Negative equity - is this normal?
Discussion
Classic pistonheads. Everyone likes to jump on someone who has a PCP. Newsflash shed enthusiasts, literally millions of people pay this much for cars.
I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
the tribester said:
Settlement figure - £31.5k
WBAC valuation - £24k
It's only a WBAC valuation. Have you asked the dealer for a trade-in figure?
You think A dealer trade in is going to be much more than WBAC?WBAC valuation - £24k
It's only a WBAC valuation. Have you asked the dealer for a trade-in figure?
Last time I tried to trade in a 5 series to BMW the guy literally told me to look on WBAC for a rough price and theirs would be similar or a smidge more. Ended up selling privately for 10% more.
As others have said perfectly normal. I we had 3 pcps
Ended the first after 2 years and broke even
Ended the second after 2 years and was £2k negative which I paid to get out as my circumstances changed
Ended the last after a year and was £200 negative, however I got a great deal on the last one in terms of a big discount upfront and a dealer funded deposit.
Worth noting that cars 1 and 3 were in demand abarth models, car 2 was a boring jeep diesel of which there were loads for sale and very little appeal. I guess I'm saying some cars hold value better than others and being in demand when you need to end the deal is good as the dealer can charge more and therefore offer more
If you plan to run the term you are fine
P.s try motorway, I got alot more with them than wbac
Ended the first after 2 years and broke even
Ended the second after 2 years and was £2k negative which I paid to get out as my circumstances changed
Ended the last after a year and was £200 negative, however I got a great deal on the last one in terms of a big discount upfront and a dealer funded deposit.
Worth noting that cars 1 and 3 were in demand abarth models, car 2 was a boring jeep diesel of which there were loads for sale and very little appeal. I guess I'm saying some cars hold value better than others and being in demand when you need to end the deal is good as the dealer can charge more and therefore offer more
If you plan to run the term you are fine
P.s try motorway, I got alot more with them than wbac
Edited by Roboticarm on Thursday 25th February 07:03
covmutley said:
Op, you posted on here just a month or so ago and everyone told you that you will be in massive negative equity. Are you honestly surprised?
Sorry, but there was an accusation of trolling in that thread, and I now believe it.
Of course it’s not a surprise. I’m asking if the extent of the negative equity is normal in the circumstances.Sorry, but there was an accusation of trolling in that thread, and I now believe it.
Edited by AudiMan9000 on Thursday 25th February 08:29
Few things:
WBAC is only a reflection of what one buyer is prepared to pay on a given day. You may get more selling it to a dealer, p/x to a dealer, sell privately
You put no stake in. The government still wanted vat on the deal and the manufacturer / dealer still required a profit. You were the person signing up to paying those numbers. Said stakeholders took their money at the beginning of the deal.
You only have that negative equity iof you get rid
Cheapest money is your own money. If you had bought it outright this would not be an issue (until you want to get rid its then called depreciation and its what depreciating assets do - loose value.
As its a PCP though yiou can walk away at the end of the term surely ? not quite sure why its a problem if you pay what is due. When you hand your car back shop around for a deal with 'beter value'
WBAC is only a reflection of what one buyer is prepared to pay on a given day. You may get more selling it to a dealer, p/x to a dealer, sell privately
You put no stake in. The government still wanted vat on the deal and the manufacturer / dealer still required a profit. You were the person signing up to paying those numbers. Said stakeholders took their money at the beginning of the deal.
You only have that negative equity iof you get rid
Cheapest money is your own money. If you had bought it outright this would not be an issue (until you want to get rid its then called depreciation and its what depreciating assets do - loose value.
As its a PCP though yiou can walk away at the end of the term surely ? not quite sure why its a problem if you pay what is due. When you hand your car back shop around for a deal with 'beter value'
rlg43p said:
If forum rules meant that posting like a smartarse t
t got you banned the membership of Pistonheads would be half what it actually is.
If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
I’ve experienced lots of abuse/sarcasm whenever I post. I just rise above it and focus on the genuinely helpful replies.t got you banned the membership of Pistonheads would be half what it actually is.If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
AudiMan9000 said:
rlg43p said:
If forum rules meant that posting like a smartarse tt got you banned the membership of Pistonheads would be half what it actually is.
If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
I’ve experienced lots of abuse/sarcasm whenever I post. I just rise above it and focus on the genuinely helpful replies.t got you banned the membership of Pistonheads would be half what it actually is.If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
I think you’ll learn more by researching yourself rather than constantly asking questions in the form of new threads.
