Getting out of PCP after 2 months... how?

[trowelhead]

Hello all,

Helping for a lady friend of mine...

She took out a 48 month pcp on an evoque about 3 months ago, her situation has changed now so she needs to cut this cost (£400 a month) down if possible

Situation is this, she owes £29.5k, car is worth a hair over that as a private sale, Part ex value likely £26-28k

She is happy to take some neg eq into another car, with the purpose being to lower her payments down to £250pcm mark.

We are looking at basic 1 series, something like a 2016 118d / 118i m sport at 15-18k, or a golf. Would she be having to go to a main dealer to facilitate? Can we use our own finance providers and still take the neg eq? Obviously if they try to stick her on something at 12%APR it's not going to work...

Is it do-able, or is she going to have to stick with the evoque?

Many thanks!

[daemon]

trowelhead said:

Hello all,

Helping for a lady friend of mine...

She took out a 48 month pcp on an evoque about 3 months ago, her situation has changed now so she needs to cut this cost (£400 a month) down if possible

Situation is this, she owes £29.5k, car is worth a hair over that as a private sale, Part ex value likely £26-28k

She is happy to take some neg eq into another car, with the purpose being to lower her payments down to £250pcm mark.

We are looking at basic 1 series, something like a 2016 118d / 118i m sport at 15-18k, or a golf. Would she be having to go to a main dealer to facilitate? Can we use our own finance providers and still take the neg eq? Obviously if they try to stick her on something at 12%APR it's not going to work...

Is it do-able, or is she going to have to stick with the evoque?

Many thanks!

Shes really going to blow her brains out in terms of loss on the car.

Best bet would be to take out a cheap personal loan for the value of the car she wants + the negative equity.

The dealer may well buy her car back for its trade value, likewise worth trying WBAC, etc. OR attempt to sell it privately.

Used car PCP deals tend to be around 10+% APR which makes them horrendous.

[Mandat]

I'm sure someone will come along sooner or later spouting bks that PCP is "perpetual car prison" or similar, citing your colleague's situation is proof of that.

The reality is that she is largely free to do whatever she likes with the car, as long as she can pay off the outstanding finance.

Perhaps she could keep the car and get a long term bank loan, say 7 - 10 years, where the resulting monthly payment will be more in line with her new budget?

[trowelhead]

Mandat said:

Perhaps she could keep the car and get a long term bank loan, say 7 - 10 years, where the resulting monthly payment will be more in line with her new budget?

Good shout, i'll look into that

[trowelhead]

daemon said:

Best bet would be to take out a cheap personal loan for the value of the car she wants + the negative equity.

The dealer may well buy her car back for its trade value, likewise worth trying WBAC, etc. OR attempt to sell it privately.

Used car PCP deals tend to be around 10+% APR which makes them horrendous.

Thanks, so new PCP even on cheaper car is unlikely to be the way to go

I hadn't considered the loan route but makes sense...

[w00tman]

Sell car; repay outstanding PCP assuming covered by car sale; get cheap bank loan and buy moderate car - 3% over 5 years is something like £140 a month.

[Nickp82]

trowelhead said:

Good shout, i'll look into that

The thing with doing that is whilst it will reduce the monthlies it will mean her negative equity only increases as the car depreciates, she will be fully wedged in to the car after a few years!

[JordanM200]

She can sell. Get settlement, go get a trade in price, and pay the difference.

I bought a Clio 220 Trophy on PCP, traded it in 6 weeks later. It can be done !!

[Sheepshanks]

daemon said:

Shes really going to blow her brains out in terms of loss on the car.

Best bet would be to take out a cheap personal loan for the value of the car she wants + the negative equity.

The dealer may well buy her car back for its trade value, likewise worth trying WBAC, etc. OR attempt to sell it privately.

Used car PCP deals tend to be around 10+% APR which makes them horrendous.

It shouldn't be too bad although the timing is unfortunate for such a new car with JLR just announcing they're cutting back production.

Agree on used - PCPs generally don't make sense on used cars.

[trowelhead]

Ok another option also,

What about she takes on a super cheap lease deal

Any neg eq she takes a cheap personal loan, say 1-3k and pays as quickly as possible...

[strath44]

Its just taken me 5 years to clear off a similar situation - a change of job and circumstance meant racking up a load of miles on a car quickly which led to a crap trade in and a lot of neg equity when I had to change.

