Possible negative equity on 2013 0% PCP

[boff180]

Hi guys,

Just come away from the dealers a little concerned.

I dropped my 2013 2ltr Elegance Hatch (with front assist) in for its second service today, they offered to see if it was worth me changing cars.

They ran the numbers on my 0% interest PCP taken out in September 2013 and the current equity in my Octavia is wait for it.... 26 pence! The cars value.... £12,300

The PCP was taken out based on 14000 miles a year, but I have only just rolled over 18000 today on the way to work.

My final payment next September is £9,900. I'm now quite concerned I'll have negative equity based on that valuation.

It appears the mk3 isn't holding it value as well as vwfs hoped back in 2013 so thought I'd share my experience with everyone in case someone else is in the same boat!

Andy

[sdenny]

You can't have negative equity can you?

 

How does solutions work?

Step 1 - Agree a repayment period and estimate your annual mileage

Step 2 - Set a deferred amount to the end of the agreement (the optional final payment) to make your repayments lower

Step 3 - Pay a deposit made up of part exchange or cash – as little as one repayment (in advance)

Step 4 - At the end of your repayment term you have three choices:

 

• Pay off the optional final payment so you own the car
• Return the car to us and pay nothing more (subject to terms and conditions)
• Part-exchange the car for a brand new ŠKODA on a new solutions contract

[M12MKD]

No different to my citigo. Nearly at the GFV amount already with another year to go on the term.

I think this is fairly common as the cars (not just Skoda) are fairly over priced and people are buying new over used.

That may change and go the other way though.

[spacenase]

I was getting that feeling too, but remember different dealers will have different deals and I don't think the value of the car will continue to drop as quickly as the outstanding payments, so hopefully the equity will increase.

 

Ultimately, I won't have a huge issue just handing it back if there is no equity, but it will obviously impact my next choice of car.

[RobbySpurs]

But don't you need to look at it one of two ways. Either (1) you just hand back the car at the end of the PCP term or (2) whilst technically you might be in negative equity, will the £9k final payment get you a similar 3 year old car?

Guess it all depends how long you plan on keeping it.

[dredge3]

Hand it back at end of term. Doesn't matter what its worth. As long as you have had your moneys worth out of it. We just set one up. 3 years later, we will order a new car and start again. That or hire one

[cortina63]

When I got my car valued for a swap, a 2014 vrs estate for a my16 vrs hatch, the car was dropping around 300-400 a month, my payments being 280,i took a pch out on the new one, cost less over the remainder of my term,with less outlay to pay as deposit, so really i have the equity in my bank so I can get another in 2years

Edited 6 August, 2015 by cortina63

[Neily03]

You're always going to be in negative equity until you're near the end of the term.

[pipsyp]

I looked into shifting mine at just over a year old as I did my previous two Skodas....I put hardly any deposit into mine and transpired it was going to cost me the thick end of 4k to walk away from it.....my 23k car being given a best case 13k PX value.

Most people will be forced into keeping these until v near the end of their PCP....or perhaps to the end.

I ended up passing it over to my wife and so replacing an ageing Astra H and having to continue to stomach the monthly cost...the only saving grace being that as far as PCP deals go it still represents alot of car for just sub £300/month (being a relatively high spec 2.0 TDI Elegance estate).

Main reason the situation is so dire is the frankly unrealistic retail price (made paletable on finance by the 0% APR) and the fact used valued have been hammered by UK oversupply.....loads of used examples of all spec levels available. So a massive early life chasm between price paid and worth. Sure alot of new cars suffer like this but I think the O3 is particularly bad.

[steveo82]

As far as I'm aware the GMFV is what will be enough to clear the debt on the PCP deal, it's not your next deposit on a new deal. From the above posts if your GMFV is 10K and your balloon payment is say between 8-9K then you only have 1-2K to put down on a new deal the remainder has to settle the PCP deal ie the car goes back to them either way even if you part ex, you won't get 9K off a new car.

 

Quite shocking really considering

[loskie]

which is why IMHO leasing is a better option that PCP type deals if you want to drive a new car.

