Why does she want to swap what is basically like for like?
she owes a hell of a lot more than the current car is worth and to swap cars simply because she fancies a different colour or something equally daft.
Even without doing the full sums it seems as if she was both stitched up on the current car and the dealer is trying to stitch her up again.
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Agreed. Trade in is probably about £500 too low.
Absolute waste of time and money.
Incidentally, £228/month is £13,680 over five years for what is a £7.5k car at best (when new). She's going to get into significant debt for no noticeable benefit whatsoever.
Assuming the current finance has three years left to run, she'll only be able to save a few hundred quid by refinancing now (about £8 am month), but despite that, her finance deal stinks because she could have paid off that loan in three years at the same monthly payment.
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My thoughts exactly the dealer is stitching her up and the reality of it is that if this continues every couple of years the neg equity will get bigger and bigger, would that be correct?
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David, in your opinion do you think she should just stick with the car she has and run the remaining term on the finance and then think about a new car?
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Absolutely.
Assuming that there is a debtor-supplier creditor relationship here under the Consumer Credit Act, she should let this finance run until she has paid half the total credit price - speak to the CAB to find out if this is the case and when that will be - and hand the car back.
Then, if she has a good credit rating, she'll be able to borrow £7k to get a brand new car in six months' time and pay it all off for a similar monthly payment in about three years, despite having no deposit.
This will save her over £5k - that's £912 per month by waiting six months. Be as persuasive as you can be to keep her away from this deal.
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Thanks mate,
I'm not sure she can hand the car back as its not a Hire Purchase type agreement, its more like a personal loan but from a garage.
Do you think its worth an appointment at the CAB?
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It's worth spending half an hour on free advice. It's basically a way of structuring the finance agreement to avoid a DSC relationship - obviously to the garage's advantage.
If it were a sham definiton then in theory you could try litigating out of it but I'm not aware of any case law on the point and the CAB probably would be. I wouldn't suggest going down that route lightly though.
APR is approximately 30% on the current loan but there's nothing that can be done about that.
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Thanks again David, I'll advise her to make an appointment at the CAB and take along all the finance documents etc for them to have a look over.
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When we bought the wife's car at Motorpoint a few years ago:
- FIAT dealership quoted one price and then when I said web price for them was less they could match it
- Motorpoint's finance turned out to be HP! Not what we were told. And the interest rate wasn't APR either!!! We took finance but were misled. And I DID read the paperwork... so be warned.
- Finance was with Lloyds (Blackhorse) and when I phoned for settlement figure they could switch loan to proper repayment for same term and it became about 50GBP cheaper per month. About same as other finance companies so switched the loan with them with no hastle. Paid it off within 12 months because loan had interest calculated per day and no penalties to repay early ... unlike original deal.
So conclusion... your friend could find she can refinance current loan (even with the same company?) and save lots.
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Unless you've got money falling out of your pockets anyone is mad to buy a new car. Then again it's her money and she doesn't have to justify it to anyone, but there's no financial argument for buying a new car. This is especially true if it's on a loan or other finance agreement.
Any new car loses about 25% of its value as soon as you take delivery of it. 17½% of that is VAT, and Mr Brown won't give you that back. Also any car is only worth at best 45-48% of it's original value by the time it's three years old, so if you've bought it on finance you'll always owe more than it's worth.
My advice to your friend is buy a decent car which is four or five years old, where most of its depreciation has already taken place.....
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In general terms, I agree.
But there are ways of making the financial pain of driving a new car less - e.g., buy from the cheapest supplier; sell the old one for the best price (probably privately); avoid finance or at the very least borrow at the cheapest possible rate; buy a car that will depreciate as little as possible. They can all make a huge difference.
It also sounds like Matrix's friend is keen to drive a new car at almost any price and with that in mind, it wouldn't be sensible to suggest that she drive something older, no matter how cheap, because she'll see it as a contest between old vs new rather than cheap(er) vs expensive and probably still choose the new option.
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Yip, I'd agree there :)
I'm going to try my best to advise her that this deal stinks to the high heavens and to contact the CAB to see if its possible to get out of the agreement after she has paid 50% off the finance and then hand the car back and she can start again on a better deal with lower payments, lower term etc etc..