For example, what is the point of this thread exactly? You’ve bought a car with nil down, 3 months payments deferred and only paid 7 payments. Yet you’re confused that you owe more than the value of the car. Did you not think of this before entering into the contract, or are you asking questions for the sake of it?
Anyway, carry on and good luck.
maz8062 said:
AudiMan9000 said:
rlg43p said:
If forum rules meant that posting like a smartarse tt got you banned the membership of Pistonheads would be half what it actually is.
If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
I’ve experienced lots of abuse/sarcasm whenever I post. I just rise above it and focus on the genuinely helpful replies.t got you banned the membership of Pistonheads would be half what it actually is.If a lot of the replies on this thread were spoken face to face you'd end up punched in the mouth.
I think you’ll learn more by researching yourself rather than constantly asking questions in the form of new threads.
For example, what is the point of this thread exactly? You’ve bought a car with nil down, 3 months payments deferred and only paid 7 payments. Yet you’re confused that you owe more than the value of the car. Did you not think of this before entering into the contract, or are you asking questions for the sake of it?
Anyway, carry on and good luck.
Maybe I've missed some history, but some of these posts seem rather harsh.
In answer to the OP's question - yes, it's normal for new cars to depreciate rapidly in the first few months. A £24k trade-in car would probably re-appear on a dealer's forecourt at around £27-8k for example due to the dealer's fair markup and the saving a potential buyer would expect to see compared to buying new.
If you genuinely don't expect to sell the car anytime soon, then it's nothing to worry about. If you want to sell soon then you are going to have to cover the difference between the actual sale value of the car and what's still owed on the finance agreement. I'm afraid that the PCP funding model makes buying cars (and buying out of finance agreements) very expensive.
I have ordered a brand new £30k car for delivery later this year and have done all the sums on how to fund it. I tend to get good value from buying personalised new things and owning them for the long term, so I plan to actually buy this car. It's amazing how much difference paying by different methods make to a purchase like mine...
I could buy it from savings but have decided to pay 50% cash and 50% from a bank loan as I don't want to break into my longer term savings. Hence, my new £30k car becomes a c.£31k car depending on how long the loan is for - that's because I would pay around £1k interest on the loan. (Many would argue I should also add the opportunity cost of losing future interest on my £15k cash savings).
If instead I do a low-deposit PCP at the rates available on this car, then I would pay more like £37k to take eventual ownership - roughly comprising £6k interest on the first 3-4 years' PCP period and then another £1k on a loan to pay the balloon payment. That's because with a PCP you are deferring part of the payment until year 3 or 4, but paying interest (often at quite a high rate, 6.4% in this case) on the whole sum. The way a loan like PCP is structured means more interest is paid earlier in the agreement period.
So, in addition to the high depreciation of a new car, you are also still going to be in the high-interest bearing period of a PCP if you want out at 7 months. Put your own numbers into this calculator and see what I mean... https://www.themoneycalculator.com/vehicle-finance...
In answer to the OP's question - yes, it's normal for new cars to depreciate rapidly in the first few months. A £24k trade-in car would probably re-appear on a dealer's forecourt at around £27-8k for example due to the dealer's fair markup and the saving a potential buyer would expect to see compared to buying new.
If you genuinely don't expect to sell the car anytime soon, then it's nothing to worry about. If you want to sell soon then you are going to have to cover the difference between the actual sale value of the car and what's still owed on the finance agreement. I'm afraid that the PCP funding model makes buying cars (and buying out of finance agreements) very expensive.
I have ordered a brand new £30k car for delivery later this year and have done all the sums on how to fund it. I tend to get good value from buying personalised new things and owning them for the long term, so I plan to actually buy this car. It's amazing how much difference paying by different methods make to a purchase like mine...
I could buy it from savings but have decided to pay 50% cash and 50% from a bank loan as I don't want to break into my longer term savings. Hence, my new £30k car becomes a c.£31k car depending on how long the loan is for - that's because I would pay around £1k interest on the loan. (Many would argue I should also add the opportunity cost of losing future interest on my £15k cash savings).
If instead I do a low-deposit PCP at the rates available on this car, then I would pay more like £37k to take eventual ownership - roughly comprising £6k interest on the first 3-4 years' PCP period and then another £1k on a loan to pay the balloon payment. That's because with a PCP you are deferring part of the payment until year 3 or 4, but paying interest (often at quite a high rate, 6.4% in this case) on the whole sum. The way a loan like PCP is structured means more interest is paid earlier in the agreement period.
