Conditional Sale Loan
Discussion
I'm presuming this is the correct location on the forum to post this.
I've never had a car loan before so I don't know too much about them. My girlfriend's Mum, who is 80 today, has asked me to look at her current car loan.
In October 2022 she took out a loan on a brand new Vauxhall Crossland on a 4 year deal. The deal is due to end in October this year. When she took out the loan in 2022 she traded in her Skodia Fabia (I'm not sure how much equity was in the car at the time, if any) plus she paid around £5k deposit. Looking at the paperwork it was a conditional sale loan. Speaking to her recently, she thought it was a PCP and there would have been a balloon payment or at least some equity in the car. The loan was for around £15k and she's been paying around £150 a month.
The garage asked her to call in recently to discuss changing and she was told she would have to pay £1k as the car was worth less than the outstanding loan and then put down another significant deposit to change the car.
Due to a number of minor incidents in the car in recent months, the family are trying to convince her to give up driving so trading in the car to another dealer might not be an option anyway.
Is handing back the car and paying the £1k the only option she has?
I've never had a car loan before so I don't know too much about them. My girlfriend's Mum, who is 80 today, has asked me to look at her current car loan.
In October 2022 she took out a loan on a brand new Vauxhall Crossland on a 4 year deal. The deal is due to end in October this year. When she took out the loan in 2022 she traded in her Skodia Fabia (I'm not sure how much equity was in the car at the time, if any) plus she paid around £5k deposit. Looking at the paperwork it was a conditional sale loan. Speaking to her recently, she thought it was a PCP and there would have been a balloon payment or at least some equity in the car. The loan was for around £15k and she's been paying around £150 a month.
The garage asked her to call in recently to discuss changing and she was told she would have to pay £1k as the car was worth less than the outstanding loan and then put down another significant deposit to change the car.
Due to a number of minor incidents in the car in recent months, the family are trying to convince her to give up driving so trading in the car to another dealer might not be an option anyway.
Is handing back the car and paying the £1k the only option she has?
Sorry just read that you have the paperwork so ignore that point !
Below is what the internet describes as being part of that CS Loan.
Reading those points through and assuming they are correct it might seem that the Garage asking for more money is certainly an interesting point as it reads as if she will automatically own the car outright anyway ?!
( The interest and capital she would have repaid would obviously take this into account )
It might also be the case that did she fully understand the pertinent points when she took out the loan ( at 76 years old ) as another question might be was she in fact taken advantage of as a "vulnerable " person ?
Key Features of Conditional Sale
Automatic Ownership: Unlike Hire Purchase (HP), there is usually no "option to purchase" fee at the end; ownership passes automatically upon the final payment.
Fixed Payments & Interest: Interest rates and monthly repayments are fixed for the duration of the agreement, which typically lasts up to 60 months.
No Balloon Payment: Unlike Personal Contract Purchase (PCP), there is no large final payment needed to own the car at the end.
No Mileage Restrictions: Because you are intended to own the car, there are generally no strict mileage limitations or damage charges, unlike lease agreements.
Secured Loan: The debt is secured against the vehicle. If you fail to make payments, the lender can repossess the vehicle
Below is what the internet describes as being part of that CS Loan.
Reading those points through and assuming they are correct it might seem that the Garage asking for more money is certainly an interesting point as it reads as if she will automatically own the car outright anyway ?!
( The interest and capital she would have repaid would obviously take this into account )
It might also be the case that did she fully understand the pertinent points when she took out the loan ( at 76 years old ) as another question might be was she in fact taken advantage of as a "vulnerable " person ?
Key Features of Conditional Sale
Automatic Ownership: Unlike Hire Purchase (HP), there is usually no "option to purchase" fee at the end; ownership passes automatically upon the final payment.
Fixed Payments & Interest: Interest rates and monthly repayments are fixed for the duration of the agreement, which typically lasts up to 60 months.
No Balloon Payment: Unlike Personal Contract Purchase (PCP), there is no large final payment needed to own the car at the end.
