Negative equity

[rhud]

Yes and you will could be paying more than the car is worth.

Having said that a dealership will add on cost for remarketing and selling as a used vehicle.

If I were you I would get it valued against the GFV.

I don't think there is a reasonable alternative.

1. I knew exactly what the deal was when I took it on.

2. They no longer make my car (A160 BlueEfficiency Avantgarde) with various add-ons. (The new A is definitely not for me. The new B is too expensive)

3. I am very happy with the car which is perfect for my needs

4. It has a low mileage

5. No more monthly outlay.

 

[Piff]

I have an Agility PCP with (in my opinion) a silly high final option to purchase figure of £20,875. I can't see any way a 3yr old 30k miles SLK will be worth that.
I did query it with salesman & he claimed the residual values for diesel SLK's are very strong.
I'm guessing (from reading the above) that there are 2 reasons for the high final value:-
1) makes for low monthly payments
2) low monthly payments mean that we will never hit the 50% of the finance so can't opt out early (should we want to)

 

[Paul/]

1. I knew exactly what the deal was when I took it on.

3. I am very happy with the car which is perfect for my needs

Same for my wife with her SLK200.

She'll probably decide to purchase at the end of the term, but if it's worth significantly less than the GFV she can return it, be thankful that the inflated GFV subsidised her payments, then buy an equivalent used vehicle for less.

So, as it says in the blurb, Agility ensures you don't have to suffer the consequences of unexpected depreciation. As far as I remember, there was no mention from our salesman or in the documentation of possible surplus value at the end of the term, so we were spared that disappointment.

 

[Rory]

I'm guessing (from reading the above) that there are 2 reasons for the high final value:-
1) makes for low monthly payments
2) low monthly payments mean that we will never hit the 50% of the finance so can't opt out early (should we want to)

...plus the high GFV vs actual value means the most logical thing to do is to hand the car back and start another PCP.

Bear in mind PCPs were designed by the car industry to keep the factories busy with people changing their cars every 3yrs. If you either keep the car, or hand it back and walk away, then the scheme has failed.

 

[DJM]

I'm looking at a VT I think... I still have £2k left to pay before I'm 50% through but I assume I can just pay that early and walk away??? Has anyone got any thoughts on this?
Cheers.

 

[HumberMart]

I'm looking at a VT I think... I still have £2k left to pay before I'm 50% through but I assume I can just pay that early and walk away??? Has anyone got any thoughts on this?
Cheers.

I'm sure you can, subject to no other deductions for damage/mileage etc.

However if that equates to say 6 months payments, best to control your impatience and have a 'free' car for 6 months

 

[DJM]

Thanks HumberMart. The patience thing is the most difficult part of this whole process!

 

[Dieselman]

Thanks HumberMart. The patience thing is the most difficult part of this whole process!

And don't car Salesmen know that...


You've got someone else's money in your pocket and it's burning a hole.

 

[DJM]

I suggested to MBFS yesterday that I might want a VT and you wouldn't believe how rude and awkward they got! At this stage I'm just making an enquiry to weigh up my options.
It's perfectly legal to leave a PCP contract once you meet a given point but they obviously don't want anyone to be doing it...
Before someone dives in and says I'm trying to screw the system, I'm not...I simply want to get another Merc and my P/X price is ridiculous.

 

[Dieselman]

So wait until the end, alternatively add the outstanding finance onto your new lease.

 

[DJM]

I might end up doing that...

 

[Dieselman]

I might end up doing that...

Sounds like a good plan.

In 10 years time you could have a C220 Cdi with the finance of an SLS hanging off it...

 

[moff]

DJM -VT, it's your right to do it if you want to.

Google voluntary termination letter and use the template. Send it to MBFS and they will send you the correct forms to fill in. Don't be intimidated.

This will not and cannot affect your credit file.

I've done it twice without issue.

 

[DJM]

Thanks Moff. I am hoping to receive the documents next week so I will take it from there...

 

[DJM]

I spoke to a different person at MBFS today and asked them the same question - 'Does a VT affect your overall credit rating or will it only remain on the MBFS file?'
Answer...'Yes it will show up on your credit file and may affect future finance decisions by them or other lenders'
They told me that you could be accepted for finance but probably at a higher rate...
All this uncertainty is making me think twice about leaving my agreement early. I think I might just have to be patient until next year sometime as I don't want anything to happen to my credit file.
It's a shame but hey ho

 

[moff]

I spoke to a different person at MBFS today and asked them the same question - 'Does a VT affect your overall credit rating or will it only remain on the MBFS file?'
Answer...'Yes it will show up on your credit file and may affect future finance decisions by them or other lenders'
They told me that you could be accepted for finance but probably at a higher rate...
All this uncertainty is making me think twice about leaving my agreement early. I think I might just have to be patient until next year sometime as I don't want anything to happen to my credit file.
It's a shame but hey ho

They are allowed to place a marker that shows a voluntary termination on your credit file to show ow the agreement was SETTLED, but it is not used within your actual credit score.

The key phrase they use is 'lenders may....'

Lenders hate VT's for obvious reasons so they try and scare people into not doing it. I've done it twice with no issue, as you can imagine they are still pretty keen for a sale

Taken from a credit reference agency's website:

Your credit rating should not be affected. ‘Voluntary termination’ of a hire-purchase agreement is your legal right and if you’ve paid at least half of the total amount due and the car is in satisfactory condition then you should be left owing nothing. The lender may add a voluntary termination flag to the record of the credit agreement on your credit report, to explain to other lenders why the agreement was settled early. But as long as you have paid all of your monthly payments on time up to the point you hand the keys back, your credit history should not be damaged by this. Voluntary termination is actually an archaic form of debt relief and is not particularly popular with lenders, but I’ve seen no evidence to suggest that exercising this consumer right in any way damages credit scores.

 

[DJM]

Very interesting Moff...thank you very much!
I will hopefully receive my VT paperwork in the next couple of days so I will take it from there.
DJM

 

[Dieselman]

Can you explain more about what is included in the total amount payable, presumably and contract setup costs and the deposit?

 

[Piff]

Can you explain more about what is included in the total amount payable, presumably and contract setup costs and the deposit?

If I understand it correctly, it works like this in our instance (numbers rounded for simplicity):-

Cost of car (list price) £37,200
Discount £5,700
Nett cost £31,500
Our deposit £1,800
Amount from finance company (MB Finance) £29700
Add interest £5,300
Total amount payable £35,000

50% of debt = £17,500 so we could terminate after paying £17,500.

But, our repayments 36 x £335 = £12,060 so we will never hit the 50%

Guaranteed future value at 36 months = £20,900, should we wish to spent that on a 3 year old 30,000 mile SLK.

 

[ibrar]

Wish I had read this thread before going through PCP, though I've only paid my holding deposit.....
The only real benefit (for me) here is that I've been able to negotiate a deal (friend&family recommendation discount from MB HQ staff) which keeps my monthly payments at £300 (without the dealership losing out) and a £3k deposit on a C220cdi AMG Sport Plus, though all contract hire agreements through brokers seem to have considerably higher monthly installments with a deposit of 6months... Circa £1800!