So, in addition to the high depreciation of a new car, you are also still going to be in the high-interest bearing period of a PCP if you want out at 7 months. Put your own numbers into this calculator and see what I mean... https://www.themoneycalculator.com/vehicle-finance...
Wagonwheel555 said:
the tribester said:
Settlement figure - £31.5k
WBAC valuation - £24k
It's only a WBAC valuation. Have you asked the dealer for a trade-in figure?
You think A dealer trade in is going to be much more than WBAC?WBAC valuation - £24k
It's only a WBAC valuation. Have you asked the dealer for a trade-in figure?
Last time I tried to trade in a 5 series to BMW the guy literally told me to look on WBAC for a rough price and theirs would be similar or a smidge more. Ended up selling privately for 10% more.
Hi OP,
Ignore the sarky comments .
To answer your question - Yes this is normal. As other have said it wont even out until year 3 or 4. The deferred payment, £0 deposit, £477 p/m and £15k p/a will all work against you.
You'll have to bide your time on this one, untill at least year 3. Avoid WBAC until then or it will depress you!
View WBAC as worst case scenario. When the right time comes, try Audi dealers, local garages first and then compare with WBAC. If a model is in demand WBAC can occasionally value higher than the trade for some reason.
I've ended 2 PCPs early and positively -
1. 520d on a 3 year PCP with a £7K deposit (trade in - and yes I was stupid). Ended after 24 month, sold to local garage and had £2.5K back to me.
2. 340i on a 48m PCP, with £1k deposit. Ended after 35 months, sold to WBAC and £600 back to me.
all the best.
Ignore the sarky comments .
To answer your question - Yes this is normal. As other have said it wont even out until year 3 or 4. The deferred payment, £0 deposit, £477 p/m and £15k p/a will all work against you.
You'll have to bide your time on this one, untill at least year 3. Avoid WBAC until then or it will depress you!
View WBAC as worst case scenario. When the right time comes, try Audi dealers, local garages first and then compare with WBAC. If a model is in demand WBAC can occasionally value higher than the trade for some reason.
I've ended 2 PCPs early and positively -
1. 520d on a 3 year PCP with a £7K deposit (trade in - and yes I was stupid). Ended after 24 month, sold to local garage and had £2.5K back to me.
2. 340i on a 48m PCP, with £1k deposit. Ended after 35 months, sold to WBAC and £600 back to me.
all the best.
Look up a general 'car depreciation' graph and you'll see it drops steeply in the first year then starts to turn over the next 3 years then starts to level out more as the car gets older.
Your finance agreement will be a straight diagonal line from the purchase price at the 0 year mark to the value at the 4 year mark - the GFV/balloon payment the dealers give you is where they expect the price to be at the end of your term.
The gap between the finance line and the car value line is your neg equity (and what gap insurance providers are supposedly covering should the car be written off).
If you're lucky, the finance line might drop below the value line near the end and you can claw some equity back by selling the car.
Your finance agreement will be a straight diagonal line from the purchase price at the 0 year mark to the value at the 4 year mark - the GFV/balloon payment the dealers give you is where they expect the price to be at the end of your term.
The gap between the finance line and the car value line is your neg equity (and what gap insurance providers are supposedly covering should the car be written off).
If you're lucky, the finance line might drop below the value line near the end and you can claw some equity back by selling the car.
Edited by ilikejam on Thursday 25th February 15:57
£3K deposit on a £20k A3 convertible bought in 2017, I ended the PCP 11 months early last June about £2000 in negative equity. Payments were £260 a month. Calculating the future value of the car I worked out that I would have definitely have broken even or better (taking into account the reducing interest).
Current 330e was £18500 with £2500 deposit, so I expect to be in a similar place, but 3 series tend to hold value better when it comes to PCP agreements. A few years ago on a 3 year deal, I was £500 in positive equity with about 8 months left. I was very disappointed with the Audi, but understandable when I was pushing them down on monthly payments.
Current 330e was £18500 with £2500 deposit, so I expect to be in a similar place, but 3 series tend to hold value better when it comes to PCP agreements. A few years ago on a 3 year deal, I was £500 in positive equity with about 8 months left. I was very disappointed with the Audi, but understandable when I was pushing them down on monthly payments.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff