Hi all
I have recently purchased a Vauxhall Meriva from a car dealer on Finance however in hindsight I maybe shouldn't have as it is giving me a lot less money a month than I originally banked on for myself. Does anyone know if it is possible for me to give the car back to the company the finance is through and if so what the financial penalties are likely to be?
Thanks in advance
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It should all be in the small print that came with your finance agreement. I believe there is some '50%' rule where you can hand the car back without further penalty, although I can't recall if it before you've paid 50% or after...
You can, without any obligation, ring them up and ask for a settlement figure, and then try and get a better deal elsewhere.
If your purchase is very recent then a 'cooling off' period might still be valid.
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Highly unlikely that there'll be any cooling off period unless
a. You bought the car sight unseen over the phone or mail order, in which case you would have seven days as a matter of right under the distance selling regulations; or
b. You signed the finance agreement with the salesman at your home - again seven days applies.
Both of these exist to protect you if you're stitched up, and not to enable you to change your mind.
If you have paid 50% of the total credit price, you can walk away - that includes both deposit and interest, e.g., £10k car + £1k interest less deposit of £3k means you have to make £2,500 of payments, £5,500 50% threshold and £11k total credit price. If (subject I think to fair wear and tear) you have paid more than 50% of the total credit price you can hand the car back and walk away without further penalty.
This applies only where the finance is linked to the car (i.e., not to a personal loan) and again, is designed to protect you from oppressive bargains and it may not actually be in your interest unless you've had a bad deal.
What are the figures involved? (Age/spec/mileage of the car, price paid, deposit, monthly payment and length of the agreement?)
Of course, no one can force you to pay the full credit price of the car. However, if you hand the car back, the garage must only give you what they are willing to pay, though you are of course free to sell it on to someone else who knows about the finance and use the money offered to settle it. (How much the car is worth to sell back will depend on the answers to my questions above).
You will still be liable for the original purchase price, plus any interest, less any payments made and the value of the car. You may also owe an 'administration fee' and/or an 'early repayment fee', which is typically two months' interest, which, using the rule of 78 and 19.9% APR on a 5 year/£10k loan, would be £340; using the average interest across five years, and 6.0% APR, would be £51.
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The figures are its a 53 Reg Meriva (registered in 04) the mileage is about 15000, the price paid was £7500 plus £2500 cash back, th deposit was my old Primera which was valued at £3500 and the monthly payment is approx £140 a month over 5 years.
Thanks for the info, very useful.
Chris
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A rough estimate of the trade value of this car would be £5,750.
I will assume that the £2k cash back was subtracted from your deposit, so that the only deposit for finance purposes was £1k. (If this is not the case, the figures get a little more complicated in terms of calculating the total credit price and also, whether there is a debtor-supplier-creditor relationship for the Consumer Credit Act).
Your deposit: £1,000
You borrowed: £6,500
Total credit price: £140 × 60 = £8400 + deposit = £9400
50% hand back threshhold = £4,700 of payments including deposit You will reach that after 26.42 monthly payments so, in 2 years' time, you will be able to hand the car back and walk away with nothing more to pay. After 26 payments, using the Rule of 78, you will owe £4,142, which is probably slightly more than the car's likely value at that time, so you may just be better off handing the car back rather than selling it and using the money to pay off the finance.
Right now, assuming you have made 2 payments, you owe (also using the rule of 78) £6,343 plus any admin fee to settle the loan. I'd value the car (depends on which spec though) at about £5,750 as a trade in, so you'd have approximately £700 to pay to settle the loan and walk away with no further payments.
You would be walking away of course, because you'd have no car either. Incidentally, using those figures (£6,500 borrowed over 5 years at £140 per month) your APR is approximately 11% - not the worst, but if you have a good credit history, you could have got an APR of 6.0% and saved nearly £15 a month by shopping around.
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I handed back my car last year after I had paid my 50%. I would advise anyone who does this to take as many pictures of the car as possible. The car I handed back was in excellent condition but the finance company tried to say that all the alloys where damaged and that there was a ciggie burn on the passanger seat. They wanted £600 off me. I sent them a copy off the pictures that I took and low and be hold I have never heard anything from them again.
P.S I was stuffed with a high interset rate in case anybody was wondering why I handed it back
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