Negative Equity Finance
Discussion
tl;dr
On PCP - Can I trade in my current car (Negative Equity including) and get a PCP deal with zero (negative) deposit?
On PCH - Can I trade in my current car (Negative Equity including) and get a PCH deal with zero (negative) rental up front?
Hey Guys, long time lurker and finally created an account so go easy on me.
I have a car on HP and it is currently in a negative equity state if sold/traded in (I estimate around £3,000 to £4,000 - based on WBAC, I assume due to the high mileage I have put on the car).
I am saving for a house and will soon have childcare costs starting so looking to save extra where possible so I can continue to save for a house and negate childcare costs.
I have been looking at HP, PCP and PCH. Since I am looking for a cheaper car, HP is ruled out (due to higher payments plus Negative Equity).
Leaving PCP and PCH - I really just want the cheapest, so I assume that would be PCH but, I may be wrong.
From what I have read, normally on PCP there is an initial deposit and on PCH there is 3-12 months rental up front.
Can you clarify:
On PCP - Can I trade in my current car (Negative Equity including) and get a PCP deal with zero (negative) deposit?
On PCH - Can I trade in my current car (Negative Equity including) and get a PCH deal with zero (negative) rental up front?
Just for reference:
I currently pay ~£400 per month with 4 years remaining (last 2.5 years will be outwith warranty). Hoping to drop this to ~£150-£300 with 3 years term (term end within warranty period).
I commute ~20,000 miles a year.
P.S. I know this might sound daft but, I have done some rough figures, a base spec white goods motor plus my Negative Equity should come to less "£" per month over a shorter "lease" time frame than my current does as payments on it are high and so is the months remaining.
I have no issues with not owning the car and handing it back/just renting it as we have other cars we own for weekend fun/modifying/track days - this is purely a commuting car which will spend the majority of its life in stop-start traffic.
Thanks in advance guys.
On PCP - Can I trade in my current car (Negative Equity including) and get a PCP deal with zero (negative) deposit?
On PCH - Can I trade in my current car (Negative Equity including) and get a PCH deal with zero (negative) rental up front?
Hey Guys, long time lurker and finally created an account so go easy on me.
I have a car on HP and it is currently in a negative equity state if sold/traded in (I estimate around £3,000 to £4,000 - based on WBAC, I assume due to the high mileage I have put on the car).
I am saving for a house and will soon have childcare costs starting so looking to save extra where possible so I can continue to save for a house and negate childcare costs.
I have been looking at HP, PCP and PCH. Since I am looking for a cheaper car, HP is ruled out (due to higher payments plus Negative Equity).
Leaving PCP and PCH - I really just want the cheapest, so I assume that would be PCH but, I may be wrong.
From what I have read, normally on PCP there is an initial deposit and on PCH there is 3-12 months rental up front.
Can you clarify:
On PCP - Can I trade in my current car (Negative Equity including) and get a PCP deal with zero (negative) deposit?
On PCH - Can I trade in my current car (Negative Equity including) and get a PCH deal with zero (negative) rental up front?
Just for reference:
I currently pay ~£400 per month with 4 years remaining (last 2.5 years will be outwith warranty). Hoping to drop this to ~£150-£300 with 3 years term (term end within warranty period).
I commute ~20,000 miles a year.
P.S. I know this might sound daft but, I have done some rough figures, a base spec white goods motor plus my Negative Equity should come to less "£" per month over a shorter "lease" time frame than my current does as payments on it are high and so is the months remaining.
I have no issues with not owning the car and handing it back/just renting it as we have other cars we own for weekend fun/modifying/track days - this is purely a commuting car which will spend the majority of its life in stop-start traffic.
Thanks in advance guys.
If you are seriously trying to save money I would be highly tempted to get a 3 year, £7.5k personal loan and pay the negative equity of £4k, leaving £3.5k to spend on a ~6 year old white goods car:
https://www.autotrader.co.uk/classified/advert/201...
(others available)
or
https://www.autotrader.co.uk/classified/advert/201...
You will actually save money this way and be in a better position to get a mortgage in the future, instead of saddling yourself with significant car repayments
https://www.autotrader.co.uk/classified/advert/201...
(others available)
or
https://www.autotrader.co.uk/classified/advert/201...
You will actually save money this way and be in a better position to get a mortgage in the future, instead of saddling yourself with significant car repayments
kiethton said:
If you are seriously trying to save money I would be highly tempted to get a 3 year, £7.5k personal loan and pay the negative equity of £4k, leaving £3.5k to spend on a ~6 year old white goods car:
https://www.autotrader.co.uk/classified/advert/201...
(others available)
or
https://www.autotrader.co.uk/classified/advert/201...