Just out of interest, if the CAB advises that she will have to pay the full amount and is not able to hand the car back, I would assume that she should just keep the car and continue paying the finance off.
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Having said all of this if she is adamant she still wants a new car feel free to point her in my direction as i'm more than happy to take her money off her!
Better to keep a fellow backroomer in business than a random fiat dealer!
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Pretty much. I mean it's a financially nasty position to be in but if she sells it now she'll still owe £3k or so and have no car. She could consider reborrowing the money but she'll only save a few quid per month if she does, because a cheaper loan will still be front loaded.
She could consider going down the bangernomics route but it doesn't sound like something she'd be comfortable with doing and even then it's not guaranteed that it'll be cheaper.
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Ok, I'll get her to go to the CAB and go over the finance details and take it from there. Cheers for your help!
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Unless you've got money falling out of your pockets anyone is mad to buy a new car.
I don't agree. In general the only way to get the optional extras that you want is to buy new. For example, I prefer to have a sunroof in addition to aircon. How many used cars have both aircon and a sunroof?
--
L\'escargot by name, but not by nature.
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>> Unless you've got money falling out of your pockets anyone is >> mad to buy a new car. I don't agree. In general the only way to get the optional extras that you want is to buy new. For example, I prefer to have a sunroof in addition to aircon. How many used cars have both aircon and a sunroof? -- L\'escargot by name, but not by nature.
If you buy new you may get a NEW car, but they're not anywhere near as good value for money as buying second hand.
If people buy new cars with a sunroof as well as A/C they will eventually find their way into the second hand maket too, so I don't quite understand your logic there.
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Had a nice Golf GTI 1.8T brand new with air-con and sunroof as a company car. Nicked after six months. Still convinced it was pretty unique with the spec I chose.... blue not red seats, cruise control and CD autochanger too. Off topic I know :-) But how many Golf GTI 1.8T MKIV's have cruise control! I even remember a scrach on the rear hatch.
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How many used cars have both aircon and a sunroof?
BMW 535
Vauxhall Omega
Toyota Landrcuiser Colorado
No, not a random selection but 2nd hand cars that I've bought/sold in the last few years which had both aircon & sunroof.
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">> How many used cars have both aircon and a sunroof?"
Also, Mk3 Granada Scorpio.
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Why is she thinking of paying interest at all. New Fiats at present have 0% interest and no deposit on offer. So if she desparately wants to change then go for this. In my opinion there is no point in her changing one Punto for another Punto unless she has money to burn.
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As far as i'm led to beleive it wont be possible to get the new fiat on 0% APR as she has outstanding neg equity on the car she has at the moment so the there not going to combine the two. I guess its still worth asking but personally I can't see it.
Got an appointment booked at the CAB for Wed so they can look over all the documents and see where to go for the best.
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Correct me if I am wrong but IIRC anybody who uses the "hand back" rule after paying off 50% will have a black mark put on their credit file, which could affect her ability to borrow at a decent APR in the future.....but I agree what she is wanting to do is absolute madness!
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"Correct me if I am wrong but IIRC anybody who uses the "hand back" rule after paying off 50% will have a black mark put on their credit file, which could affect her ability to borrow at a decent APR in the future"
A mark called "Voluntary Termination" is placed against the account record on the credit reference file. This is neither good nor bad.... It's purely informative.
Lenders would not be allowed to place a "black mark" on a credit file based on conditions which by law must be contained within a credit agreement of this type....
Cheers,
DB
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Correct me if I am wrong
You're wrong. It's not a default, it's a settlement using an implied term in the contract.
Section 99 (1) CCA 1974 states:
At any time before the final payment by the debtor under a regulated hire-purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive the sums payable under the agreement.
Section 100 (1) states:
(1) Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.
In other words, your liability is capped at half the total credit price if you hand back goods under a conditional sale/hire purchase.
The key issue, contrary to what I may have implied last night, is whether or not there is a conditional sale or hire purchase agreement and therefore it's unlikely that you could litigate as it depends on a fairly clearly defined title in the goods. If title in the goods transfers upon delivery, you can't hand back; if it waits until the payments are complete, you can.
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David, its Matrix999 here again.
You really sound like you know what your talking about and I just wanted to say thanks again for all your input into this thread.
Do you work in the car industry out of interest?
I've made an appointment at the CAB for her to go and see what finance agreement she has exactly. I really do think though that she won't be able to hand the car back.
I phoned up a random amount of garages today and explained everything to them and they to agree that the deal wis very dodgy especially all the little niggily things like £400 delivery etc etc..
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Most of the deal looks like a bad deal but there is nothing odd or dodgy about a delivery charge.
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I don't work in the industry but I do have transferrable skills that mean I can take apart a deal and see where the profit is coming from, although I'd rather not talk about my career at the moment :-(
There is nothing odd or unusual about a delivery charge per se - what is unusual is listing it separately, since virtually everyone invoices an on the road price now, at least on advertisements. Of course if the figures add up and they've taken the delivery charge off the manufacturer's list price as well as their own price, there's no harm done, but it's not like the situation 10 or 15 years ago, and the way it still is in the USA, where delivery is extra.
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Yep delivery to dealer is a standard charge. My order form looks like this.
Base Vehicle price £8000
Less Discount (£1500)
Numberplates £17.02
Delivery to dealer £356.67
Sub Total £6873.69
VAT £1202.90
First Reg Fee £38
RFL £105
On the Road Total £8219.59
Shortfall insurance is some kind of GAP insurance - definately over priced - you can buy similar policies over the net for a lot less.
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I stand corrected, sorry for causing any undue concern.
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I've seen this method of sales in action before.
It's obvious what line they are spinning your friend, and it is indeed a VERY persuasive one for people who focus solely on the weekly/monthly payment without looking at the whole picture, it goes something like this:-
"So, you're paying £228 per month for a 2 year old Punto that's almost out of warranty, what would you say Mrs Customer if I could get you a BRAND NEW, FACELIFTED model with a 3 YEAR WARRANTY and not only keep your payment the same, but also REDUCE it by £29 per month for the first 2 years?" I've typed the bits that the salesman is supposed to emphasise in capitals.
It sounds good doesn't it?
It's only when you pull the deal apart like this that you realise that it isn't really as good as it sounds.
The only time I have used it is with Options finance customers who are always paying out for their car as they replace it every 1, 2 or 3 years religously (for those who don't know it's essentially almost like a form of personal leasing). I never had a moral problem with it then as it wasn't really tying them into anything new, they were going to be changing the car anyway.
I don't however like the deal that your friend has been offered Matrix, it's aimed at luring people who don't know any better into inescapable finance deals and then getting them back in next time as no one else can re-finance their massive negative equity or make a deal look attractive. I've had to send away a lot of people who have massive negative equity in my time, most of them ended up buying a new car at the place that ripped them off the first time. :-(
Blue
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Thanks for your reply Blue,
I've got an appointment booked at the CAB for her to go through her options tomorrow.
I'm sure the deal she has is a Motor Loan and therefore she will not be able to hand the car back after 50% of payments have been made.
Looks like its going to be a bumpy ride!!
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I think the only real option for her is to keep her current car for at least a couple more years to pay off a large chunk of the outstanding finance. If she does want to change her car every couple of years she would then be best off going for some kind of PCP plan as mentioned by blue.
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DSG Auto do a Punto Active Sport on a 3+35 PCP for £144 a month; £2800 to buy it at the end of the deal.
If she really wants a new car my advice would be to get a flexible loan (Cahoot for example do a good one) to cover the outstanding finance and pay it off. Sell the car (Parkers trade value is £4800 - usually a bit optimistic) for say £4250 which would leave about £3k on the flexible loan which would cost her £92 a month over 3yrs and leave her with roughly the same payment as she has now.
In 3 years she has a number of choices - loan paid off, throw Punto back and get a similar car and be £92 a month better off, borrow the £2800 on the flexible loan over 2 yrs and own the Punto, or use the £230 or so a month to get a far nicer car.
The above assumes she has a reasonable credit rating.
Dealers do try it on - When I bought my Mondeo I enquired about finance (big Ford main dealer group) and the salesman came back with a figure over 4 years that was more than I'd worked out I could pay a loan off in 3 years and that was only borrowing about £5k! I asked for a calculator and was refused, so I got my PDA out and the interest rate was something ridiculous like 17% flat. Last car I had on finance was at 3.25% flat!
