Voluntary termination

[danielanthony]

Hi

I've looked into terminating my BMW finance deal early as you can do once you've paid 50% of the agreement amount, on my 530D, this is in month 36 of the 48 month term. If I was in negative equity at this point there would be no point keeping it for the additional 12 months so VT would be an attractive option.

What I didn't know is that the finance company can only charge you for damage, not excess mileage. So you could take on a 6000 miles per annum deal, actually do 30,000 miles per year, VT and there's nothing they can do.

Some articles I've read on the net suggest that some manufacturers won't let you take out further finance deals if you've VT'd. But speaking to a dealer today he said one of his customers had VT'd 5 times already - no skin off the dealers nose as its the manufacturer who takes the hit.

Has anyone here voluntary terminated a Finance deal early? Is it only morally wrong to state you'll do 6000 miles per annum for the lower monthly payment, only to do 30,000+ as you know there's nothing they can do if you terminate early... I suppose if everyone started doing this then such deals would be withdrawn...

 

[iaind]

Assume it's a PCP?

Your thinking may have a flaw - if you're in negative equity at 36 months then something is probably pretty wrong. Your GFV should be lower than the cars actual value at the end - so at 48 months you should have at least some equity. So you're better keeping it and buying it would be the best option (then sell it/trade it in if you don't want the car)

If it was new, negative equity should have only lasted for the first 12-18 months, if it really is in negative equity after 36 then something is badly wrong, the only way that could happen is a silly high GFV to lure you in with low payments... I can't see BMW finance being this irresponsible though.

The other option - if you actually want to get rid of it then call for a settlement figure. Then take it back to the garage and see if they'll take it off your hands for that amount or more. I did this with a PCP before and walked away with the same as I put in as a deposit. Selling privately would get you more money but is a bit more of a pain as you have to get permission, but selling it back to the dealer is simpler as they settle the finance before the finance company even knows it's changed hands

 

[Scrutinize]

Yes you can VT and no it doesn't effect your credit rating as it shows as a settled agreement, and yes you can still finance from the same company.

Simple as that.

Dealer scare tactics.

 

[xs2man]

Assume it's a PCP?

Your thinking may have a flaw - if you're in negative equity at 36 months then something is probably pretty wrong. Your GFV should be lower than the cars actual value at the end - so at 48 months you should have at least some equity. So you're better keeping it and buying it would be the best option (then sell it/trade it in if you don't want the car)

If it was new, negative equity should have only lasted for the first 12-18 months, if it really is in negative equity after 36 then something is badly wrong, the only way that could happen is a silly high GFV to lure you in with low payments... I can't see BMW finance being this irresponsible though.

The other option - if you actually want to get rid of it then call for a settlement figure. Then take it back to the garage and see if they'll take it off your hands for that amount or more. I did this with a PCP before and walked away with the same as I put in as a deposit. Selling privately would get you more money but is a bit more of a pain as you have to get permission, but selling it back to the dealer is simpler as they settle the finance before the finance company even knows it's changed hands

I don't think your fully understanding his point in all fairness.

I'm in a "similar" situation just now. My 530d was taken out on a 4 year / 10k pa PCP, and after 25 months, I have around 3k neg equity (by tradi-in) due to doing around 18k pa. My options are to reduce the mileage (which is happening anyway due to the other car being so practical) and hope that the value catches up to the settlement figure, or more likely I'll be VT'ing it, probably next year.

It's the almost double the miles that has caused this situation, rather than anything else really here. And this was an oversight on my part, not really intentional, on this scale at least. But it does mean I'm "stuck" with my 530d until I can VT it, rather than swap it for something else just now.

 

[danielanthony]

I don't think your fully understanding his point in all fairness.

I'm in a "similar" situation just now. My 530d was taken out on a 4 year / 10k pa PCP, and after 25 months, I have around 3k neg equity (by tradi-in) due to doing around 18k pa. My options are to reduce the mileage (which is happening anyway due to the other car being so practical) and hope that the value catches up to the settlement figure, or more likely I'll be VT'ing it, probably next year.

