[Masterplan]

Hi guys,

Looking for some advice as I'm sure someone here will have done it or looked into it before.

I've had my car valued and its worth considerably less than the HP settlement figure agreed by BMW. Its not far off the GFV and I'm only 20 months into a 48 month deal which is scary. I'm about 8 months away from meeting the VT figure quoted by BMW, but I plan to contribute extra to speed this up.

So I'm looking to terminate the HP finance agreement once I'm 50% through paying the total balance. But I have a few questions which google gives conflicting answers to.

1. Does terminating the contract affect you credit rating in any way?
2. Does it make it more difficult to get HP finance in the future?

I've looked at part exchanging and private sale, but neither is going to get me anywhere near the finance settlement figure, and the salesman at the dealer said this could actually be the more sensible approach if I could wait a few months.

Any help would be gratefully appreciated guys as I can't seem to find any info from anyone who has done this before.

Cheers
Scott

[Frobius]

As far as I know yeah, vt affects your credit rating as you're deemed to have been unable to meet the original terms of the agreement.

[peterg1965]

Am about to VT my Mini Cooper, to answer your questions:

1. No. It doesn't, it's a statutory right to VT and it cannot be held against you.
2. I wouldn't have thought so. I already have finance agreed on a replacement Mini.

My Mini is £2k in negative equity after 3 years of a 4 year PCP.

[peterg1965]

Originally Posted by Frobius

As far as I know yeah, vt affects your credit rating as you're deemed to have been unable to meet the original terms of the agreement.

This is incorrect.

[jimmylimmy]

Originally Posted by Frobius

As far as I know yeah, vt affects your credit rating as you're deemed to have been unable to meet the original terms of the agreement.

Wrong. No it doesn't affect your credit rating as it is written into the finance agreement. As it doesn't appear on your credit history, it wont be a factor when applying for credit from elsewhere, but BMW Finance will be unlikely to offer finance to you again as finance companies don't like people taking advantage of this option

[SteveC]

VT is a statutory right built into every finance agreement and is often suggested by dealerships when they want to sell a new car. It has no affect on your credit rating as you are considered to have fully met the terms of your agreement. In my experience, the Finance houses generally take care of VTs by auctioning the car, as well as billing you for any pro-rata excess mileage and any rectification to paint, body work, wheels, interior or documentation.

If you think about it, vitually every finance agreement has negative equity built in. You pay linear payments across the agreement but depreciation is strongest in the 1st and 2nd years. This is why you need good gap insurance in case the car is stolen or written off and you are left owing a lot more than your standard insurance pays out. Dealerships' GAP insurance is about twice the price as buying direct from the insurer...

[Frobius]

Ah, my bad. That does make sense. From what I've looked at via experian, they reckon it 'shouldn't' affect your rating per se but some lenders may put a VT flag on your rating which might mean other lenders won't touch you. Apparently.

[peterg1965]

Originally Posted by jimmylimmy

BMW Finance will be unlikely to offer finance to you again as finance companies don't like people taking advantage of this option

This is not true either. I am financing the new Mini Countryman with BMW finance and they are fully aware the current Mini is being VT'd in a couple of weeks. Having spoken to them previously I was told that VTing a car is not necessarily a bar to further credit.

As has been said VT is a statutory right and I suspect it would be illegal for them to use this solely to deny further credit. For most finance contracts, with smallish deposits, VT occurs pretty late on in the contract period, so it's not as if people are doing it on a annual basis, for me I was able to VT at month 36 of a 48 month contract. Even though there is a paper loss for BMW finance, I have no doubt that they have still made a handsome profit on the deal overall.

[Masterplan]

Thanks very much for these replies. That's what i was hoping to hear. The position I am is not great due to your negative equity, but I feel I am making financial sense to VT the car as I'd be throwing good money after bad otherwise.

I presume approaching these agreements with a deposit always helps prevent these agreements from land sliding into negative equity so fast? Because otherwise I would have just traded the car in against another car and avoided a negative equity load or clearing it with my deposit.

[davyk31]

It really depends on what you intend to do. Your existing car has suffered the worst of its depreciation but if you VT and step into a new agreement you are hiking up the depreciation again. Years 3 and 4 of any agreement are the ones where you level the balance of loan against car value because depreciation has drastically reduced.

[A_P]

You gave them your word when you signed that you will pay it off.

A man only has two things in this life. His word and his balls.

He shouldn't break them for nobody.

