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 I suppose if everyone started doing this then such deals would be withdrawn...

 

[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.

 

[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.

 

[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.