Some dealerships could do you a new deal on a new car and put this neg equity onto a loan type deal rather than a PCP or HP. The interest as mentioned will be awful. I essentially ended up paying £21k for a £14k car over 5 years but circumstances dictated that.
There is also a legal issue I believe at the dealership end as essentially they are lending more than the value of the car they are selling because of the neg equity. So she may want to look at gap / some form of protection insurance possibly.

The other reason that dealerships can use loans as I found out is it avoids you using VT - voluntary termination and effectively wiping off the dept, your friend won't be able to exercise this as she isn't far enough into the deal yet.

https://www.parkers.co.uk/car-finance/advice/2016/...

what you say above sounds sensible (small loan + lease), was it a Land Rover dealership? I guess the issue is getting finance whilst this car is on file!

Edited by strath44 on Wednesday 24th January 15:52

[GreatGranny]

trowelhead said:

Ok another option also,

What about she takes on a super cheap lease deal

Any neg eq she takes a cheap personal loan, say 1-3k and pays as quickly as possible...

If she can clear the debt by selling then do that then think about what she can get as a cheap lease deal or bank loan.

The difficult bit is selling for enough to clear the debt.
Easy bit is finding another car.

Try WBAC, you may be surprised.

[PositronicRay]

trowelhead said:

Ok another option also,

What about she takes on a super cheap lease deal

Any neg eq she takes a cheap personal loan, say 1-3k and pays as quickly as possible...

Thing is a cheap lease (say £250 pcm) + 150pcm to pay off her loan she's hardly better off + will need to find new deposit.

[Over over under steer]

Sell car, clear off debt, buy a seriously cheap runaround, say old civic or equiv for c.£1500 and accept that she can't afford a nicer car for a while. It seems a little mad to me to be jumping suddenly out of something @ £400 pcm to c.£200 pcm because that differential is not available in disposable income. If she is living that close to the edge I'd suggest BMWs aren't for her at this point, which can be a bitter pill to swallow, but she will thank herself in the long run.

Hope she gets back on her feet.

[PositronicRay]

Over over under steer said:

Sell car, clear off debt, buy a seriously cheap runaround, say old civic or equiv for c.£1500 and accept that she can't afford a nicer car for a while. It seems a little mad to me to be jumping suddenly out of something @ £400 pcm to c.£200 pcm because that differential is not available in disposable income. If she is living that close to the edge I'd suggest BMWs aren't for her at this point, which can be a bitter pill to swallow, but she will thank herself in the long run.

Hope she gets back on her feet.

This is the answer, money is money and debt is debt no matter how you structure it. Oh and the poster suggesting a 10yr loan is out of his tree, what next add it to mortgage?

[Mandat]

PositronicRay said:

This is the answer, money is money and debt is debt no matter how you structure it. Oh and the poster suggesting a 10yr loan is out of his tree, what next add it to mortgage?

Seeing as how a mortgage can sometimes be the cheapest form of lending for some people, that is not such an outrageous idea as you think.

Anyway, the predicament in hand is how to get monthly payments down from £400 pcm to £250 pcm quickly. One way of doing that without losing £000's on selling the car is to extend the loan term.

Presumably the financial problems are short term, seeing how the OP's friend was happy with the original finance package at £400 pcm, and the long term loan can be paid of sooner once circumstances permit.

[w00tman]

Mandat said:

Seeing as how a mortgage can sometimes be the cheapest form of lending for some people, that is not such an outrageous idea as you think.

Without getting in to semantics, it's potentially only the cheapest in terms of interest rate; unless the person is diligent in structuring it over a shorter term, or overpaying, then it's likely being borrowed for the duration of the mortgage term which often through compounding means even on a low interest rate you pay a lot more overall than a shorter, higher-rate, personal loan.

[93DW]

trowelhead said:

Situation is this, she owes £29.5k, car is worth a hair over that as a private sale, Part ex value likely £26-28k

I'm assuming she paid a fairly strong deposit on the Evoque PCP? I only ask as I work in the trade and its very rare that someone would have that little negative equity so soon into the PCP.

[trowelhead]

To clarify, it's not a job loss or anything terrible. Something has happened where she is having some other unexpected ongoing expenses so...

She can afford the car as is, however i think she just regrets taking something on at £400 a month and would feel less burdened at £250 -

I'll explore some of the options mentioned however if she has to crack on with the current agreement then she can still thankfully do it.

[trowelhead]

Also will ask her to check if she is eligible for a 0% credit card, if so she could use that to buy out any neg equity...