Negative equity - is this normal?

[anonymous-user]

It’s not negligible on a 4 year term. Compound interest is a killer.

[Monkeylegend]

GR_WILL said:

nickfrog said:

Welshbeef said:

Deep Thought said:

Welshbeef said:

He be losing the VAT as soon as driving off the forecourt.

Vat has nothing to do with it.

You drive it off the forecourt and end of the day drive it back to the garage and sell it back to them or sell if private on that same day everyone will knock the 20% vat off

I can't believe you still come up with this, particularly for a Finance Director. It has absolutely nothing to do with the VAT but with inherent depreciation and dealer spread.

I’ve seen this on a website, are they incorrect?

The full article explains it more accurately.

https://www.thecarexpert.co.uk/depreciation/

[Deep Thought]

GR_WILL said:

nickfrog said:

Welshbeef said:

Deep Thought said:

Welshbeef said:

He be losing the VAT as soon as driving off the forecourt.

Vat has nothing to do with it.

You drive it off the forecourt and end of the day drive it back to the garage and sell it back to them or sell if private on that same day everyone will knock the 20% vat off

I can't believe you still come up with this, particularly for a Finance Director. It has absolutely nothing to do with the VAT but with inherent depreciation and dealer spread.

I’ve seen this on a website, are they incorrect?

They're not incorrect, no. But thats not the reason why a nearly new car depreciates.

Their subheading of "VAT – the Government’s contribution towards depreciation" is slightly misleading. They're really saying "if the dealer didnt have to pay vat, the car would retail at £16K", but then everything would move downwards from there in terms of the value of nearly new and used cars anyway.

[The Hofff]

The idea of spending almost £23K in payments and being £7.5K down on equity (if sold) to be left with nothing at the end just seems like madness to me, I suppose you do get the memory of 4 years of having the privilege of driving a brand new car... but that £30K figure would never be forgotten in my mind

I guess people that do this either earn considerably more than more that I do or just have different priorities - anyway, I'll head back under my 'PCP hater' stone now.

Just think, if you did this 4 year PCP twice you would have £60K to help your kids with a deposit on their first house, or pay that off your own mortgage and saves ££££'s on interest

[Gareth1974]

AudiMan9000 said:

I’ve just been on Ford’s website and got a PCP quote for the cheapest poverty spec Kuga. Nil deposit, 15k miles pa = £493.51 per month x 36.

This is why I prefer to lease - Kuga 2.0 ST-X edition, no deposit, just 36 payments of £326.30, 15,000 miles a year, includes metallic.

https://www.whatcar.com/car-leasing/deals/ford/kug...

[Hugo Stiglitz]

Gareth1974 said:

This is why I prefer to lease - Kuga 2.0 ST-X edition, no deposit, just 36 payments of £326.30, 15,000 miles a year, includes metallic.

https://www.whatcar.com/car-leasing/deals/ford/kug...

£12,000 to rent a car that you have to keep in top condition.

Or buy a decent used 12k car and sell it for 6k min in 3 yrs?

[pb8g09]

Hugo Stiglitz said:

£12,000 to rent a car that you have to keep in top condition.

Or buy a decent used 12k car and sell it for 6k min in 3 yrs?

Chap on another thread has just bought a really smart Octavia VRs for that money - bet I wouldn't be able to buy it off him in 3 years for £6k!

[Chris32345]

Don't it just screams
Look at me I'm special

[Car 54 where are you]

I've done PCP on premium brands for 22 years. Every one has been negative equity right up to the end. Hand the car back within mileage and in perfect condition - and treated it like a personal lease (PCP works out cheaper O/A because they always get the 'balloon' wrong). In some instances I've triggered "Voluntary Termination" once I've paid 50% of the deal. That really pisses the finance company.

[maz8062]

GR_WILL said:

nickfrog said:

Welshbeef said:

Deep Thought said:

Welshbeef said:

He be losing the VAT as soon as driving off the forecourt.

Vat has nothing to do with it.

You drive it off the forecourt and end of the day drive it back to the garage and sell it back to them or sell if private on that same day everyone will knock the 20% vat off

I can't believe you still come up with this, particularly for a Finance Director. It has absolutely nothing to do with the VAT but with inherent depreciation and dealer spread.

I’ve seen this on a website, are they incorrect?

I always thought this was the case but I’m not sure if secondhand values of cars factor in the gross price including VAT or net it down to exclude it. Terms like CAP this and CAP clean that don’t make any sense to me, but it’ll be interesting what it measures for a car that is up for sale with delivery miles only.

[Dimebars]

AudiMan9000 said:

I don’t understand why £477 pcm is an eye watering amount for a Q3. That’s x 45 payments (the first 3 months were ‘free’). So it’s the equivalent of £448 pcm.