You will actually save money this way and be in a better position to get a mortgage in the future, instead of saddling yourself with significant car repayments
Thank for the advice. I did look at a loan but, the outstanding finance is ~£16,000. Trade in is offering ~£12,000. I cannot get a loan for the full amount as I have tried. https://www.autotrader.co.uk/classified/advert/201...
(others available)
or
https://www.autotrader.co.uk/classified/advert/201...
You will actually save money this way and be in a better position to get a mortgage in the future, instead of saddling yourself with significant car repayments
I would never recommend rolling negative equity into new finance, as you're already starting upside down and will be that way for future cars, it's a snowball effect. You probably won't see a huge difference in the payments unless you go for a cheap car. It'll also be a nightmare for a mortgage application as you're financing the new car, then the negative equity with interest on top.
The previous poster who suggested a loan and then buy a white goods car is probably the best route to go down. Sell your current car and use the loan to pay the difference, you don't need to refinance the full amount owed.
The previous poster who suggested a loan and then buy a white goods car is probably the best route to go down. Sell your current car and use the loan to pay the difference, you don't need to refinance the full amount owed.
Edited by kieranblenk on Tuesday 22 January 10:49
VoynichMS said:
Thank for the advice. I did look at a loan but, the outstanding finance is ~£16,000. Trade in is offering ~£12,000. I cannot get a loan for the full amount as I have tried.
Surely you don't need to get a loan for 16k to pay off the finance first. Surely WBAC or similar will sort out paying off the finance - you just need to top up the 4k.Others will know better here - I've never done that kind of thing.
Edit: if that is possible, it is definitely what you need to do. Your current cost saving strategy is partly downgrading, but partly also just deferring your problems by pushing what you save into a balloon payment in 3 years.
VoynichMS said:
Thank for the advice. I did look at a loan but, the outstanding finance is ~£16,000. Trade in is offering ~£12,000. I cannot get a loan for the full amount as I have tried.
All you need to do is accept the trade-in offer of £12,000 which leaves you with £4,000 to pay. Take out a personal loan greater than £4,000 to pay off the negative equity to the car finance house. Then, depending on how much you took out on a personal loan you can buy a white goods commuter for £1,000-£5,000 or if you are set on getting into more debt you can get one of those £0 down, 0% APR, £199-299/month Toyota's or Jeep's or whatever is on offer. Examples:
https://www.jeep.co.uk/
https://www.toyota.co.uk/current-offers/
https://www.carbuyer.co.uk/news/81264/best-new-car...
https://www.autoexpress.co.uk/best-cars/98556/the-...
RedSwede said:
Surely you don't need to get a loan for 16k to pay off the finance first. Surely WBAC or similar will sort out paying off the finance - you just need to top up the 4k.
Others will know better here - I've never done that kind of thing.
That's right, though getting a personal loan on top of the finance might be tricky.Others will know better here - I've never done that kind of thing.
Blimey.
Negative equity on a car. No house. Kids on the way.
That's going to take a good few years of hard work to turn around. Good luck with it.
Hard to know what to recommend. Is there a balloon to pay after the finance period ends? If not, and you then own the car that might be the way to go. If you're doing 20k miles pa it might be more realistic to just keep making the payments.
But if the interest rate is high, and you think you can stomach a cheaper car for that commuting distance, then it might be better to do what others have said and walk away.
Tough situation mate. I was in a similar situation, saddled with debts before first house purchase and first kid, mostly down to buying/selling cars, and it has taken years of a good job and some luck with the housing market to put me on a steady footing now, but it has been a long road.
Negative equity on a car. No house. Kids on the way.
That's going to take a good few years of hard work to turn around. Good luck with it.
Hard to know what to recommend. Is there a balloon to pay after the finance period ends? If not, and you then own the car that might be the way to go. If you're doing 20k miles pa it might be more realistic to just keep making the payments.
But if the interest rate is high, and you think you can stomach a cheaper car for that commuting distance, then it might be better to do what others have said and walk away.
Tough situation mate. I was in a similar situation, saddled with debts before first house purchase and first kid, mostly down to buying/selling cars, and it has taken years of a good job and some luck with the housing market to put me on a steady footing now, but it has been a long road.
Thanks for all of the replies so far guys!
kieranblenk, RedSwede, cib24 and Donbot - I never thought of that tbh and I will definitely look in to a loan for Negative Equity only further but, I do have debts (stupidity in my youth, so probably average credit rating). So not sure how likely but, always worth looking at every option.
Edible Roadkill - I thought about a cheap runabout as my Fiancées car is a cheap, older runabout and it fairs well but, I have been stung with reliability with older cars doing high miles before and not sure if I could risk it (I work on an appointment basis so a breakdown is disastrous).
