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PCP and Equity.

Discussion in 'Motors' started by Clearcut, Dec 9, 2018.

  1. rodenal

    Capodecina

    Joined: Dec 7, 2011

    Posts: 10,177

    Totally depends on the value of the car when you have paid the 50% point and how able yoh are to realise that value really.
     
  2. Mercenary Keyboard Warrior

    Capodecina

    Joined: Aug 4, 2007

    Posts: 10,484

    Location: Wilds of suffolk

    In theory yes
    If taking this approach you must pay minimum deposit, so your interest and loan vs residual are at their greatest.

    If you pay too much deposit or the car is worth too much as a residual you can get stuck.
    My TT for example had 50% of the residual at 3 years. As thats the balloon payment its very close on being able to VT. Would require some perfect timing practically very close to the end of the agreement

    Simple way to look at it, if you may want to try to get out early, pay minimum deposit
     
  3. muon

    Capodecina

    Joined: Nov 8, 2006

    Posts: 18,789

    Location: London

    That's hilarious. Thanks for the tip.

    So always pick minimum mileage and VT, one month before the end (assuming you know there is no equity left).
     
  4. Scania

    Capodecina

    Joined: Nov 25, 2004

    Posts: 24,259

    Location: On the road....

    This seems pretty flawed, so effectively if I was to take say a 320d at a mileage of say 32k over 4 years - which I think is the minumum with BMW ,pay as little as possible in deposit,maintain my payments and ensure I pay enough to be over the 50% (or whatever) threshold I can - if I choose - pile on 50k p/a without a care and just voluntarily terminate one month before my deal is up and walk away laughing given the PCP was based upon a far lower mileage and therefore considerably cheaper?

    My mate with his 320d will be laughing by the sounds of it, he's intending to terminate early (albeit by a month or so) due to a company car arriving but his current way over mileage f30 is absolutely spotless.
     
  5. [TW]Fox

    Man of Honour

    Joined: Oct 17, 2002

    Posts: 155,705

    A 3 series with no deposit is going to be very expensive per month and by VTing you walk away with nothing.
     
  6. muon

    Capodecina

    Joined: Nov 8, 2006

    Posts: 18,789

    Location: London

    Well why would you want to walk away with something that is in negative equity. You've destroyed the residual value.

    The deposit thing is a bit irrelevant. That just brings the VT point forward a bit. You also want to avoid such a large deposit there is no worthwhile VT point I guess.
     
    Last edited: Jan 1, 2019
  7. Mercenary Keyboard Warrior

    Capodecina

    Joined: Aug 4, 2007

    Posts: 10,484

    Location: Wilds of suffolk

    There is one catch that introduces a risk, although only if you go manu backed scheme.

    Most new car (if not all) PCP agreements require main dealer servicing. In theory they can check this has been done and the logged mileage. I did hear of one person who had been billed based on mileage from servicing records. he took out the PCP for something like 5k pa and after 9 months had a 15k service. they billed him something like 11k miles based on pro rata of PCP term mileage. Its the friend of someone who worked with me, he mentioned it as he was a solicitor and was the first port of call for the "WTF can they do this?" phonecall

    I cant remember what was believed to be the cause. In my mind it was a warranty claim at the service which I think they believe triggered the fact it was noticed.
    I did check my PCP agreement when I took it out and it certainly did cover this scenario being possible. If I remember I will try to find out if they ever worked out what was behind it. he did have to pay btw even after specialist advice, he couldn't VT and it was in his agreement.

    Its possible this is the start of their fightback to the problem as once it spreads it will have to be covered somehow.
     
  8. [TW]Fox

    Man of Honour

    Joined: Oct 17, 2002

    Posts: 155,705

    My point is that it isn't the secret amazing cheap car idea people seem to be thinking it is. It's an expensive way out of an even more expensive situation.
     
  9. muon

    Capodecina

    Joined: Nov 8, 2006

    Posts: 18,789

    Location: London

    But is it actually better than buying the car yourself? I think it may be.

    Yes there is an argument not to buy a brand new vehicle and destroy it's value.

    But, the dealer wins as they get full payment, you sort of win the zero sum game (ignoring the interest) between you and the lender.
     
