Negative equity - is this normal?

[AudiMan9000]

I’m 7 months into a 48 month PCP on a 2020 Audi Q3.

It has about 7.5k miles on the clock.

I paid nil deposit, negligible equity from last deal as trade in, and there was nothing to pay in the first 3 months. Monthlies are £477,

Settlement figure - £31.5k
WBAC valuation - £24k

So I’m £7.5k in negative equity. Is this normal or something to do with Covid or something else?

[AudiMan9000]

No regret or desire to get rid early. Just curiosity. It seem a huge amount of negative equity to be in. But you’re right, I paid no deposit, only paid 3 x £477 in 7 months of ownership, and drove it 7.5k. I’m doing much less than the 15k miles pa my deal is based on. So hopefully my unnecessarily larger monthly payments will clear off the negative equity faster than commensurate payments otherwise would have.

[AudiMan9000]

RUSTILLDOWN said:

An expensive mistake...

AudiMan9000 said:

So in July 2020 I got a new Audi Q3 on PCP. Nil cash deposit. First 3 months free. £477 pcm x 45. 15k miles pa.

Only made two payments so far. 7k miles on clock.

The 15k figure used to be justified as I drove a lot in my old job. As of January, I’ve changed career and am likely to be WFH permanently. Annual mileage could be as low as 5k. Car likely to sit on the drive all week unused, save for a few short journeys when lockdown lifts (luckily I got the petrol model).

Now considering having 3rd baby (already have two kids aged 1 and 2). Wife has a Mini Countryman; PCP runs out in May 2022 and costs £250 pcm.

Wife has suggested we now only need one car, a bigger car (think Q7) to accommodate a 3rd kid.

Any thoughts/advice?

3rd baby is way off. Wife now likely to want to keep her own car. Lockdown being relaxed soon, so don’t really see it as an expensive mistake anymore.

[AudiMan9000]

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.

Edited by AudiMan9000 on Thursday 25th February 08:29

[AudiMan9000]

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.

[AudiMan9000]

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.

Yes, but you’ve been asking all sorts of questions since the last lockdown in March last year. It appears as though you find it difficult to make decisions and, without knowing your finances, appear not to be able to afford these finance purchases that you’re committing to.

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.

I’ve made 3 payments, not 7 due to the ‘first 3 months free’ promotion. The purpose of this thread was to measure how expected or unusual such a steep drop in residual value is. Clearly, from the responses, it’s to be expected. I had my suspicions it was normal, but thought I’d ask on here. There is no obligation to read/reply.

[AudiMan9000]

Jellybeans2016 said:

J1990 said:

The most eyewatering part of this is paying £477/month to drive a Q3.

Hopefully you can afford the payments that you committed to, but this is the perfect example to people of why low upfront, long term deals are not ideal for everyone. The moment your needs change you're then having to look at whether you can adapt the policy to meet these new needs or if you're facing a painful amount to escape the PCP.

His last thread was, he wasn’t using the Q3 and whether to swap it for a new Q7

That’s an oversimplification designed to make me sound fickle.

Thanks to those who’ve kindly given positive and constructive responses.

[AudiMan9000]

I don’t understand why £477 pcm is an eye watering amount for a Q3. That’s x 45 payments (the first 3 months were ‘free’). So it’s the equivalent of £448 pcm.

That’s with no deposit, no trade in. It’s a premium SUV optioned with: S-line package, metallic paint, auto, flat bottom steering wheel and interior lighting pack.

How much less could it really be? You’re not gonna get it for £200-£300 a month.

I’ve look at the PCP quotes on Audi’s website and it looks like I’ve got it much cheaper than full price.

[AudiMan9000]

pb8g09 said:

AudiMan9000 said:

I don’t understand why £477 pcm is an eye watering amount for a Q3. That’s x 45 payments (the first 3 months were ‘free’). So it’s the equivalent of £448 pcm.

That’s with no deposit, no trade in. It’s a premium SUV optioned with: S-line package, metallic paint, auto, flat bottom steering wheel and interior lighting pack.

How much less could it really be? You’re not gonna get it for £200-£300 a month.

