Negative equity
Discussion
Maybe this is better placed in the car dealers thread but i'm looking for some clarification.
Here's a scenario.
My car is on finance. It has £9500 on it and has 3.5 years to go. I've no intention of sellign it or getting rid but i'm perusing the classifieds and there is some nice cars for decent money.
Anyhoo. Say i want rid for something else. Car is valued around £10k private but a dealer i reckon would want to see it for £7800 - £8500.
So, say the car i was looking at was around £6k. If i done the deal i'd be looking to put about £1500 down and finance the rest / loan etc.
I think this is negative equity?
Here's a scenario.
My car is on finance. It has £9500 on it and has 3.5 years to go. I've no intention of sellign it or getting rid but i'm perusing the classifieds and there is some nice cars for decent money.
Anyhoo. Say i want rid for something else. Car is valued around £10k private but a dealer i reckon would want to see it for £7800 - £8500.
So, say the car i was looking at was around £6k. If i done the deal i'd be looking to put about £1500 down and finance the rest / loan etc.
I think this is negative equity?
Davie_GLA said:
Maybe this is better placed in the car dealers thread but i'm looking for some clarification.
Here's a scenario.
My car is on finance. It has £9500 on it and has 3.5 years to go. I've no intention of sellign it or getting rid but i'm perusing the classifieds and there is some nice cars for decent money.
Anyhoo. Say i want rid for something else. Car is valued around £10k private but a dealer i reckon would want to see it for £7800 - £8500.
So, say the car i was looking at was around £6k. If i done the deal i'd be looking to put about £1500 down and finance the rest / loan etc.
I think this is negative equity?
How long is the deal? You may simply be able to hand the car back.Here's a scenario.
My car is on finance. It has £9500 on it and has 3.5 years to go. I've no intention of sellign it or getting rid but i'm perusing the classifieds and there is some nice cars for decent money.
Anyhoo. Say i want rid for something else. Car is valued around £10k private but a dealer i reckon would want to see it for £7800 - £8500.
So, say the car i was looking at was around £6k. If i done the deal i'd be looking to put about £1500 down and finance the rest / loan etc.
I think this is negative equity?
Look at the contract and look for the section that talks about your rights once you've paid 50%.
spud989 said:
Isn't negative equity just any situation where you owe more on an asset than what it's worth?
Yes, but i guess that could be said about every finance deal.Scenario is hypothetical, but if it were me then i'm only 6 months in.
Simpler version would be:
My car has £9500 left on finance.
Car is worth to trade £8k max
New car is £5k so £3k advantage to me.
What would dealer do in this situation?
Your in negative equity if your car isn't worth as much as it has outstanding on it,
In your scenario you'll get kicked in the stones regarding the price of your car as you are trading down, dealers don't usually like this, unless the car your interested in has been sticky for a few months and your car is desirable, anyway,
Your car is worth £8000
Finance is £9500
New car is £6000
You have £1500 to put into the deal
In simple terms dealer gives you £8000 for your car, you pay the remainder of the finance off with the £1500 and start again with the new car. Simple
It's worth noting though if you have a desirable car and you genuinely believe you will get the amount that's owed on your car privately, it's worthwhile pursuing this route, as the £1500 you have means less to finance on the new car.
Scenario I was in a few years ago, was offered £19k for my 335d tourer part ex against a 118d for the OH, there was £20500 outstanding on the 335d, they wanted to load the neg equity on the 118d, I decided I wasn't happy with this and said I'd call them in a few days, cue placing the 335d on auto trader, it sold in under 24 hours for £21600, result, no neg equity, and the £1100 I ended up with was a deposit on the 118d. So don't be pressurised to deal, they tried it with me but I stuck to my guns.
In your scenario you'll get kicked in the stones regarding the price of your car as you are trading down, dealers don't usually like this, unless the car your interested in has been sticky for a few months and your car is desirable, anyway,
Your car is worth £8000
Finance is £9500
New car is £6000
You have £1500 to put into the deal
In simple terms dealer gives you £8000 for your car, you pay the remainder of the finance off with the £1500 and start again with the new car. Simple
It's worth noting though if you have a desirable car and you genuinely believe you will get the amount that's owed on your car privately, it's worthwhile pursuing this route, as the £1500 you have means less to finance on the new car.