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They were definately trying it on, I don't think I've ever sold above 6% flat IIRC.
Matrix - I agree with what was said above. Your friend obviously likes to change her car, yet she is doing it in absoloutely the most expensive way possible, 5 year finance is no good for people who want to do this.
Check out dsgauto.com she can lease a Punto for far less per month for three years and then hand it back and get a new one.
The amount of people who said to me when shown this type of deal said "oh, but I would never own the car then". Yet somehow these same customers thought that if they took their car over 5 years to get the payment lower and then traded it in after 3 years that was different, they didn't seem to grasp that if they did this then they STILL didn't own the car but they were paying more and taking on a much bigger depreciation risk!
I'm itching to know what dealership this is with, but under the circumstances I wouldn't suggest naming them, it just all sounds so familiar to me...
Blue
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Thanks guys!
I did suggest to her about getting a loan to clear the outstanding amount..
I had a plan of using 0% credit cards but not sure on your views of this.
Eg: Take the £7000 or so negative equity and use the Virgin Credit Card 0% for 9 months and pay the minimum amount. At month 8 move the balance to another 0% Credit Card and so on until loan is clear.
Few problems though.. Have to sell the car for a good price and make sure that she can get that amount of credit in the first place.
Any thoughts?
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I had a plan of using 0% credit cards but not sure on your views of this. Eg: Take the £7000 or so negative equity and use the Virgin Credit Card 0% for 9 months and pay the minimum amount. At month 8 move the balance to another 0% Credit Card and so on until loan is clear.
Not a bad idea, as long you're (or she) is completely clear why you've taken the credit card out in the first place, and don't start adding other costs.
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Ok, this is my plan below:
Outstanding Amount on Finance £7000.51
Transfer to Virgin C/C 0% 9 Months £7000.51
Finance Amount now clear £ 0.00
Pay minimum monthly payment of
2.25% of amount outstanding for
8 months * £ 157.51
Total Paid after 8 months £1260.09
£7000.51 - £1260.09 £5740.42
Sell Car for approx £4500 hopefully £4500.00
£5740.42 - £4500.00 £1240.42
Transfer this balance to another
0% Credit Card and continue to
pay £157.51 for 9 months to clear £ 0.00
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That sounds like a seriously good plan to get rid of the car as cheaply as possible.
Once that is done, try and talk her into leasing a car in future, she will get to change it nice and regularly and she will have none of these problems.
Blue
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That sounds like it may work, but you have to be careful with your timings on the 0% cards. Also, DO NOT spend anything using the plastic if the initial limit is greater than £7000. The order of payment will be anything to the low rate first, then anything retail. So any retail spends will be 'locked in', attracting interest over the full 9 months.
MBNA, who issue the Virgin card, use human application scoring, after the application has gone through the initial scorecard. They assign credit limits based on competitor limits and affordibility. So, if your friend already has a £7k limit somewhere else then MBNA are likely to match it if the credit file looks good.
Also beware of balance transfer fees. They didn't used to apply to brand new accounts but that may have changed.
The industry is starting to move away from 0% deals, so you may struggle to find a 0% deal in 9 months time. 4.9% and 5.9% rates UPIF are now more common.
DB
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Thanks again guys,
Have researched the virgin credit card and its the only one not to charge a BT Charge at the moment. Some C/C companies charge up to £40 or 2% so Virgin seems the clear winner.
So long as she can get £7000 of credit which i'm sure she will have no problem getting the card will only be used for the Balance Transfer.
I'm going to the CAB with her tomorrow, i'll show the CAB staff my working out's and see what they say.
If everything goes well she'll be clear in approx 18 months instead of 36.
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A great plan in theory. However, you really must drum it into her until she hates you that this is a plan to get her out of difficulty. Otherwise the credit card will be spent on and a new car loan/finance will be taken out on top and the situation could get even worse. Also note that the nature of minimum payments is that they get smaller each month as the debt reduces. Ensure she keeps up the same level of repayment.