  10. Mercenary Keyboard Warrior

    Capodecina

    Joined: Aug 4, 2007

    Posts: 10,484

    Location: Wilds of suffolk

    Very much depends on mileage and if you get away with it.
    Like people withdrawing from finance after getting a manu discount and funding elsewhere at a lower rate or paying off with cash, whilst the numbers are small they chalk it up to just one of them things. If it becomes a significant problem then they will have to find a way to defeat it.
    Like for example only shorter terms, larger deposits etc. Which will affect the market, but may mean the 50% thing becomes very difficult for people to achieve.
     
  11. Scania

    Capodecina

    Joined: Nov 25, 2004

    Posts: 24,259

    Location: On the road....

    Ok fair comment, what about with something else then, does the same principle apply?
     
  12. Clearcut

    Wise Guy

    Joined: Jul 28, 2004

    Posts: 1,555

    'Semi' outcome. I found a car at my original dealers and as part of the process they take the car as part exchange. The original finance was set at 8000 miles per year (32,000 for period of contract) I actually did 10 over the 4 years. Despite this and the car being in excellent condition, they offered me £3,600 (£250 equity). The salesman actually suggested I try Webuyanycar. I got a quote online for £5,000. I took it to them and after a ridiculous amount of scrutiny - tiny paint chips etc. they knocked it down to £4,000 take it or leave it.

    At the end of the day, the finance is settled, I have the deposit for the new car and £350 in my back pocket so I'm fine with that.

    There is one thing however, he said it would take 5 working days for the finance settlement to go through. It never crossed my mind at the time but I have a deposit on another car which I now can't finance for at least 5 days. So as it stands, Webuyanycar have the car and the money for the next week. This is ridiculous.
     
  13. 200sols

    Mobster

    Joined: Jan 14, 2018

    Posts: 4,420

    Location: Hampshire

    Im sure they explained it, and offered you the choice of a next day or same day payment for a small fee.

    Edit - just seen this was for finance. Nothing you can do then.
     
  14. Clearcut

    Wise Guy

    Joined: Jul 28, 2004

    Posts: 1,555

    Thanks for confirming the position I am in. :D
     
  15. CraigN

    Mobster

    Joined: Jul 30, 2005

    Posts: 2,551

    Location: Bristol

    I read lots of horror stories about excess mileage and VT particularly with BMW finance. They do not close the account on your credit report and you get non payment strikes for not paying the excess mileage even with a VT.

    VT is not meant to effect your credit rating but when i looked into it i didn't want to take the risk.

    I put the wifes car in my parents garage for 3 months until i could hand it back. The options i was given were settle finance and own the car, VT or finish the term I was not allowed to pay the amount owed to finish the term and give the car back early.
     
  16. Blackhawk47

    Capodecina

    Joined: Sep 17, 2007

    Posts: 11,044

    Location: West Yorkshire / Market Bosworth

    I don't really understand why VT would be preferable in any situation really - unless you really just want rid of the car.
     
  17. jpaul

    Capodecina

    Joined: Mar 1, 2010

    Posts: 10,909

    that must be the easiest situation for them/owner to consult service records and see if annual mileage has been abused.

    why ? - don't get it , or , it was possible credit rating impact .
    My neighbour must have been in the same situation, car sat untouched for probably 9 months (maybe to reach the 50% point) but a bit of a liability parked up on their drive.
     
  18. Basher

    Sgarrista

    Joined: Oct 18, 2002

    Posts: 7,706

    If you’re in negative equity/gone massively over the mileage limit ...
     
  19. dowie

    Caporegime

    Joined: Jan 29, 2008

    Posts: 47,220

    I don't think they can easily defeat the 14 day thing, if they're offering discounts then they're offering discounts... the 14 day cooling off period for credit is standard and not specific to motor vehicles.

    I guess the 50% payment thing on the other hand can be pushed back against as you've highlighted. Useful to know though, certainly likely to burn some bridges with the dealership and finance company.
     
  20. 200sols

    Mobster

    Joined: Jan 14, 2018

    Posts: 4,420

    Location: Hampshire

    They could start checking mileage at services or yearly and charge accordingly.