That’s with no deposit, no trade in. It’s a premium SUV optioned with: S-line package, metallic paint, auto, flat bottom steering wheel and interior lighting pack.

How much less could it really be? You’re not gonna get it for £200-£300 a month.

I’ve look at the PCP quotes on Audi’s website and it looks like I’ve got it much cheaper than full price.

You should be comparing that price with Drive the Deal or Carwow prices, not the list price on Audi's website

Then you'll know whether you've had your pants down or not

Edit: doing some quick sums and investigation, you're paying ~£60 per month too much

Coast2Coast will get you a Q3 1.5 FWD S Tronic with metallic paint, fancy interior lights and flat bottom wheel for £30,793.

Using Audi's finance calculator to get the GFV and using that sell price/GFV/APR/term gives a payment of around £420 a month at 10k miles and £445 at 15k miles (which you've already said is way too much)

Edited by Dimebars on Thursday 4th March 10:12

Edited by Dimebars on Thursday 4th March 10:13

[maz8062]

AudiMan9000 said:

I’ve just been on Ford’s website and got a PCP quote for the cheapest poverty spec Kuga. Nil deposit, 15k miles pa = £493.51 per month x 36.

Yes, but why does it have to be zero down and why 15k miles? When you bought the car you had been furloughed - in between jobs, why didn’t you opt for lower miles and factor in excess mileage charges?

As above, you could have got the same car dressed in a different frock for £200 less. It’s too late now, but next time you're looking at buying a new car do the maths, start a thread even, to determine what works out best for your finances over the long term as your current deal would keep we awake at night.

[Dimebars]

maz8062 said:

Yes, but why does it have to be zero down and why 15k miles? When you bought the car you had been furloughed - in between jobs, why didn’t you opt for lower miles and factor in excess mileage charges?

As above, you could have got the same car dressed in a different frock for £200 less. It’s too late now, but next time you're looking at buying a new car do the maths, start a thread even, to determine what works out best for your finances over the long term as your current deal would keep we awake at night.

But his neighbours would point and laugh at the Skoda badge. Those 4 rings hold cachet dont you know

[Deep Thought]

Hugo Stiglitz said:

Gareth1974 said:

This is why I prefer to lease - Kuga 2.0 ST-X edition, no deposit, just 36 payments of £326.30, 15,000 miles a year, includes metallic.

https://www.whatcar.com/car-leasing/deals/ford/kug...

£12,000 to rent a car that you have to keep in top condition.

Or buy a decent used 12k car and sell it for 6k min in 3 yrs?

Factor in wear and tear maintenance, either a good warranty for the three years or budget for ad hoc bills, MOT prep, maybe a few days off the road to facilitate all that over the three years....

Factor in then any finance charges for the £12K loan (or are we assuming all used car buyers buy cars at £12K cash?)

It wont bridge the gap by any means but maybe some people are happy to pay the remaining delta for those perceived benefits?

And lets be honest if people didnt buy new then there wouldnt be the cars at £12K to buy at three years old.

[Hugo Stiglitz]

Ratesetter is <3% so 400 over 3yrs.

Modern cars don't break that often. It's age that tends to be the killer.

Prep for MOT- @15k a year you'll be using discs, pads, tyres before the end of term and in the first couple of years there are always re visits for teething issues on some marques. Friend had to go back countless times in the first year for issues on a Tiguan leased car.

Servicing- do all lease providers allow for out of main dealer servicing? There's that to consider as well. Plus you can't throw budgets on a decent wheeled car. They'll want circa 500 before end of term.

If you get bored you can walk out on a private owned car.

You can't on a lease for 3 yrs.

Theres always the fear of a big bill at hardback for spurious charges?

You don't need someone's permission to drive your car abroad. You do with a lease.

Theres plus and minus to each but I'd rather have something interesting than a warmed up Ford or VW

[GR_WILL]

Deep Thought said:

GR_WILL said:

nickfrog said:

Welshbeef said:

Deep Thought said:

Welshbeef said:

He be losing the VAT as soon as driving off the forecourt.

Vat has nothing to do with it.

You drive it off the forecourt and end of the day drive it back to the garage and sell it back to them or sell if private on that same day everyone will knock the 20% vat off

I can't believe you still come up with this, particularly for a Finance Director. It has absolutely nothing to do with the VAT but with inherent depreciation and dealer spread.

I’ve seen this on a website, are they incorrect?

They're not incorrect, no. But thats not the reason why a nearly new car depreciates.

Their subheading of "VAT – the Government’s contribution towards depreciation" is slightly misleading. They're really saying "if the dealer didnt have to pay vat, the car would retail at £16K", but then everything would move downwards from there in terms of the value of nearly new and used cars anyway.

Bearing in mind the OP bought brand new, thereby meaning there is a VAT element to his purchase, does that mean Welshbeef was actually correct then?