No Mileage Restrictions: Because you are intended to own the car, there are generally no strict mileage limitations or damage charges, unlike lease agreements.
Secured Loan: The debt is secured against the vehicle. If you fail to make payments, the lender can repossess the vehicle
On the assumption the car was bought from a Vauxhall dealer the below is what Vauxhall's website says about Conditional Sale.
https://www.vauxhall.co.uk/help-centre/buyers-guid...
"Conditional Sale, often referred to as Hire Purchase, is one of the most common ways to finance a new or used vehicle.
This is probably the most straight-forward and easy to understand method of vehicle financing.
Conditional Sale assumes that you want to eventually own the vehicle at the end of your finance term, so simply splits the total cost of the vehicle (minus your deposit) over the duration of your plan.
Once the last monthly payment has been made, the vehicle is yours."
https://www.vauxhall.co.uk/help-centre/buyers-guid...
"Conditional Sale, often referred to as Hire Purchase, is one of the most common ways to finance a new or used vehicle.
This is probably the most straight-forward and easy to understand method of vehicle financing.
Conditional Sale assumes that you want to eventually own the vehicle at the end of your finance term, so simply splits the total cost of the vehicle (minus your deposit) over the duration of your plan.
Once the last monthly payment has been made, the vehicle is yours."
Edited by iansp on Wednesday 1st April 12:20
davek_964 said:
It doesn't add up though.
If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
Yep, something is not adding up.If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
Even at 0% APR, a £15k loan would be £312 per month over 48 months.
davek_964 said:
It doesn't add up though.
If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
+ the traded in car + £5k!If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
Powerkiter said:
When she took out the loan in 2022 she traded in her Skodia Fabia (I'm not sure how much equity was in the car at the time, if any) plus she paid around £5k deposit.
LooneyTunes said:
davek_964 said:
It doesn't add up though.
If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
+ the traded in car + £5k!If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
Powerkiter said:
When she took out the loan in 2022 she traded in her Skodia Fabia (I'm not sure how much equity was in the car at the time, if any) plus she paid around £5k deposit.
Unless the new car price was £15k, then the trade in & deposit might account for the difference, but the OP has said that the loan itself was £15k.
Mandat said:
LooneyTunes said:
davek_964 said:
It doesn't add up though.
If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
+ the traded in car + £5k!If the terms of conditional sale are that you own the car at the end of the loan, then she'd be getting a bargain. £150 a month for 4 years is £7,200 - which appears to be less than half the size of the loan.
Something isn't right with this info.
Powerkiter said:
When she took out the loan in 2022 she traded in her Skodia Fabia (I'm not sure how much equity was in the car at the time, if any) plus she paid around £5k deposit.
Unless the new car price was £15k, then the trade in & deposit might account for the difference, but the OP has said that the loan itself was £15k.
I've found some more paperwork.
The initial amount of credit was £14,445 with an interest rate of 7.44%. The opening balance was £18,338.95 and she has been paying £143.85 a month (for 48 months).
She put down a deposit of £4,750 cash and the credit agreement says total deposit of £11,314.85 (which I presume must have included the traded in Skoda Fabia).
The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
I cannot see anything in the contract which says what happens if the car is worth less than the £11,578 at the end of the 4 years.
The initial amount of credit was £14,445 with an interest rate of 7.44%. The opening balance was £18,338.95 and she has been paying £143.85 a month (for 48 months).
She put down a deposit of £4,750 cash and the credit agreement says total deposit of £11,314.85 (which I presume must have included the traded in Skoda Fabia).
The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
I cannot see anything in the contract which says what happens if the car is worth less than the £11,578 at the end of the 4 years.
You pay the difference. Dont you have the suspicion car could be sold for more on private market? Hassle factor ofcourse.