 

PCP is a tool invented by manufacturers in the 90's to lock buyers into a lifetime of being tied to that manufacturer.

 

Very clever marketing the same as 60000m 3yr warranties which have folks believing that the car will disintegrate after that date.

Edited 7 August, 2015 by loskie

[airscool]

We (SWMBO and I) originally headed to the stealer to purchase a used MKII Octavia Estate, with 14K in our 'pocket'.

 

The car we looked at was parked back to back with a MKIII, both with the boots open. We were just saying to each other how much bigger it looked and wouldn't it be great if we could by a MKIII. At that moment we were approached by the salesman who introduced is to  PCP with 0%.

We came to realise we had a 5K deposit and the 9K end payment. All we had to do was find £100 each per month for 3 years and we could have a brand new car.

At the end of the 3 years we will have the paid full price we negotiated at the start and not a penny more. Another way we look at it is we will be paying 9K for a 3 year old car we know the history of and have looked after.

But we intend to keep it, so this works well.

[RobbySpurs]

At the end of the 3 years we will have the paid full price we negotiated at the start and not a penny more. Another way we look at it is we will be paying 9K for a 3 year old car we know the history of and have looked after.

But we intend to keep it, so this works well.

This.

[skd12]

At the end of the 3 years we will have the paid full price we negotiated at the start and not a penny more. Another way we look at it is we will be paying 9K for a 3 year old car we know the history of and have looked after.

But we intend to keep it, so this works well.

Exactly the same as my thinking. I can buy a three year old car that isn't to my spec and keep it 4 years or buy a new one to my spec. At the end of the pcp I'll 'buy' a three year old car that I know has been looked after. Edited 7 August, 2015 by xdq

[AllanDJ]

I kind of think that the Octavia 3 used values will be a bit weak once the ex PCP cars start to hit the market from next summer on, given the sheer volume of cars they must have shifted on these 0% deals. I'm pretty sure that right now I'll be in negative or low equity myself. The choices are pretty simple, if you like what you have right now you can pay the balance and buy the car you currently drive or hopefully get some equity out of it trading it in against whichever new car you choose but this only works if there is a real trade in value higher than the price you can buy the car from Skoda and the dealer doesn't give you a bad deal on your next car doing the usual playing with numbers trick!

I've got that choice to make by April 2017 when my current deal ends, not sure if there is any discount available if you buy your car off of Skoda finance a year or so before your deal ends as the 0% deals have been in part financed by increasing list price a lot from the previous model and then giving thousands of UK customers the supposed 0% deals. It looks more attractive than having a lower list price with a higher interest rate, a good marketing ploy as it were but maybe not quite as good a deal as it seemed when I took out my PCP in 2013!

[classic]

Is there ever any equity to become negative ? Car "buying" is a cost whichever way you do it. What else would you pay £20k+ for when the salesman actually tells you it will be worth less than half the amount in 3 years...?

[Timoctav]

Had mine serviced a couple of weeks ago at 42k miles. It was a service while you wait job. My dealer (Sparshatts Botley, Southampton) also has a Nissan franchise, so got talking to a Nissan salesman about possible PX for a Quashqai mainly to pass the time. He valued my car at only £10.5k, but said he'd give me a couple of grand over book if I did a deal. I wasn't overly interested in changing as my Octavia is as good as the day it was new, but I must admit I was a tad disappointed at the very low value of the car. I'll probably run it on for a few more years yet, methinks, bearing in mind there are Octavia taxis out there running reliably with over 200k on the clock!

Edited 8 August, 2015 by Timoctav

[AllanDJ]

As regards the issue of whether or not there actually is ever any real "Equity" on a PCP deal, as I recall it that was one of the salesman's selling points when I bought the car, that if you brought your car back to trade it in with the same garage with no more than the agreed total mileage and in decent condition that the car should be worth "around" £2000 more than the final balloon payment to buy the car outright. That £2000 (approx) being the equity in the deal, theoretically over and above any discount that you managed to get off of your next car.