Scenario I was in a few years ago, was offered £19k for my 335d tourer part ex against a 118d for the OH, there was £20500 outstanding on the 335d, they wanted to load the neg equity on the 118d, I decided I wasn't happy with this and said I'd call them in a few days, cue placing the 335d on auto trader, it sold in under 24 hours for £21600, result, no neg equity, and the £1100 I ended up with was a deposit on the 118d. So don't be pressurised to deal, they tried it with me but I stuck to my guns.
Davie_GLA said:
Yes, but i guess that could be said about every finance deal.
Scenario is hypothetical, but if it were me then i'm only 6 months in.
Simpler version would be:
My car has £9500 left on finance.
Car is worth to trade £8k max
New car is £5k so £3k advantage to me.
What would dealer do in this situation?
They could put the negative equity on to a newer finance deal. I've done this previously. It's not ideal, mind.Scenario is hypothetical, but if it were me then i'm only 6 months in.
Simpler version would be:
My car has £9500 left on finance.
Car is worth to trade £8k max
New car is £5k so £3k advantage to me.
What would dealer do in this situation?
If it is a dealer, they will settle any existing finance and then add whatever is owed to a new agreement.
If it is private and you are upfront with the buyer and ensure they can confirm with the finance company that the car is indeed finance free then I don't see why it would be a problem.
If it is private and you are upfront with the buyer and ensure they can confirm with the finance company that the car is indeed finance free then I don't see why it would be a problem.
I bought a new saxo vts on finance in 2000 for 11k on a 3 year interest fee offer with a years free insurance, one year later after not getting any sensible insurance quotes, I bought a 300zx TT from a dealer they took my car in PX sorted out a new finance deal and I got 800 in my pocket. The nissan was up for 7k at the time. Was a good deal I think...
Any yes at the time a 300zx TT was cheaper to insure than a saxo vts?
Any yes at the time a 300zx TT was cheaper to insure than a saxo vts?
Edited by TaffRichie on Saturday 21st January 21:31
Nothing wrong with selling a car with outstanding finance, as long as the finance is paid off.
Done this with the above mentioned 335d and a 330d the buyers paid the finance company directly and then me the remaining balance.
That way the buyers are 100% satisfied the finance is cleared and I have fulfilled my duties as a seller
Done this with the above mentioned 335d and a 330d the buyers paid the finance company directly and then me the remaining balance.
That way the buyers are 100% satisfied the finance is cleared and I have fulfilled my duties as a seller
1point7bar said:
Cars are personal assets.
Equity is normally in bricks & mortar or company shares.
You would be just plain in debt.
Correct. The concept of negative equity on cars came up in the car salesman thread; I'd not considered it before.Equity is normally in bricks & mortar or company shares.
You would be just plain in debt.
I assumed that if you were paying a debt back, you would do so in way that meant you were paying it back quicker than the car depreciated. That way you'd have an asset at the end of the payback.
Bit old skool of me I suppose!
cheadle hulme said:
1point7bar said:
Cars are personal assets.
Equity is normally in bricks & mortar or company shares.
You would be just plain in debt.
Correct. The concept of negative equity on cars came up in the car salesman thread; I'd not considered it before.Equity is normally in bricks & mortar or company shares.
You would be just plain in debt.
I assumed that if you were paying a debt back, you would do so in way that meant you were paying it back quicker than the car depreciated. That way you'd have an asset at the end of the payback.
Bit old skool of me I suppose!
Theres also 1.1 million hits if you type in 'negative equity car finance' into google!
It has always been quite common to owe more than your car is worth in a finance agreement particularly for the first half of the loan, due to interest charges, dealer profit margin, etc.
daemon said:
From Wiki - "Negative equity occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan", so by definition its not strictly limited to houses.
Theres also 1.1 million hits if you type in 'negative equity car finance' into google!
Negative equity house 11.1 million hits.Theres also 1.1 million hits if you type in 'negative equity car finance' into google!
Negative equity can obviously be used to describe car finance when the security is worth less than the loan, but is normally used for underwater mortgages.
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