Trading in with outstanding finance...

[Donatello]

Hello all,

Just looking for some advice really. After a lot of thought, the OH and I have come to a conclusion that we would like to trade our car in for something else. Trouble is, we have outstanding finance and I have no idea how it works.

Obviously, if we were to get more finance, we would need a deposit and if we could use our current car, it would be a big help.

Please, can anyone who has done this give me some advice and just explain how it works to me.

Thanks

[john_p]

You need to get a settlement figure from your current finance provider. This is usually given over the phone and valid for x days.

The dealer will use this figure and deduct it from the trade in value. They'll pay the finance company for you. Make sure you get confirmation in writing. The finance company will then write to you to inform you it's settled.

[Alfachick]

^^^ Exactly this.

Thing is the one time that I have done this the finance settlement figure was MORE than what the dealer was going to give me for the car.

In this situation they cook the books slightly. For example:

1. You buy car for £10,000 in 2009, take finance for £9000 out on this car.
2. Drive car for 2 years and pay finance for 2 years.
HOWEVER
Finanance is on 5 year plan so you have mostly been paying interest not the capital owed
3. Get settlement figure of £6950
4. Go to garage to buy new car worth £15,000
5. New garage will only give you £5000 for your old car
6. New garage will pay ALL outstanding finance on your car, SO they are paying £1950 more than they are actually giving you for the car.
7. Garage adds £1950 onto price of £15,000 car to take it up to £16,950
8. You give garage deposit of what you have in your bank account e.g. £2000
9. Garage gives you £14,950 finance on new car

Thats how it worked with me when I did it anyway.
I couldn't use my old car as a trade in as it still had the finance outstanding on it, and the garage valued the car less than the outstanding finance bds

If the value of the car is MORE than the outstanding finance then the garage will pay the finance off and also take the difference as a deposit.

Edited for stupid mistake

[predding]

That's how it works...welcome to car financing. Your oversight was taking a 5 year finance deal...maybe cos the payments were affordable but it will only be intothe 4th year you stand a chance of the settlement balance = the car value.

You are now getting caught in the car finance trap...The payments will also start to pay the interest first then dig more into the capital. The only way out now is to buy a car of less vale, or save up for a bigger deposit/contribution. Looks like you may need to keep it for another year.

[Alfachick]

Yeah it sucks, managed to get out of that trap though which is nice Took a fair bit of doing though for sure.

[Donatello]

Well it sounds like the main advice is... Don't get into it as you will struggle to get out?

Looks like I might have to wait until I can buy one outright then

Thanks for all help and advice guys and girls

[SteveS Cup]

Alfachick said:

^^^ Exactly this.

Thing is the one time that I have done this the finance settlement figure was MORE than what the dealer was going to give me for the car.

In this situation they cook the books slightly. For example:

1. You buy car for £10,000 in 2009, take finance for £9000 out on this car.
2. Drive car for 2 years and pay finance for 2 years.
HOWEVER
Finanance is on 5 year plan so you have mostly been paying interest not the capital owed
3. Get settlement figure of £6950
4. Go to garage to buy new car worth £15,000
5. New garage will only give you £5000 for your old car
6. New garage will pay ALL outstanding finance on your car, SO they are paying £1950 more than they are actually giving you for the car.
7. Garage adds £1950 onto price of £15,000 car to take it up to £16,950
8. You give garage deposit of what you have in your bank account e.g. £2000
9. Garage gives you £14,950 finance on new car

Thats how it worked with me when I did it anyway.
I couldn't use my old car as a trade in as it still had the finance outstanding on it, and the garage valued the car less than the outstanding finance bds

If the value of the car is MORE than the outstanding finance then the garage will pay the finance off and also take the difference as a deposit.

Edited for stupid mistake

I was told that this is illegal.

[m3jappa]

I'm not sure how its illegal?

Either way i think car finance is a nightmare, if you get bored/can't afford it or whatever then to sell up is difficult if not impossible.

You will always owe more than the cars worth for the large majority of the term so trading in is no good, selling private is almost impossible too as no one trusts anyone enough to buy a car with finance outstanding or you have to pay the finance off first which if you bought it using finance will typically be impossible.

I am desperate to buy a car but don't have the money but due to past experience with finance i won't bother until i have the actual money, i suppose a better option is a personal loan but either way buying outright makes actual ownership much nicer.

[agxster]

Do some research and find out how much your current car is worth. Get a price on the new car you want. Get a personal loan for X amount to pay off your current car plus X amount extra needed for your new car.

Much better then finance from a car dealer.

All my own opinion and how I would do it. I have done both and a personal loan worked better for me, much simpler.

[Boothy911]

Hi I have a car with outstanding finace I want to trade that car in at available car were I got the car from been told the car is worth 2000-2500 but the finace owed is about 4500 what are my options

Cheers in advance

[Ste1987]

Boothy911 said:

Hi I have a car with outstanding finace I want to trade that car in at available car were I got the car from been told the car is worth 2000-2500 but the finace owed is about 4500 what are my options

Cheers in advance

Look up voluntary termination. If you've paid off more than half the total amount payable, you can terminate and walk away. Only downside is the finance company may not consider you again for finance in the future.

[strain]

I know a guy who bought a brand new mini on finance and had to trade it in a year later due to not being able to fit a baby seat in it.

IIRC he was down about £10,000 by the time he could trade it in for an older, bigger car that he didn't like

Currently 1.5 years left on ours and we owe less than it's worth, always been borderline due to a good deposit and low purchase price, but now we only owe about £4,500 and the cars £6500 ish

[Blanchimont]

I've done it a few times.

Bought a car at 17k.
ran it for a year.
Settlement of 11k.
Car valued at 15,500.
Used £4,500 as deposit for another car.
Cost 13,300
Sold replacement after 2 months.
Got £13k back when sold.
Settlement was 10k.

Costly mistake it was, but back in a car I like!

[liner33]

I've got a year left on my car and already it's close to the settlement value . I planned on keeping it but I'm not going to pay more than the car is worth and I won't have any deposit to do that. But hey I would be in the same position if I had paid cash .