Voluntary Termination of Car PCP - Any advice please?

[TikTokTrev]

I’m just into the last 6 months of a 3 year PCP on an Audi A3.

I went into the dealership today, and they valued my car at £2500 less than the settlement figure....incidentally within £50 of the webuyanycar quote that I already obtained for comparison.

The dealership suggested I voluntarily terminate the PCP and start again....the likelihood is I will buy my next car outright.

So I call upon the collective wisdom of TZ-UK please!

Is it a good idea to do the voluntary termination, or better to let the agreement run its course and hand the car back at the end of the contract?
It seems too good to be true that I can simply walk away from a car with a negative equity of this amount without any repercussions, but this is what is being suggested.
For instance if I terminate early will the condition of the car be scrutinised more strictly?

Incidentally I am way under my contracted mileage which I assume will work in my favour.

Also I really do not want to go through the aggro of a private sale, especially given the car has finance outstanding.

Many thanks in advance.

[bloater]

The process itself is fairly simple to do, did it with the wife’s last car before she went on a lease through work.
It was collected and inspected but due to the distance it was going back they took it on a low loader, I though no more.
Roll on a couple months later and a demand for the difference between the auction sale price and the balance of the PCP as it was collected as a non runner.
They have since got the debt collection company chasing us dispite paperwork showing it was a runner and it had an mot and service as well as a few other jobs done less than a week before being collected.
Just waiting on the outcome of the financial ombudsman. But I’m prepared to go to court over it if needed.

[kungfupanda]

As I understand it, you can VT an HP or PCP agreement at any stage after you have made payments totalling 50% of the outstanding debt. With PCP which I presume you have, this will be towards the end of the agreement as the balloon payment is also taken into account.

Not sure why negative equity should concern you anyway as you don’t have to suffer it. It’s the finance company that seem to have got it wrong. If you ran this agreement to it’s full term, you obviously hand the car back as I presume the guaranteed future value or balloon payment is higher than the market value? The negative equity loss therefore doesn’t really crystallise for you.

It’s up to you whether you want to chop the car in now or wait until the end of the term. I don’t think there are any major pitfalls to either choice.

If you do VT, technically you aren’t running the contract to the end of it’s term so the end of term stipulations regards condition and mileage aren’t enforceable. I don’t recommend trashing the car prior to handing back though.

[rincewind]

I VT'd 3 years into a 4 year contract, although when trading in against a car of the same make from the same dealer as i purchased the first. One phone call to the finance company and a they sent through some forms to sign. I didn't sign the forms as the wording would have made me explicitly liable for damage etc. Instead i wrote them a letter telling them i wanted to VT as was my right and that the car was ready for collection at a time of their choosing and was in reasonable condition. This was important as legally you are only obliged to return the vehicle in reasonable condition and provided you do so they cannot charge you for anything they deem outside of this definition. I think it was moneysavingexpert that described in detail how to do this and i used this as a template http://legalbeagles.info/forums/show...tter-Templates

The finance company then sent a chap to inspect the car and another to collect it (although he also checked the car). Both noted various chips etc and asked me to sign a form confirming the 'damage' which i declined to do and the car was taken away. A few days later i received a letter from the finance company saying no money was owed.

I think that essentially trading up with the same dealer, manufacturer and finance company helped. It may be that they decide to press any supposed claims for damage etc if you buy outright, although in reality other than send threatening letters there's not much they can do as no company has yet been prepared to test the reasonable condition definition in court in case they lose and set a precedent.

[TikTokTrev]

Thanks for the advice so far....
Sounds like it’s not as straightforward as the dealer suggested.
My next car is unlikely to be another Audi, so I’m guessing there’s not much incentive for the finance company to be kind to me.

[Byron]

I VT'd 3 years into a 4 year contract, although when trading in against a car of the same make from the same dealer as i purchased the first. One phone call to the finance company and a they sent through some forms to sign. I didn't sign the forms as the wording would have made me explicitly liable for damage etc. Instead i wrote them a letter telling them i wanted to VT as was my right and that the car was ready for collection at a time of their choosing and was in reasonable condition. This was important as legally you are only obliged to return the vehicle in reasonable condition and provided you do so they cannot charge you for anything they deem outside of this definition. I think it was moneysavingexpert that described in detail how to do this and i used this as a template http://legalbeagles.info/forums/show...tter-Templates

The finance company then sent a chap to inspect the car and another to collect it (although he also checked the car). Both noted various chips etc and asked me to sign a form confirming the 'damage' which i declined to do and the car was taken away. A few days later i received a letter from the finance company saying no money was owed.