PTF - No balloon payment, £400 for the next 4 years will give me a 6 year old Volvo with ~105,000 miles on it. It is straight up HP. Just do not know if I can afford that much for a car, childcare and continue to save for a house.
I'd happily have a Dacia Sandero Access, no radio and manual front windows but, wouldn't bother me in the slightest, that is what I am considering.
I know mate, tell me about it! Stupidity in my youth and I am now paying the price. What makes it worse is I did a bit of house flipping in my early twenties and blew it all... now mid twenties. Long story short but, it was the right time for having our son, I won't bore you with the details haha.
I am realistic and it will probably be 3-5 years (once free childcare hours kick in/he goes to school) that things will all get moving again. It is a long journey, just trying to get it started and grow up asap.
I am so glad to hear you have the worst of it behind you now.
kieranblenk, RedSwede, cib24 and Donbot - I never thought of that tbh and I will definitely look in to a loan for Negative Equity only further but, I do have debts (stupidity in my youth, so probably average credit rating). So not sure how likely but, always worth looking at every option.
Edible Roadkill - I thought about a cheap runabout as my Fiancées car is a cheap, older runabout and it fairs well but, I have been stung with reliability with older cars doing high miles before and not sure if I could risk it (I work on an appointment basis so a breakdown is disastrous).
PTF - No balloon payment, £400 for the next 4 years will give me a 6 year old Volvo with ~105,000 miles on it. It is straight up HP. Just do not know if I can afford that much for a car, childcare and continue to save for a house.
I'd happily have a Dacia Sandero Access, no radio and manual front windows but, wouldn't bother me in the slightest, that is what I am considering.
I know mate, tell me about it! Stupidity in my youth and I am now paying the price. What makes it worse is I did a bit of house flipping in my early twenties and blew it all... now mid twenties. Long story short but, it was the right time for having our son, I won't bore you with the details haha.
I am realistic and it will probably be 3-5 years (once free childcare hours kick in/he goes to school) that things will all get moving again. It is a long journey, just trying to get it started and grow up asap.
I am so glad to hear you have the worst of it behind you now.
VoynichMS said:
I know mate, tell me about it! Stupidity in my youth and I am now paying the price. What makes it worse is I did a bit of house flipping in my early twenties and blew it all... now mid twenties. Long story short but, it was the right time for having our son, I won't bore you with the details haha.
I am realistic and it will probably be 3-5 years (once free childcare hours kick in/he goes to school) that things will all get moving again. It is a long journey, just trying to get it started and grow up asap.
I am so glad to hear you have the worst of it behind you now.
My youngest starts school in september. The childcare was crippling up until about a year ago when the free care kicked in, so now only paying a little bit. But from september that all goes away (no doubt replaced with kids club activities though!).I am realistic and it will probably be 3-5 years (once free childcare hours kick in/he goes to school) that things will all get moving again. It is a long journey, just trying to get it started and grow up asap.
I am so glad to hear you have the worst of it behind you now.
I think part of your issue is having a car on finance AND having a 20k mile pa commute. The two don't really go together unless you're earning the money to cover the extra depreciation.
In your position i'd ditch the volvo. Take out a £10k loan (about £200/month), pay off the neg equity and get something super-economical with the remaining £6k ish like a Civic 1.6 i-DTEC. Free tax and it'll do 65-70 mpg all day long. And after 5 years when it's on 160k miles and the finance is paid off, it'll still be worth a couple of grand.
Put the remaining £200/month aside for house/car repairs.
Edited by PTF on Tuesday 22 January 11:54
even if you do go for a completely and utter beater of a car, you're already £4k further in debt because of the negative equity, so a £10k dacia duster (don't know if that's the cheapest it can be had for, very quick google search) is actually going to cost you the equivalent of a £14k car... A £7k personal loan for 4 years (same duration as you currently have) could be as little as £150-160 a month. Put £100 aside for the house and £140 aside for potential repair bills and you're in the same position you currently are.
Yes older cars can come with reliability issues, but they are so much cheaper to start with and depreciate so much less that on the law of averages it all works out.
Have you looked at leasing instead of buying? Monthly payments will likely be lower than buying, and since you don't own the car you can't get into further debt issues (you do however have to be honest about your mileage which will make the prices look less attractive than a "standard" 12k mile lease).
Yes older cars can come with reliability issues, but they are so much cheaper to start with and depreciate so much less that on the law of averages it all works out.
Have you looked at leasing instead of buying? Monthly payments will likely be lower than buying, and since you don't own the car you can't get into further debt issues (you do however have to be honest about your mileage which will make the prices look less attractive than a "standard" 12k mile lease).
