SunnySideUp

Drivers who bought prestige models have been worst hit because the nose dive in second-hand prices means they owe significantly more than the cars are worth.

According to Auto Express, the shortfall for drivers across the country has now reached £272 million.

Buying a car is often a family's biggest financial transaction apart from home purchase.

Thousands of motorists try to spread the bill through a system known as Personal Contract Purchase.

This entails putting a deposit down and then paying monthly instalments for two or three years, before having the option to buy the car outright.

The final payment – known as a balloon payment – is based on what the car is expected to be worth at the end of the contract.

But the collapse of the second hand market has meant that the amount demanded by finance companies is often far more than the car is actually worth.

According to CAP, one industry analyst, in December 2006 the "predicted value" of a Volvo XC90 D5 S two years later was £18,775.

But this car is now estimated as being worth £12,600 – leaving the motorist with a choice between paying £6,175 more than the car is worth or handing it back to the finance house.

The Finance and Leasing Association, the trade body representing finance houses which handle the business, admitted that thousands of drivers were returning the cars rather than pay more than they were worth.

As a result more second hand cars are being put onto the the market, forcing their price down even further.

"This is hitting people wanting to get high aspiration vehicles at an affordable price will have been hit by the crash in value," said an AA spokesman.

"They should be approaching the finance house as well as the dealer to see what the options are.

"These could be very expensive cars and the losses could be crippling because of the change in the financial world."

'If you cannot buy it outright at the outset, you probably cannot afford it' is my response.

Source:- Thousands of drivers who bought cars on hire purchase face 'negative equity' - Telegraph

HankScorpio

Hardly news, been discussed in here for months.

R 14NS R

as i and others have said before, that is the main benefit of pcp, if the car takes a huge drop, as it has now, the customer does not have to find the negative equity, they hand the car back and start again (they do have to find a deposit again).

this also means that with the deals about on new cars at the momment, putting a similar deposit down as last time should actually enable people to go into the same car again for less monthly, the main downside is that people have to stay in their cars for the whole period of agreement as oppose to being taken out of them early when the p/x prices were higher.

it actually is a good time to buy on pcp as the manufatureres are throwing money at dealers with low rate finance offers (better rates on nearly every merc than you get at the bank) and extra discounts to sell the units, so some awesome deals about.

NotoriousREV

Hmm, is this the industry's way of putting people off a PCP when in fact it's exactly why a PCP is a good idea? Capital Bank are probably sat knee deep in 4x4's they've had handed back

cster

I think that bit is right! - if not a bit "sunnyside down"

mrtheedge2u2

Pete, that has been known for years and years.

what would scooby do

just bought a Saab for £4k that's worth £6.5k (until next year of course when it will be worth £2k)

I just love the smell of desperate sellers in the morning

SunnySideUp

With all due respect, the SAAB you have bought is worth £4k ..... if you can sell it today for £6.5k, why didn't the desperate seller?

I would agree that there are fantastic deals out there to be had (in comparison to prices 12 months ago) ..... but they could and may fall quite a bit lower!

what would scooby do

Because nobody is buying

Semper

He's referring to your comment about it being "worth £6.5k". It's clearly not.

SunnySideUp

So you were the only buyer and paid £4k ....... I would suggest that is the true value, is all I was saying.

what would scooby do

worth valued

SunnySideUp

Sorted

RyanSTI

iTrader: (1)

do not despare, you can get out of neg eg situtations, depending on what u borrowed, how much etc over how long, there is a clase which enables u to just terminate the contract.


monthly payments these days will go up, because finance companys have got wise to the car market and so the residual will be lower.

lozgti

I used to be a car buyer- a -holic

Can't see me changing mine or the wife's for a long long time.Mainly due to the governments policies which I suppose worked on a forced 'be green and smile front' but screwed the car industry new and used

STi wanna Subaru

iTrader: (1)

Had my car 7 years, paid for it a long time ago. I'm done with wasting money on the things unless I become wealthy.

mrtheedge2u2

I did not need my car, so sold it

stilover

Was reading in Evo magazine, that 997 Turbo's are going at Auction for about £55k. They say later this year you'll get one starting with a 4.

Tempting, oh so tempting. A car to buy but keep for many years. Could make sense then.

fivetide

iTrader: (1)

Exactly - a cash buyer should be able to pick up some real bargains at auctions. It is where most of the motability cars end up anyway and that is a very similar set up. Auction houses will be awash with these things.

5t.

Paul3446

I've always upgraded my car every few years, but not now, I'm hanging on to my MY00 for as long as possible. Cheap tax, reliable, cheap to run. There's no reason to change!

billythekid

We handed our BMW back in November, they wanted £15k final payment, yet the dealers were giving us £8 to £9k as trade in value. No point in paying the final payment so they got the car back. Now in a much better car and should keep its value a lot better in the end. In fact as many stated above I will probably keep this car for quite a few years now.

SunnySideUp

Most people are waking up to the costs of buying new cars ..... it simply doesn't make economic sense, it may make you feel good and that could be worth the cost to you - but, in pure economic terms, a new car is madness.

AndyC_772

iTrader: (2)

Arguably that's exactly what disposable income is for, though. Any reliable car will do the job of getting you from A to B, so spending anything extra is all about making the process more enjoyable.

SunnySideUp

No argument, that is EXACTLY what disposable income should be used for - improving ones life in some luxurious way.