I think that essentially trading up with the same dealer, manufacturer and finance company helped. It may be that they decide to press any supposed claims for damage etc if you buy outright, although in reality other than send threatening letters there's not much they can do as no company has yet been prepared to test the reasonable condition definition in court in case they lose and set a precedent.

BVRLA Fair Wear & Tear. Look it up - this could help you avoid large bills post-termination!

[rincewind]

BVRLA Fair Wear & Tear. Look it up - this could help you avoid large bills post-termination!

Indeed, although the consumer credit act refers to 'reasonable care' rather than fair wear and tear.

OP this is another useful link that may help inform your decision http://legalbeagles.info/forums/show...on-Your-rights

[-Ally-]

I did it recently on a Skoda Citigo and apart from them wanting ~£250 for damage considered beyond fair wear & tear, it went very smoothly.

I have no intention of paying the £250 as I didn’t even know the damage was there and thought the car was in a fantastic condition for age/mileage.

[Jpshell]

I traded a ford ST for my Mazda; I was around 24 months into a three year pcp. They just gave me a value for the Ford, checked how much was owing on credit and the £1500 equity I had (like you, it had much lower mileage than the agreement) was used as part of the deposit against the Mazda.

All very straightforward and a bit of a surprise as I thought Ford credit were going to hit me with early exit penalties and such like but there was no added payments at all.

[TikTokTrev]

Thanks all....

I’ve spent the evening reading up about this. It all sounds quite adversarial!
My agreement is with VWFS themselves, so I would hope they would ‘play fair’.

This is my 4th consecutive PCP. The previous 3 the settlement figure and the part-ex value were pretty much the same, so changing car was an easy process. This time they seem to have got their residuals very wrong....I’m guessing there will be a lot of people in the same boat as me.

[jaytip]

Thanks all....

I’ve spent the evening reading up about this. It all sounds quite adversarial!
My agreement is with VWFS themselves, so I would hope they would ‘play fair’.

This is my 4th consecutive PCP. The previous 3 the settlement figure and the part-ex value were pretty much the same, so changing car was an easy process. This time they seem to have got their residuals very wrong....I’m guessing there will be a lot of people in the same boat as me.

But the residual is irrelevant because when you took out the PCP you were given a GFV.
So as long as the car is at or below the agreed mileage and there is no damage to the car other than wear and tear, then you owe nothing. You simply give the keys back and walk away. This is regarding keeping the car until the end of the agreed term.
If you want to do a VT, then as long as 50% of your agreement has been paid, then you can walk away.
I did one last year. I took out the PCP based on 5K a year and gave it back after 2.5 years with 80K on the clock and badly scuffed alloys. No charge off VWFS.

[Valkyrie]

My wife's BMW Z4 was worth less than the final payment so we handed it back. All the alloys were kerbed so I got them refinished before the car was picked up. Cost a few hundred versus the risk of the finance company coming after me for a new set of wheels. Car went back with no issues and no charges.


Sent from my iPad using TZ-UK mobile app

[alanm_3]

I did a VT about 6 years ago. Nothing adversarial about it, I just sent them a letter intimating my intentions and they arranged for someone to come to my home, check the car was ok and drove it away.
That was the end of it.

[TikTokTrev]

Thanks again everyone for your replies.

What has thrown me today is that I’ve never had to return a car to the finance company before...I’ve always been able to trade up around 6 to 9 months before the contract finishes and the dealer has settled the finance

What I have definitely gained from your replies is that the negative equity issue really isn’t my problem.

[TikTokTrev]

To update this thread I have just spoken to VWFS, and it transpires I will not have reached the 50% VT threshold until 3 weeks before the end of the 37 month term!....as rightly pointed out above the balloon payment is included within the 50% calculation. Seems my Audi dealership is unaware of this.
So to terminate now I would have to pay the equivalent of 5 monthly payments....and not have a car!

I will simply run the car to the end of my agreement and hand it back.

Incidentally I cheekily offered to buy the car off them for the sum the dealer offered me yesterday....effectively auction value which is what they will achieve anyway. Not surprising they were having none of it!

Once again thanks to everyone that replied....

[cyrusir]

just a thought but you mentioned you dont want another audi, have you gone to wherever you intend to go next with a view to trading your car against a new model with them?

They may offer a trade in higher than your settlement value and thus you will have equity going into the PCP. in this case they clear your finance.

PCP doesnt tie you to one manufacturer.