[Masterplan]

Originally Posted by davyk31

It really depends on what you intend to do. Your existing car has suffered the worst of its depreciation but if you VT and step into a new agreement you are hiking up the depreciation again. Years 3 and 4 of any agreement are the ones where you level the balance of loan against car value because depreciation has drastically reduced.

I see where you are coming from. The current situation is that the car is valued at £5-5.5K less than the current settlement, and only £1k above the GFV of the car and its already done 25000 miles after 21 months. I don't know if this car will ever even out, and the salesman even recommended that BT might be a sensible approach.

The car isn't really meeting our needs anymore, and we would P/EX it against another car if we could. However any deposit we pay would only eat into the negative equity, and even then we would probably have to take out a negative equity loan depending on the dealers figures. I don't want to throw good money after bad where I could pay another few months and leave the car with nothing owed.

Does my logic sound reasonable or am I missing something? Always interested to hear other opinions as they always have valid points.

Originally Posted by A_P

You gave them your word when you signed that you will pay it off.

A man only has two things in this life. His word and his balls.

He shouldn't break them for nobody.

I can see your point of view. I just think compromising with this car on order to keep my word with a dealer isn't worth it to me. It's surely still a mo at spinner for BMW regardless.

[Kerr]

Originally Posted by A_P

You gave them your word when you signed that you will pay it off.

A man only has two things in this life. His word and his balls.

He shouldn't break them for nobody.

It is an agreement between both parties.

Both parties also agree to the VT being part of the agreement.

[Frobius]

Spose so. As mentioned above though, being in negative equity leads you to VT so you can get a new car. As soon as you take the keys, you're going to be in negative equity. Have you considered that what you're really paying for is the depreciation on all these cars?

To be fair, I think unless you put down a hefty deposit, you're pretty likely to be in negative with a car for the first few years of the agreement. In fact, not till you get pretty close to the end will you start balancing out unless as I said, you put down a big deposit or are paying loads a month.

[A_P]

Originally Posted by Kerr

It is an agreement between both parties.

Both parties also agree to the VT being part of the agreement.

It was a quote from a film.

[Masterplan]

Originally Posted by Frobius

Spose so. As mentioned above though, being in negative equity leads you to VT so you can get a new car. As soon as you take the keys, you're going to be in negative equity. Have you considered that what you're really paying for is the depreciation on all these cars?

To be fair, I think unless you put down a hefty deposit, you're pretty likely to be in negative with a car for the first few years of the agreement. In fact, not till you get pretty close to the end will you start balancing out unless as I said, you put down a big deposit or are paying loads a month.

That's right. I'm not saying its the sole fact of negative equity that's making me change, it's the fact we want to change and the car happens to still be in negative equity. I'd happily pay the depreciation of a car if its one we need, like and use. Sadly that's not the case at the moment.

[A_P]

im confused man. So do you or do you not use the spaceship?

[jimmylimmy]

Originally Posted by peterg1965

This is not true either. I am financing the new Mini Countryman with BMW finance and they are fully aware the current Mini is being VT'd in a couple of weeks. Having spoken to them previously I was told that VTing a car is not necessarily a bar to further credit.

As has been said VT is a statutory right and I suspect it would be illegal for them to use this solely to deny further credit. For most finance contracts, with smallish deposits, VT occurs pretty late on in the contract period, so it's not as if people are doing it on a annual basis, for me I was able to VT at month 36 of a 48 month contract. Even though there is a paper loss for BMW finance, I have no doubt that they have still made a handsome profit on the deal overall.

Well funnily enough, that was what I was told by BMW Finance when I rang up to enquire about VT'ing mine - maybe their way of trying to scare me off

[Kerr]

There was a discussion on here before and quite a few guys were of the opinion although nothing could be added to your credit history, there was a strong chance that the finance company wouldn't consider you again.

[Masterplan]

The spaceship gets used daily, but it's not really ideal any more. It's lack of flux capacitor is its biggest down fall.

In all seriousness though, there is so much varying information on this topic all over the web. According to me contract agreement, I should be able to hand it back providing the finance reaches 50% off the total borrowed.

[FRG]

I VT'd an A6 in 2011. I'd paid £86 short of the 50% when I rang up so paid it there and then on the phone and it was collected a week later. If it's HP you have then there's no inspection on the car, wish I'd known this as I had the wheels refurbed in anticipation of it but I was later told by VWFS that its only PCP deals that require a car inspection on return. And as the other replies, no problem with credit rating or anything like that.

[Masterplan]

I'm not sure if its HP or PCP. There is a balloon payment at the end, but the agreement says Hire Purchase Agreement. So presuming BMW Select is HP.