I’ve look at the PCP quotes on Audi’s website and it looks like I’ve got it much cheaper than full price.

Hey if having an automatic gearbox and interior mood lighting is your idea of a premium automobile then you fill your boots.

What I mean is the only way of getting that £477 down would be to get rid of these extras (which wouldn’t reduce the price that much) and blow a big deposit on it (which ultimately is only saving a bit of interest. That fact it’s less than £500 a month for an Audi with nil deposit or trade in is pretty good I think. It’s silly to think you’d have a Q3 for like £200 a month.

[AudiMan9000]

Camelot1971 said:

PeteinSQ said:

Some rather unkind comments on here from very judgemental people. He came on here with a relatively straightforward question, he doesn't need a lecture on why he's made a mistake.

Why some on here think the OP is trolling:

On 15 April 2020 OP said:

I’ve placed an order on a 2020MY Audi A4 saloon 35 TFSI S tronic Black Edition in Quantum Grey.

I’ll be coming from a 2017 Q3 1.4 TFSI S Tronic.

Does anyone have any thoughts on this particular car or how I’ll likely find the transition?

On 31 May 2020 OP said:

Is it possible to start a new PCP whilst furloughed or is the finance likely to be refused? Even if it is possible, is it wise?

On 28 June 2020 OP said:

I might be out of work soon. I have an Audi Q3 on 4 year PCP. I’m almost 3 years into the agreement. Back in March the dealership where I bought it from made a PX offer which was break-even in terms of equity I.e. they agreed to clear the finance.

Is it likely that any dealership would take the car off my hands without me buying a new car from them? I.e. they clear the finance and I let them keep the car? It’s probably worth more than the outstanding finance so they could probably make a little bit of profit on it.

On 30 July 2020 OP said:

Just got a new Audi Q3 on PCP. It seems Audi have decked out the interior with cheap plastics to cut costs. I have noticed some minor scratches not caused by me. Some very faint ones around the virtual cockpit, and a small but noticeable one on the drivers door handle. I can only assume when cleaning the vehicle ready for handover, someone has wiped the surfaces too enthusiastically with a cloth that must have had some grit or other abrasive substance on it.

On 25 October 2020 OP said:

As a general proposition, does not putting any deposit on a PCP mean you’ll likely be in negative equity for longer, probably until the end of the term? Or is that counter balanced by the fact you’re making bigger monthly payments as a result of the lack of deposit?

On 8 December 2020 OP said:

My wife does not work and I am the sole bread winner. I am aware that I cannot get car finance in my name for a car that will be exclusively/substantially driven by her. But can she get car finance in her own name without any income, on the basis our joint income (my wages) will cover the monthly payments? She will have a good credit rating.

On 15 December 2020 OP said:

Is there any point in considering buying a G20 in 318i (150bhp) M-Sport? Would this be a sheep in wolf’s clothing? I’m hoping to get one after my current PCP ends. Last time I looked into it, a 320i M-Sport was too pricey. Since then they’ve realised the 318i model but I wonder if getting such a small engine in an ‘ultimate driving machine’ kinda defeats the object. And I wonder if getting a low powered engine in M-Sport trim would be pointless I.e. for the extra money might as well get a more powerful engine in lower trim.

On 9 January 2021 OP said:

So in July 2020 I got a new Audi Q3 on PCP. Nil cash deposit. First 3 months free. £477 pcm x 45. 15k miles pa.

Only made two payments so far. 7k miles on clock.

The 15k figure used to be justified as I drove a lot in my old job. As of January, I’ve changed career and am likely to be WFH permanently. Annual mileage could be as low as 5k. Car likely to sit on the drive all week unused, save for a few short journeys when lockdown lifts (luckily I got the petrol model).

Now considering having 3rd baby (already have two kids aged 1 and 2). Wife has a Mini Countryman; PCP runs out in May 2022 and costs £250 pcm.

Wife has suggested we now only need one car, a bigger car (think Q7) to accommodate a 3rd kid.

Any thoughts/advice?