PTF said:
In your position i'd ditch the volvo. Take out a £10k loan (about £200/month), pay off the neg equity and get something super-economical with the remaining £6k ish like a Civic 1.6 i-DTEC. Free tax and it'll do 65-70 mpg all day long. And after 5 years when it's on 160k miles it'll still be worth a couple of grand.
+1 OP - VAG 1.9tdi (or the 3 cyl 1.4tdi in the smaller platform cars) are famously bulletproof when they've been looked after, do incredible mpg in some applications (my golf bluemotion mk 5 once did 1000 miles on a single tank, was around 78mpg if I remember rightly), and can be bought and maintained for peanuts.
NotBenny said:
PTF said:
In your position i'd ditch the volvo. Take out a £10k loan (about £200/month), pay off the neg equity and get something super-economical with the remaining £6k ish like a Civic 1.6 i-DTEC. Free tax and it'll do 65-70 mpg all day long. And after 5 years when it's on 160k miles it'll still be worth a couple of grand.
+1 OP - VAG 1.9tdi (or the 3 cyl 1.4tdi in the smaller platform cars) are famously bulletproof when they've been looked after, do incredible mpg in some applications (my golf bluemotion mk 5 once did 1000 miles on a single tank, was around 78mpg if I remember rightly), and can be bought and maintained for peanuts.
VoynichMS said:
I currently pay ~£400 per month with 4 years remaining (last 2.5 years will be outwith warranty). Hoping to drop this to ~£150-£300 with 3 years term (term end within warranty period).
Ignoring any interest on the £4k negative equity, that would be £111.11 a month over 3 years, so there's no way on earth you'd get to the bottom end of your price scale with a new car on top.VoynichMS said:
I commute ~20,000 miles a year.
There's a Seat Arona diesel deal for £225.30 a month www.leasing.com/independent-brokers/jet-vehicle-fi...You'd need to put £675 down as an initial rental, and then you'd need to sort out the negative equity. You could get rid of your car via WBAC or similar, and pay the balance with by credit card and pop that on a 0% balance transfer job and chip away at it for the next 3 years. But you're not really going to save much money overall in honesty
May I recommend a Mk1 petrol Ford Focus for saving cash and getting you back to financial stability. My £625 purchase does 100 miles a day and so far has needed some HT leads in 2 years (circa £40)
Comfy, spacious, cheap to run and maintain, no diesel bits to go wrong (boost pipes, turbo, egr, dpf, etc)
Comfy, spacious, cheap to run and maintain, no diesel bits to go wrong (boost pipes, turbo, egr, dpf, etc)
I agree with the others who have said get rid of the car and take a loan to pay off the difference plus get yourself a shed for a couple of years.
A £7k loan over 3 years at 3.5% APR works out to just over £200/month. Pays off your neg, halves your monthly payment and leaves you £3k to find a replacement. Usually lenders will take into account that a loan is to pay off a current lump of car finance when considering you for it.
I'll save ZX10R the bother and recommend the Mondeo 2.5 Titanium X on his behalf
. In estate form it'll do all the family type stuff with ease and is well thought of in reliability terms (not that I've ever had one).
https://www.autotrader.co.uk/classified/advert/201...
https://www.autotrader.co.uk/classified/advert/201...
A £7k loan over 3 years at 3.5% APR works out to just over £200/month. Pays off your neg, halves your monthly payment and leaves you £3k to find a replacement. Usually lenders will take into account that a loan is to pay off a current lump of car finance when considering you for it.
I'll save ZX10R the bother and recommend the Mondeo 2.5 Titanium X on his behalf
. In estate form it'll do all the family type stuff with ease and is well thought of in reliability terms (not that I've ever had one).https://www.autotrader.co.uk/classified/advert/201...
https://www.autotrader.co.uk/classified/advert/201...
Edited by ilikejam on Tuesday 22 January 13:12
VoynichMS said:
I'd happily have a Dacia Sandero Access, no radio and manual front windows but, wouldn't bother me in the slightest, that is what I am considering.
Don't kid yourself about this. All well and good to say you are happy to drive a very basic car, but the realities of commuting means that will wear thin very quickly! I do about 25k a year in a 13 year old Mondeo and that works well for me because it's a high spec car that's quiet and nice to drive.Cars are generally reliable these days but you do need to maintain them properly. I think you would be much better off with a cheaper, "better" car that might need routine maintenance rather than commit to another new PCP basic car where you will lose the will to live after 12 months!
VoynichMS said:
I have no issues with not owning the car and handing it back/just renting it as we have other cars we own for weekend fun/modifying/track days - this is purely a commuting car which will spend the majority of its life in stop-start traffic.
What are the other cars and how much tied up in them?Gassing Station | Car Buying | Top of Page | What's New | My Stuff