kav

I read a letter in the motoring section of one of the broadsheets today from a chap who wants to get a new car but is caught in a negative equity trap on his present vehicle. The columnist recommended that he write to the finance company and 'volunatarily terminate' his credit agreement and simply hand the car back. There were the usual caveats to make sure his credit rating wasn't going to be adversly affected.

Is it that simple? If so, is there any difference between a straight HP deal and lease purchase? I seem to recall a thread a while ago along the lines of providing you had paid off a certain percentage of the finance, you could then hand the car back.

Any feedback much appreciated.

Cheers
Kav

SiDHEaD

i wanna do this... then i can get a Scoob

Clarebabes

I am in the same situation with my Astra. Would have paid nearly a year out of a 4 year agreement. Want to get a Civic Type r, but the dealer probably wouldn't offer me enough in p/x to cover the finance. I have tried to sell it, but didn't get a sniff because I was trying to get enough for the finance.

Is very annoying. Would be interested to know the answer to this.

47 NAT

If you've paid at least half of the loan amount including interest then you can do a voluntary termination/hand-back..Theres no real point in talking to the Dealer (as its the Finance Companies property)..unless their Business Manager is switched on and eager to help without pulling your pants down.

Check on your contract yourself to see what figures are inserted on the 1/2's and 1/3rds as this will give you an indication of how much, then get a settlement figure from the Fin Comp. Most people who put down small deposits will be more than likely caught up in the Neg Equity. Also they will have to fully re-imburse the figure if you took out some kind of loan protection cover....although they will dispute this, until you insist. There are some Fin companies who will run another loan side-by-side of a new one which will cover the neg equity, but if you look into it you'll find your still no better off and this enables the Fin Comp to sell you a vehicle and loan that doesnt exceed a certain percentage of Glasses guide retail book value...

Sorry I cant go a bit more into detail at the moment as I've got to run out the door and go to work ....

Nath

MarkO

I did this earlier this year.

As has been said, it's part of the consumer credit act, and hence all finance deals. Once you're more than 50% of the way through the loan, if you don't want the car any more, and can't/won't sell it, you can just terminate the agreement and hand the keys back.

In my case, my 40k mileage, 3.5 year-old STI IV Type-R had about 11-12k outstanding on the finance, but wasn't going to sell at anywhere near that price. I didn't want to spend weeks trying to sell it privately (too risky letting people test-drive it, and I didn't want it nicked) so the hassle-free option was to terminate. I called up the finance people, told them I wanted to give them the car, and they came to collect it. A month later, I got a letter telling me the agreement was complete.

They tried to make me cough up for the costs of auctioning the car (?!) and the cost of collecting it, but since there was no mention of any of that in the finance agreement, I told 'em to shove it. After all, what they do with the car after I've given it back to them is their business. I think they were just trying it on (i.e., trying to get another £500 in 'admin fees' just to make the hit for them even less).

It will not affect your credit rating, since you've abided by the terms of the loan, and haven't defaulted or anything like that.

Reffro

Copied from the other thread -

Yes this is entirely possible. The consumer credit act allows you this facility to hand back the vehicle with no further penalties provided 50% (I think) of the total amount borrowed has been re-paid. It may even be as low as 30% but you will need to check the fine print on any agreement. As for an adverse credit rating, well you may be able to do this but it doesn't mean the finance companies have to like it, so chances are it will registered in some form or other as a black mark against your name.

Now the above certainly stands for HP agreements, and should also stand for a lease purchase , but the important thing to remember here is the 50% threshold, it is not 50% of your repayments but 50% of the total borrowed, If you've offset 50% of your borrowings until the end of the term, then you are stuck. But again check the fine print in your documents.

For those not understanding the term, lease purchase works like a PCP with an amount offset to be re-paid at the end of the loan term. But their is no GMFV and no protection in place to allow you to just hand the car back and walk away, the amount outstanding has to be paid, regardless of the car's eventual value. This totally different from lease, as with a lease you don't eventually own the car, it is always the property of the leasing company, and will be returned to them at the end of the term.

kav

Thanks chaps.

Marko - was yours a straight HP deal.

Reffro - looks like I've got a bit of an odd one. It'a a lease purchase deal from IM. I put down 15% at the beginning of the agreement and there is an agreed residual at the end of the term - 35% I think. Oddly enough on this one, there is no charge for excess mileage.

There is nothing in the contract which eludes to the hand-back scenario although I have seen this clause on an HP agreement. Where's the best place to get this checked out? Citizens Advice Bureau, perhaps?

Cheers
Kav

MarkO

It was HP with a balloon payment at the end (hence the fairly high settlement figure, despite having run for 3.5 years of the term.

If you phone the finance people, they'll be able to tell you whether you can/can't do it, and what's involved.

Tiggs

kav,

y dont you just phone IM????

kav

Cheers Tiggs - going to do this anyway but forewarned is forearmed.

Cheers
Kav

Makalu

I am in the process of doing this right now...

Talking to my friendly and very helpful Subaru dealer - they told me about the 50% handback rule saying this was introduced simply because greedy car dealers where selling cars for more then they were worth and finance companies were letting them get away with it.

He went on to say that some of the worst finance companies are having to take back £2m of vehicles A MONTH!!! Serves them right I say because, at the end of the day, they should take more responsability for issuing loans on goods that are not worth the value we - the customers - have to pay for them. Like the agreements always say - the goods are the property of the finance company until a certain level of repayment has been reached (60% or thereabouts I think) so they should also share the penalties that us consumers have to endure when we suffer at the hands of untrustworthy 'car dealers'. (name and shame? .... A large Lotus / Jeep garage in Leicester did the deed to me???)

At the end of the day, finance companies are as bad as the dodgy car sales guys who sign you up for a car knowing full well that it will end in negative equity!

The finance company will register on your credit file that the goods were 'returned'... Im not sure how this is viewed by other finance companies who you approach for further finance later on but it is surely not as bad as an involuntary repossesion?

Mak.

Reffro

Kav YHM

kav

Thanks mate - so do you.

Cheers
Kav

Jer

I did this a few years ago on my Audi Coupe. I bought the Audi for 14K did 60,000 miles in two years then handed it back. When I finished with the car it was probably worth less than 5K with the miles I put on it. This saved me a good few grand and allowed me to buy the scoob.
The good thing about it was I got the salesman who sold me the Audi to put the negative equity from my PX on to the price of the Audi. This saved me even more money.
If you do it more than once, I think you will get refused credit.

Cheers

Jer

MarkO

According to the consumer credit act (and the broker I spoke to) an voluntary termination of the agreement should have absolutely no adverse effect on your credit history.

But since all credit agencies are complete b*stards, I suspect you're shafted whatever you do.

Diablo

Probably...but any adverse credit history should only be as a result of any default.

Terminating an agreement by handing back (or paying off early) does not constitute "default".

D