I don’t see what quoting my past posts actually establishes? They are literally months apart, spanning the best part of a year. Yes, you could say I’m unwise with money. Arguably anyone who finances a depreciating asset is. There was a time when my job was in doubt, but the economic uncertainty is reflected in the 3 months free promotion. All of those posts resulted in interesting and helpful threads containing advice and debate that added to my and collective wisdom. Would I have done things differently? Yeah, I’d have probably ran my old PCP to August, and switched to a new PCP later this year, probably saving some money. But ultimately I’d be in the same situation and still making similar posts. I’m sorry it seems to annoy some people, so I may not bother any more.

[AudiMan9000]

RoVoFob said:

AudiMan9000 said:

I don’t see what quoting my past posts actually establishes? They are literally months apart, spanning the best part of a year. Yes, you could say I’m unwise with money. Arguably anyone who finances a depreciating asset is. There was a time when my job was in doubt, but the economic uncertainty is reflected in the 3 months free promotion. All of those posts resulted in interesting and helpful threads containing advice and debate that added to my and collective wisdom. Would I have done things differently? Yeah, I’d have probably ran my old PCP to August, and switched to a new PCP later this year, probably saving some money. But ultimately I’d be in the same situation and still making similar posts. I’m sorry it seems to annoy some people, so I may not bother any more.

Maybe I’m misunderstanding you, but what you’re saying doesn’t make sense to me...

How does a three-month ‘free’ promotion, which simply increases the amount of interest you have to pay (since you’re delaying starting repayments) and increases the subsequent monthly payments (since the same cost, plus more interest is spread across fewer monthly payments), compensate for the increased likelihood of losing your job?

Had you lost your job, you would still be tied into the same debt, face higher monthly payments and would have the same negative equity issue had you needed to end the contract early. I don’t see how any of that is helpful when your job is in doubt.

Looking to understand the finance options is great, but it seems like you’re believing sales peoples’ spin rather than engaging with the finance options. An expensive new car may be more accessible on PCP than in cash or on Hire Purchase, but that doesn’t make it good value.

The promotion doesn’t remove the risk; it incentivises taking the risk. The first three months free is achieved by a reduction in the list price although yes it does result in some additional interest because you’re not paying the capital down.

[AudiMan9000]

PH_77 said:

AudiMan9000 said:

The promotion doesn’t remove the risk; it incentivises taking the risk. The first three months free is achieved by a reduction in the list price although yes it does result in some additional interest because you’re not paying the capital down.

Just out of interest, I hope you don't mind me asking, what's the drivetrain on your Audi? 2WD 2.0L diesel? Or is it a Quattro?

Sure. I’ve got the front wheel drive 1.5 litre petrol 150bhp with automatic gearbox.

[AudiMan9000]

Wagonwheel555 said:

AudiMan9000 said:

Sure. I’ve got the front wheel drive 1.5 litre petrol 150bhp with automatic gearbox.

Hang on, you're paying £477pm for a 1.5 litre 150bhp Q3?

Wow

I would have loved to get a bigger engine and Quattro, but that would have made the cost astronomical (if it isn’t already).

[AudiMan9000]

I’ve just been on Ford’s website and got a PCP quote for the cheapest poverty spec Kuga. Nil deposit, 15k miles pa = £493.51 per month x 36.

[AudiMan9000]

Monkeylegend said:

AudiMan9000 said:

I’ve just been on Ford’s website and got a PCP quote for the cheapest poverty spec Kuga. Nil deposit, 15k miles pa = £493.51 per month x 36.

You either found that to justify your deal to yourself or you are just not very good at finding better deals

Well I accept that you’d probably haggle that down somewhat in the dealership, but it does show that ballpark what I’m paying is pretty standard. The only way to substantially reduce it would be to put down a substantial deposit. But even then you’re just shifting the point at which you part with the cash and saving a negligible amount of interest.

I would like to know anyone who has managed to get a Q3 for £200 a month with nil deposit and estimated 15k miles. I suspect no-one has.

[AudiMan9000]

For the record, I have no intention of actually getting rid of my Q3. I just like to know whether I am in the red or black. It’s academic if I’m not looking to get out of the PCP.