[TikTokTrev]

just a thought but you mentioned you dont want another audi, have you gone to wherever you intend to go next with a view to trading your car against a new model with them?

They may offer a trade in higher than your settlement value and thus you will have equity going into the PCP. in this case they clear your finance.

PCP doesnt tie you to one manufacturer.

Thanks....yes that’s exactly how I started with Audi in 2011. They offered me more for my outgoing BMW on PCP than BMW!

As mentioned by others the negative equity really isn’t my problem.... I didn’t even put down a deposit at the start of this agreement as it was my 3rd consecutive car with the same dealer. I will just walk away from the car at the end of the term and start again. Effectively it will have been a long term rental.

[alanm_3]

When I did mine, they wouldn’t tell me which auction they would be taking the car to, other than it wouldn’t be a local one, so that I couldn’t go and buy it (probably)for less than was owed on the finance.

Not that I would have but apparently it was quite a common thing for people to do before the finance companies twigged.

[TikTokTrev]

When I did mine, they wouldn’t tell me which auction they would be taking the car to, other than it wouldn’t be a local one, so that I couldn’t go and buy it (probably)for less than was owed on the finance.

Not that I would have but apparently it was quite a common thing for people to do before the finance companies twigged.

As it happens the thought had crossed my mind! I’ve only done 5000 miles and am really not ready to change yet. I’d happily buy it, but not at the settlement figure. I think when the time comes to hand it back I may make them a cheeky offer.

[alanm_3]

I suspect you'll get a resounding "no" to any offer once you make the decision to hand it back to them.

[bloater]

The wife’s sold for less than a third of the settlement figure at auction.
And was then sold by a garage for less than. Half the settlement figure.

We had covered a lot more miles than the agreement than the annual mileage in the contract but we were not made aware of this restriction when we took out the agreement, as my wife does in excess of 30k a year we’d never have agreed to 10k per year.

[TikTokTrev]

I suspect you'll get a resounding "no" to any offer once you make the decision to hand it back to them.

I suspect so too...if they were to allow any movement off the settlement figure every end of contract would become a ‘horse deal’.

[kungfupanda]

Out of interest, has anyone been in a PCP where the value of the car has been higher than the GFV and made a profit out of the end deal either by being given a higher trade in value or selling it on and pocketing the difference?

[Integrale]

I've done three early hand backs with no issues between 2 and 2 1/2 years, BUT all had more than the 50% paid off. Refurbed the alloys on the first, but didn't bother after that.

The last PCP I had was on a Golf, and it didn't reach the 50% till the 35th month of a 36 month deal. This because I paid no deposit!

As long as they get their money there's no problem.

The recent diesel uproar will cause chaos in the next few years.

[ernestrome]

How still the diesel uproar cause uproar? Curious, not challenging.

[alanm_3]

Because the residuals on diesels has fallen through the floor in the past year or so, making then worth a huge amount less than when the deals were taken out.

[Integrale]

Because the residuals on diesels has fallen through the floor in the past year or so, making then worth a huge amount less than when the deals were taken out.

Exactly!

I wouldn't like to be trying to sell a standard diesel car second hand in three years. Big loss anticipated. Now, a PCP deal on a new one, if one was thinking of buying, could be a very sensible step.

Way to judge the car industry's expectations of re-sale is to watch the PCP or lease deals. You may get a cheap deal as they need to shift them, or they may decrease the GFV to protect themselves, thus upping the monthly payments.

There's bound to be plenty of industry insiders on here to clarify.

[ernestrome]

Won't buyers simply hand them back and the finance companies will be stuck with the losses?

[Jpshell]

Out of interest, has anyone been in a PCP where the value of the car has been higher than the GFV and made a profit out of the end deal either by being given a higher trade in value or selling it on and pocketing the difference?

I've had two cars on pcp and received more than the GFV. Ford gave me a cheque for the difference (when I traded a skoda for a fiesta) and Mazda used it as part deposit against another pcp.

In both instances it was because my mileage was well below the agreed annual miles

[David_D]

Won't buyers simply hand them back and the finance companies will be stuck with the losses?

You mean on diesels? If the deal is you can hand it back, not your problem what it's worth. I wouldn't shed any tears for them; I am sure they make enough money generally so there might be some losses but their profit margins will be pretty healthy I imagine.

Whatever people think of diesels, the longevity of engines will always mean there is a second (and third ...) hand market, eg private hire operators.

[Integrale]

Won't buyers simply hand them back and the finance companies will be stuck with the losses?

Do you think they haven't thought of this and get the punter to pay up from?