It's the almost double the miles that has caused this situation, rather than anything else really here. And this was an oversight on my part, not really intentional, on this scale at least. But it does mean I'm "stuck" with my 530d until I can VT it, rather than swap it for something else just now.

Yes, this is for PCP. So instead of being stung for an additional 8,000 miles per year @ 10ppm or whatever, you can VT and walk away with no extra charges. My main point is that the next time I take out a PCP deal, I could base it on 6000 miles pa and enjoy the lower payments as it doesn't matter how many miles I do if I VT.

 

[danielanthony]

Yes you can VT and no it doesn't effect your credit rating as it shows as a settled agreement, and yes you can still finance from the same company.

Simple as that.

Dealer scare tactics.

Understood, but why not just always take the lower monthly payments based on an unrealistically low annual mileage as excess mileage is effectively unenforceable?

For example, looking at the VW finance calculator; if I do 5000 miles pa they want a £2000 deposit but £4700 if I do 25000.

 

[xs2man]

That is my understanding. However, you are "stuck" in the PCP until you hit the 50% mark. I cannot realistically move on just now, 2 years into the agreement, because of the increased mileage. Well, I can, and all it does mean is that I will have paid for the miles I do, so not exactly the worst thing, but it doesn't really make much sense at this stage.

 

[Jez]

That is my understanding. However, you are "stuck" in the PCP until you hit the 50% mark. I cannot realistically move on just now, 2 years into the agreement, because of the increased mileage. Well, I can, and all it does mean is that I will have paid for the miles I do, so not exactly the worst thing, but it doesn't really make much sense at this stage.

I do not understand PCP at all having never looked into it, but if this thread is true then why cant you continue to pile mileage onto your 530d and then just VT it before it ends?

 

[Richie]

What I didn't know is that the finance company can only charge you for damage, not excess mileage. So you could take on a 6000 miles per annum deal, actually do 30,000 miles per year, VT and there's nothing they can do.

Incorrect

I think the OP needs to re-read his agreement. If you settle early then the maximum mileage you would have been allowed to accrue will be pro-rated into the term you VT'd at e.g:

4 year PC @ 10,000 miles per annum = 40,000 miles total.
If you settle at 3 years then you will be allowed 30,000 miles total.

 

[nas]

What are the advantages of VT over selling to a dealer, trader or private (and clearing the outstanding amount)?

 

[danielanthony]

Incorrect

I think the OP needs to re-read his agreement. If you settle early then the maximum mileage you would have been allowed to accrue will be pro-rated into the term you VT'd at e.g:

4 year PC @ 10,000 miles per annum = 40,000 miles total.
If you settle at 3 years then you will be allowed 30,000 miles total.

Nope.

http://www.thecarexpert.co.uk/car-finance-voluntary-termination-pcp-hp/

Can I be charged for excess mileage?

One of the ways people exploit the voluntary termination clause is with very high mileage. For example, if you cover 30,000 miles per year then your car will be worth much less after 3 years than a car that has only covered 5,000 miles per year. The finance company cannot charge you for high mileage, only any costs arising from “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”. If you’ve done 100,000 miles but the car is in good condition, they can’t do a thing – well, other than refuse to finance you ever again.

 

[danielanthony]

What are the advantages of VT over selling to a dealer, trader or private (and clearing the outstanding amount)?

As I see it:

A) you're in negative equity at the VT point so just give the car back.
B) you've signed an agreement for 10,000 miles per year but have done 30,000 per year

Both these scenarios assume you won't be able to cover the outstanding finance amount no matter who you sell the car to.

 

[iaind]

Nope.

http://www.thecarexpert.co.uk/car-finance-voluntary-termination-pcp-hp/

Can I be charged for excess mileage?

One of the ways people exploit the voluntary termination clause is with very high mileage. For example, if you cover 30,000 miles per year then your car will be worth much less after 3 years than a car that has only covered 5,000 miles per year. The finance company cannot charge you for high mileage, only any costs arising from “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”. If you’ve done 100,000 miles but the car is in good condition, they can’t do a thing – well, other than refuse to finance you ever again.

