car. What it doesn't mean is if the GFV turns out be higher than the actual value you get to keep the difference. If the actual value is higher though you can have this as equity toward a new car should you wish.
    Originally posted by neilmcl
    I suspect the OP has been bamboozled by a salesman trying to suggest that as the value is low, they need to do something to avoid a problem, whereas the idea should be to go to term and hand the car back.

    I'd make a complaint any which way as instead of being properly advised, the OP is being baffled with the misleading offers of getting them out of a problem that they don't have.
    • AdrianC
    • By AdrianC 12th Mar 18, 6:30 PM
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    AdrianC
    • #8
    • 12th Mar 18, 6:30 PM
    • #8
    • 12th Mar 18, 6:30 PM
    I think the confusion arises from the OP trying - perhaps inadvertantly - to hand the car back before the end of term in an exchange for another car, rather than letting the deal expire.
    • helsmet1
    • By helsmet1 12th Mar 18, 7:05 PM
    • 4 Posts
    • 0 Thanks
    helsmet1
    • #9
    • 12th Mar 18, 7:05 PM
    • #9
    • 12th Mar 18, 7:05 PM
    Thanks - I do understand all that - I wasn’t very clear with my language. I went to the dealer to discuss starting a new PCP deal when mine came to an end on the understanding that I would hand the car back and start again - hopefully with a little equity if my car was worth more than the balloon payment (I realise I wouldn’t get any money back if I just handed the car back).
    What they were essentially saying was that I owed approx £11,000 on the car, but they were only valuing it at £10,000, meaning that if I started a new PCP deal, I would owe them £1,000 on top of the cost of the new car
    • verityboo
    • By verityboo 12th Mar 18, 7:16 PM
    • 926 Posts
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    verityboo
    Thanks - I do understand all that - I wasn’t very clear with my language. I went to the dealer to discuss starting a new PCP deal when mine came to an end on the understanding that I would hand the car back and start again - hopefully with a little equity if my car was worth more than the balloon payment (I realise I wouldn’t get any money back if I just handed the car back).
    What they were essentially saying was that I owed approx £11,000 on the car, but they were only valuing it at £10,000, meaning that if I started a new PCP deal, I would owe them £1,000 on top of the cost of the new car
    Originally posted by helsmet1
    No but you don’t understand. There are normally 3 options with a pcp. 1 Pay the balloon payment and own the car. 2 Trade it in and any equity can be used towards the deposit on a new car or 3 simply hand it back to the finance company (and you don’t need to pay any negative equity)

    If your in negative equity go for option 3 and at the end of the term hand it back. You don’t need to pay the £1000
    • helsmet1
    • By helsmet1 12th Mar 18, 7:23 PM
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    helsmet1
    Yes I realise I can just hand it back too - but I can get more for the car by paying for the remainder and part exchanging elsewhere so I!!!8217;m not considering that as an option
    • Cornucopia
    • By Cornucopia 12th Mar 18, 7:29 PM
    • 10,104 Posts
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    Cornucopia
    Indeed, and to emphasise: if the car is in negative equity at the end of the term, then only one option makes sense, which is to hand the car back with nothing more to pay.

    It sounds as though there is a fundamental misunderstanding of what "guarantee" means in this context. It doesn't mean that the future value of the vehicle is guaranteed in the second-hand market - that simply isn't possible. What it means is probably better described as having the value of the vehicle underwritten. Whatever the car ends up being worth at the end of the term is irrelevant, because you can simply hand it back with nothing more to pay.
    Last edited by Cornucopia; 12-03-2018 at 7:33 PM.
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    • flashg67
    • By flashg67 12th Mar 18, 8:06 PM
    • 2,499 Posts
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    flashg67
    Yes I realise I can just hand it back too - but I can get more for the car by paying for the remainder and part exchanging elsewhere so I!!!8217;m not considering that as an option
    Originally posted by helsmet1
    So could you tell the salesman this, or buy a different make / or from a different dealer, or sell it to a we buy any car type place & let them pay off the finance and then give you any balance.
    • verityboo
    • By verityboo 12th Mar 18, 8:13 PM
    • 926 Posts
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    verityboo
    Yes I realise I can just hand it back too - but I can get more for the car by paying for the remainder and part exchanging elsewhere so I!!!8217;m not considering that as an option
    Originally posted by helsmet1
    So why start a thread complaining about being in negative equity when now you say your not? Genuinely baffled