Dont be afraid to ring Vauxhall finance they are obliged to spend with you on phone as long as you want and answer any queries you have. Otherwise fca kicks their butt
Dont be afraid to ring Vauxhall finance they are obliged to spend with you on phone as long as you want and answer any queries you have. Otherwise fca kicks their butt
Powerkiter said:
I've found some more paperwork.
The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
Don't forget that the 'final payment' figure assumes she keeps paying £148 a month until October, when all 48 payments will have been made., while the WBAC figure is what it's worth today. So the garage's figure of £1K to change today is possibly quite a bit better than WBAC.The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
Also if she'd put a few dings in it as mentioned, WBAC will likely chip her down hugely
You said she thought it was a PCP, but it appears to be an HP with a balloon (which AIUI is pretty unusual for a consumer sale) - Is there any mileage in complaining to Vauxhall finance about possible mis-selling?
Even if it was PCP, the payments have been so low relative to the loan value that she's nowhere near the 50% needed to be able to voluntarily terminate - so would need to keep paying the £148 each month until handing the car back.
Powerkiter said:
I've found some more paperwork.
The initial amount of credit was £14,445 with an interest rate of 7.44%. The opening balance was £18,338.95 and she has been paying £143.85 a month (for 48 months).
She put down a deposit of £4,750 cash and the credit agreement says total deposit of £11,314.85 (which I presume must have included the traded in Skoda Fabia).
The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
I cannot see anything in the contract which says what happens if the car is worth less than the £11,578 at the end of the 4 years.
Sounds more like a conventional PCP contact rather than a CS contact with the balloon being used to reduce the monthly repayments. The initial amount of credit was £14,445 with an interest rate of 7.44%. The opening balance was £18,338.95 and she has been paying £143.85 a month (for 48 months).
She put down a deposit of £4,750 cash and the credit agreement says total deposit of £11,314.85 (which I presume must have included the traded in Skoda Fabia).
The final payment is £11,578. We've looked on We Buy Any Car and they're suggesting a value of £11k. So I guess the dealer is valuing the car at a little less than this.
I cannot see anything in the contract which says what happens if the car is worth less than the £11,578 at the end of the 4 years.
Ignoring the slight shortfall in value the garage seems to be playing it as you would expect with then the owner either paying the balloon and owning the car or trying to negotiate out the shortfall and putting in for a new car and in effect starting again.
However as I said previously as a 76 year old whether this type of contract and transaction was correct for someone of that age might well be a better question of the garage.
No doubt she signed various FCA disclosure documents at the time but even so…
alscar said:
Sounds more like a conventional PCP contact rather than a CS contact with the balloon being used to reduce the monthly repayments.
Just thinking about it some more, if it *is* a PCP, the garage is likely correct in saying that to change to a new car NOW she would need to pay the additional £1K, because the PCP term isn't complete, and she can't VT. If it's a PCP and she holds on until October paying £148/month she can then hand the car back without charge (assuming condition is OK...!)
silentbrown said:
alscar said:
Sounds more like a conventional PCP contact rather than a CS contact with the balloon being used to reduce the monthly repayments.
Just thinking about it some more, if it *is* a PCP, the garage is likely correct in saying that to change to a new car NOW she would need to pay the additional £1K, because the PCP term isn't complete, and she can't VT. If it's a PCP and she holds on until October paying £148/month she can then hand the car back without charge (assuming condition is OK...!)
As per OP’s original post ,to wait until October and then hand back also solves the family’s concerns about her driving so the garage might actually have done them a favour.
Powerkiter said:
Looking at the paperwork it was a conditional sale loan. Speaking to her recently, she thought it was a PCP and there would have been a balloon payment or at least some equity in the car.
This is the part which is concerning. If she genuinely believes that she's been mis-sold, then she should raise it with the finance company.It seems that she's ended up with a CS agreement with an obligatory balloon payment. If it's not PCP, then there's no option to simply hand the car back at the end.
And by my fag packet maths, the monthly payments won't cover half of what's payable under the agreement, so she won't be able to do a voluntary termination. https://www.stellantisfinancialservices.co.uk/supp...
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