[Deep Thought]

maz8062 said:

I always thought this was the case but I’m not sure if secondhand values of cars factor in the gross price including VAT or net it down to exclude it. Terms like CAP this and CAP clean that don’t make any sense to me, but it’ll be interesting what it measures for a car that is up for sale with delivery miles only.

IIRC CAP doesnt include pre-reg cars per se.

It would be down to the dealer to put a perceived acheivable retail price on a delivery miles car to make it palatable to a buyer.

[Deep Thought]

Dimebars said:

maz8062 said:

Yes, but why does it have to be zero down and why 15k miles? When you bought the car you had been furloughed - in between jobs, why didn’t you opt for lower miles and factor in excess mileage charges?

As above, you could have got the same car dressed in a different frock for £200 less. It’s too late now, but next time you're looking at buying a new car do the maths, start a thread even, to determine what works out best for your finances over the long term as your current deal would keep we awake at night.

But his neighbours would point and laugh at the Skoda badge. Those 4 rings hold cachet dont you know

A couple of things.

Firstly he could have leased a standard Audi Q3 for £343 a month, compared to a standard Skoda Karoq for £276 a month

https://www.nationwidevehiclecontracts.co.uk/car-l...

https://www.nationwidevehiclecontracts.co.uk/car-l...

So £67 a month, not £200. Have you never paid a bit more for the car you want, rather than the car you need?

Yes, hes chose to PCP this particular car, which works out more expensive generally, but does have other perceived advantages with regards to consumer rights.

Did he get the best deal in the world on the Audi - No.

Do YOU get the best deal in the world on everything you buy - No, probably not.

Do you buy the most basic brand of everything you buy, out of curiosity?

Edited by Deep Thought on Thursday 4th March 11:27

[Deep Thought]

GR_WILL said:

Deep Thought said:

GR_WILL said:

nickfrog said:

Welshbeef said:

Deep Thought said:

Welshbeef said:

He be losing the VAT as soon as driving off the forecourt.

Vat has nothing to do with it.

You drive it off the forecourt and end of the day drive it back to the garage and sell it back to them or sell if private on that same day everyone will knock the 20% vat off

I can't believe you still come up with this, particularly for a Finance Director. It has absolutely nothing to do with the VAT but with inherent depreciation and dealer spread.

I’ve seen this on a website, are they incorrect?

They're not incorrect, no. But thats not the reason why a nearly new car depreciates.

Their subheading of "VAT – the Government’s contribution towards depreciation" is slightly misleading. They're really saying "if the dealer didnt have to pay vat, the car would retail at £16K", but then everything would move downwards from there in terms of the value of nearly new and used cars anyway.

Bearing in mind the OP bought brand new, thereby meaning there is a VAT element to his purchase, does that mean Welshbeef was actually correct then?

No.

Hes not correct.

The VAT element of 20% has no bearing at all on the resale value of the car. ie, the dealer does not just "knock the VAT off" the value of any new car being traded back in once its driven off the forecourt. Its retail value is relative to the new car price and what the car buying public will likely pay for the car and that value will then be subject to the dealers margin.

[HocusPocus]

Dimebars said:

AudiMan9000 said:

I don’t understand why £477 pcm is an eye watering amount for a Q3. That’s x 45 payments (the first 3 months were ‘free’). So it’s the equivalent of £448 pcm.

That’s with no deposit, no trade in. It’s a premium SUV optioned with: S-line package, metallic paint, auto, flat bottom steering wheel and interior lighting pack.

How much less could it really be? You’re not gonna get it for £200-£300 a month.

I’ve look at the PCP quotes on Audi’s website and it looks like I’ve got it much cheaper than full price.

You should be comparing that price with Drive the Deal or Carwow prices, not the list price on Audi's website

Then you'll know whether you've had your pants down or not

Hmmm £5376 each year. Perhaps an acceptable price for the nice self satisfied sensation of a new car in year 1, but how will paying the same money feel when driving a 3 year old car throughout year 4?

With careful purchasing (Mrs HP calls it obsessive deal vulturing) I cannot recall any car ever costing me £5376pa over any extended period, and I include premium cars like ML, several E classes and AMGs or even umpteen Golfs and Minis (new or nearly new). Yes, my old roller did hit a previous owner hard, but I purchased it at the end of its depreciation curve.

No criticism of OP, but an example of the financial exploitation by the new car PCP business model creaming consumers eager to be seen in a new car. These cars are just overpriced transport white goods after all. You only have to look at open market used prices to see why.

I mean, just bought a 2 1/2yo base Skoda Octavia 115bhp under 10k miles for my son. £21k new but just paid 9.5k for a main dealer approved car. That Skoda was never really worth 21k new, not in my eyes anyway.