    Just be careful if you went to a different garage that they havent offered you a greater trade in price by reducing the normal discounts you would expect on the new car. Check on somewhere like broadspeed.com and drivethedeal.com to check your not better off handing the existing car back and buying the new one without a tradein
    Last edited by verityboo; 12-03-2018 at 8:19 PM.
    • bazzyb
    • By bazzyb 12th Mar 18, 8:22 PM
    • 1,194 Posts
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    bazzyb
    Yes I realise I can just hand it back too - but I can get more for the car by paying for the remainder and part exchanging elsewhere
    Originally posted by helsmet1
    So do that then? I'm not sure what complaint you've made, or why, if your car is actually in positive equity rather than negative equity as you stated. Even if it is in negative equity, which it sounds like may not actually be the case, you don't have grounds for complaint as you can simply hand the car back to avoid this.
    • helsmet1
    • By helsmet1 12th Mar 18, 8:30 PM
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    helsmet1
    I started the thread to try and find out if this is common and acceptable practice or whether they have misrepresented the way that the process is supposed to work and whether I have legitimate grounds for escalating a complaint, and whether it has happened to others.
    • bazzyb
    • By bazzyb 12th Mar 18, 8:43 PM
    • 1,194 Posts
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    bazzyb
    I started the thread to try and find out if this is common and acceptable practice or whether they have misrepresented the way that the process is supposed to work and whether I have legitimate grounds for escalating a complaint, and whether it has happened to others.
    Originally posted by helsmet1
    From what you have stated, it sounds like they explained the process correctly and you possibly misunderstood. I genuinely can't see why you feel you have grounds for a complaint, especially as you are in a strong position - hand the car back with no repercussions, or trade it in elsewhere and benefit from.some equity in the deal.

    As for if it has happened to others, yes - PCP is often misunderstood by people who take it out, you will find multiple threads on this forum.
    • Typhoon2000
    • By Typhoon2000 12th Mar 18, 9:06 PM
    • 861 Posts
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    Typhoon2000
    Your PCP deal is with the finance company. Not with dealership. You dont owe the dealership any money at all. The finance company has already paid the dealership in full for the car.

    At the end of the PCP deal, you either hand the car back to the finanace company, pay the balloon payment to the finance company and keep the car, or sell the car to dealership who then pays off the finance company. Some times in the last case, the dealership thinks, it can make good money selling your old car on to someone after paying off the finance for you, and it will offer you a sweetener to buy another new car off them. Sounds like the last case is not going to happen. The dealership do not want to buy your car for the ballon payment amount.

    So you have to choose between handing the car back to the finance company or paying the balloon and selling the car your self. In either case you are free to get another PCP deal this or any other dealership, without any penalty.
    Last edited by Typhoon2000; 12-03-2018 at 9:09 PM.
    • neilmcl
    • By neilmcl 12th Mar 18, 9:11 PM
    • 11,088 Posts
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    neilmcl
    What they were essentially saying was that I owed approx £11,000 on the car, but they were only valuing it at £10,000, meaning that if I started a new PCP deal, I would owe them £1,000 on top of the cost of the new car
    Originally posted by helsmet1
    I don't think they were saying that at all. If your car is in negative equity you don't "trade in", you simply hand the car over and start again should you wish to do so.
    • IanMSpencer
    • By IanMSpencer 12th Mar 18, 9:50 PM
    • 1,462 Posts
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    IanMSpencer
    I don't think they were saying that at all. If your car is in negative equity you don't "trade in", you simply hand the car over and start again should you wish to do so.
    Originally posted by neilmcl
    I think they were saying that - trying to scare the OP into early termination and more debt as the OP doesn't understand their contract and they know it.
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