I'd personally prefer to read and understand the contract I had signed, rather than taking a random website as gospel...

 

[danielanthony]

I'd personally prefer to read and understand the contract I had signed, rather than taking a random website as gospel...

It's not just that website though. Plus it doesn't matter what you sign if the terms are unenforceable.

 

[Richie]

Nope.

http://www.thecarexpert.co.uk/car-finance-voluntary-termination-pcp-hp/

Can I be charged for excess mileage?

One of the ways people exploit the voluntary termination clause is with very high mileage. For example, if you cover 30,000 miles per year then your car will be worth much less after 3 years than a car that has only covered 5,000 miles per year. The finance company cannot charge you for high mileage, only any costs arising from “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”. If you’ve done 100,000 miles but the car is in good condition, they can’t do a thing – well, other than refuse to finance you ever again.

That's for standard HP agreements, not PCPs. PCP's are constructyed differently and take mileages into account whereas HP agreements do not (unless its HP with a balloon)



Go read your agreement again, especially the sections about excess mileage charges and termination. I would take my information from an actual agreement you signed over a 3rd party website... Oh and LOL about your statement regarding terms that are unenforceable



edit: I have pulled the following from a PCP agreement provided by BMW Finance:

Excess Mileage Charges for Depreciation

The Maximum Total Mileage is 64380 miles. Maximum annual mileage is 12000 miles. Mileage on delivery of 16380 miles is included in the Maximum Total Mileage.

If you end this agreement early (see Termination): the Maximum Total Mileage will apply in proportion to the reduced period of hire and your obligation to pay any Excess Mileage Charges will accrue immediately prior to termination. Accordingly if the Vehicle's mileage exceeds the adjusted Maximum Total Mileage, you will have to pay the Excess Mileage Charge for depreciation for each mile covered in excess of the adjusted Maximum Total Mileage.

As I stated, the mileage allowance is prorated should you VT the agreement (replace your mileages with the ones there, its just an example)

 

[Basher]

But speaking to a dealer today he said one of his customers had VT'd 5 times already - no skin off the dealers nose as its the manufacturer who takes the hit.

How does the manufacturer take a hit? Surely once the car is produced and sold (even via finance) the manufacturer has their money.

If anyone is losing out, surely it's the finance company?

 

[Basher]

Oh and LOL about your statement regarding terms that are unenforceable

Why LOL? Plenty of companies write contract terms that are completely unenforceable.

I'd be interested to hear if anyone has any stories of actually going through VT and not paying the excess fee.

 

[[TW]Fox]

That is my understanding. However, you are "stuck" in the PCP until you hit the 50% mark. I cannot realistically move on just now, 2 years into the agreement, because of the increased mileage. Well, I can, and all it does mean is that I will have paid for the miles I do, so not exactly the worst thing, but it doesn't really make much sense at this stage.

At least we finally get to the bottom of why you have that wonderful 530d parked on the drive but keep trying to convince us how wonderful everyone thinks that old Seat you bought is and how you just prefer it so therefore use it for all the mileage

This is one of the issues with PCP's and similar - it's not your car so you are limited in what you can do with it without significant penalty. At least if you'd bought it you'd suffer increased mileage through a lower residual - and thus have the option to just keep it - rather than by having to stump up a huge bill at the end for excess mileage.

Beware those tempting low monthly payments..

 

[paradigm]

This is why I vastly over-estimated my mileage.

 

[DRZ]

As I stated, the mileage allowance is prorated should you VT the agreement (replace your mileages with the ones there, its just an example)

The Consumer Credit Act 1974 Part 7 Section 100 disagrees with you.

The contract terminates immediately under the terms set out in that legislation. It is a statutory provision in all regulated agreements and cannot be amended by a contract (no matter what they try and pull).

I believe they will try and claim Section 101 paragraph 2 will apply to you, but paragraph 7 of the same section clearly states that it would not apply to you as your payments are more than £1500 per year.

I don't think this has ever gone to a precedent-setting court though, so its pretty much a battle of wills between you and them regarding the charge. I'd stick to my guns right up to the court steps if it were me.

I'm not a lawyer, ymmv etc etc.