IMO any salesman that will offer a financing package that leads to such negative equity should be shown the error of his ways with a heavy object on a dark night. On any new car the depreciation curve can be fairly well predicted and repayments should be set accordingly.
--
Mattster
Boycott shoddy build and reliability.
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IMO any salesman that will offer a financing package that leads to such negative equity should be shown the error of his ways with a heavy object on a dark night. On any new car the depreciation curve can be fairly well predicted and repayments should be set accordingly.
But the salesman will be under big pressure not only to sell the vehicle but to also sell finance and warranty products - if the customer is willing to sign up to such products then there will always be a salesman willing to sell it to the customer.
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borrow as much zero intrest as she can, use this to pay off loan, and as much as possible towards new car
try to get her not to buy a punto which will depreciate like a brick, and they are not that good, what about a yaris t sport, ignis sport, micra 1.4 or similar?
buy new car from broker, get them to offer cheapest finance also
sell old car privately
sort her out with a boyfriend who has a clue
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Agreed, what is important to bear in mind is that, thanks to the FSA, there isn't anything hidden or underhand about these deals, people know exactly what they are signing up for. Fortunately for most companies there are lots of people who will focus on nothing but the payment. Most people who don't understand the finance don't bother to ask a friend or relative who does, fortunately Matrix's friend seems a bit more switched on.
Sorry to sound harsh but I have relatively little sympathy for people who sign up to leg breaker finance deals like the one detailed above, it only takes half an hours research on the internet, or even asking a friend as has happened here, to find a better deal.
Blue
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My thoughts exactly Blue
i find that my brokerage customers are much more switched on to the best deal, not only on the new car but also the finance however to here some of the stories from the retail guys downstair shows that for every switched on brokerage customer there is a mug ready to be taken for a ride.
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Thanks again folks,
Will post details later on today of how we got on at the CAB.
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Sorry if I'm duplicating ideas, only here for a minute or 2!
www.moneysavingexpert.com post the Q in loans/debts forum for more ideas.
Aren't Fiat doing 0% all(nearly) models again? But your period to finance certainly won't be 5 years.
& 5 years is a verrrrrrrrrrry long time to finance a car, anyway - think of all the add on maintainence, that'll kick in, in yearts 3+! Tyres, exhausts, bigger service bills - thats WITHOUT anything going wrong!!
VB
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Hi Folks!!
Thought I would write back with an update as to whats happening. Well we never made it to the CAB due to my job and my friends job having difficulties in getting away due to Eco Warriers running riot in the town!
Anyway, we did go along to the nameless garage that presented this awful deal to her and the sales guy we spoke to was as far as i'm concerned a pink fluffy dice!! I asked him to explain how he got to the figures in question and I was given a reply of "Can you not read them there right in front of you" I told him "Don't get smart" This guy was a complete waist of space, i told him that i had independent people from the internet look over the deal and various other garages who all advised to stay clear of the deal.
So, my friend has re-financed her existing deal to lower the payments etc etc and will pay this off before buying a new car.
I wish I could name and shame the garage in question!!!
Once again folks thanks for your help.
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Sounds smart.
How does the new finance deal work out though? Would you mind sharnig some numbers?
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Hi David,
Its going to save her about £20.00 per month not totally amazing but its £20.00 per month better off in her pocket.
I cannot stress the arrogance of the sales man at the garage, there was no sense of customer service what so ever!! I felt I had armed myself with all the good advice from the website and this made him uneasy. He wanted to know who gave me the advice!
Anyway, she has £7300.51 outstanding and the figures for the new loan go along the lines of:
£211.00 x 36 = £7596.00
instead of
£228.00 x 36 = £8208.00
Saving = £612.00 over the 3 years
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Saving = £612.00 over the 3 years
Which is worth it in itself. Well done!
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That's a very smart thing to do and if you can get £7,300 for £211 per month, superbly well done as that's about 3% APR.
I suspect she's brought about £300 cash to the table as well, in which case the saving is only £300 but that's still a damn good weekend away, for instance, for half an hour's work.
When this loan is paid off (and if she keeps putting that £20 a month in a savings account, she'll get it paid off even earlier) and she replaces her next car by shopping around and being aggressive on the deal, she'll really see the benefits.
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