Of course a simple test would be to check various online brokers at the end of your current deal to see what price you could buy the car model/ spec that you want minus any trade in!

[Timoctav]

I've settled my PCP deal, mine was an early car before 0% finance was available on the then new Octavia. I've saved just under £1,000 by clearing the debt early, even though I've paid more to clear it than the car is worth!

[Breezy_Pete]

As regards the issue of whether or not there actually is ever any real "Equity" on a PCP deal, as I recall it that was one of the salesman's selling points when I bought the car, that if you brought your car back to trade it in with the same garage with no more than the agreed total mileage and in decent condition that the car should be worth "around" £2000 more than the final balloon payment to buy the car outright. That £2000 (approx) being the equity in the deal, theoretically over and above any discount that you managed to get off of your next car.

Of course a simple test would be to check various online brokers at the end of your current deal to see what price you could buy the car model/ spec that you want minus any trade in!

Selling point, or mis-selling point?

[boff180]

Thanks for the responses guys,

 

I'm more disappointed with the level of depreciation than anything to be honest, especially as with AllanDJ, it was sold to me that there would always be a "few thousand" in the car over the 0% finance.,

 

To add insult to injury Skoda sent me a letter following the visit confirming my "settlement value", obviously forgetting its 0% interest as they knocked £0.01 off the remaining finance as an "interest rebate".

 

At the moment I'll have no choice but to buy the car which is personally disappointing as I would like a VRS. After this experience, this is likely to be my first, and last,brand new car.

 

Personally I believe the 0% and the selling spiel I let myself get duped me into a PCP process and I think its best I cut my losses and get out of it as soon as I can afford to. Lesson learned.

 

Andy

[TheWanderer]

As long as they give me the GFV for the car at the end of the 3 year contract to cover the remaining value of the car that's all that matters to me, they can then have the car back and I'll have another.

 

OK it won't be on 0%, but it's the easiest way to get a new car every 3 years and if they throw in the maintenance as well, then I'm quite happy with that.

[mikecro]

I was invited to my dealer for a "Skoda Special Event" and figured I'd go see if it was worth my while changing my Aug 2013 O3 Elegance 1.6TDi DSG for a new one or maybe a VRS.

 

Imagine my shock when the dealer offered me "top book" of £11,300 for my 20 month old car that cost was about £23K new. They must have special training to maintain a straight face whilst telling you that since you need £15,300 to clear the PCP finance it would only cost £4K to buy out the PCP finance. This is simply added to the finance of the new car making monthly payments of £300 rise to almost £450 against a VRS.

 

You can guess where I told them to shove their special offer deal.

 

I also told them I'd be dropping the car off and walking away once the PCP period is over.

If I get another Octavia I reckon it'l be a proper lease deal - there seems plenty 3+35 offers out there for less than £300 a month.

[Smudger64]

With a lot of people seemingly having cars that are going to be nowhere near the future value Skoda may well be left with a hell of a lot of used cars and so are going to make a loss when people hand them back and just walk away? If I'm wrong in thinking this please let me know.

[pipsyp]

I was invited to my dealer for a "Skoda Special Event" and figured I'd go see if it was worth my while changing my Aug 2013 O3 Elegance 1.6TDi DSG for a new one or maybe a VRS.

Imagine my shock when the dealer offered me "top book" of £11,300 for my 20 month old car that cost was about £23K new. They must have special training to maintain a straight face whilst telling you that since you need £15,300 to clear the PCP finance it would only cost £4K to buy out the PCP finance. This is simply added to the finance of the new car making monthly payments of £300 rise to almost £450 against a VRS.

You can guess where I told them to shove their special offer deal.

I also told them I'd be dropping the car off and walking away once the PCP period is over.

If I get another Octavia I reckon it'l be a proper lease deal - there seems plenty 3+35 offers out there for less than £300 a month.

+1....mine booked about 4k below what it owed.

I reckon unless used surplus start to run dry and prices firm up pretty sharpish (which blatantly isnt going to happen) these cars will owe a K or two still for most come the end of the agreement.

The only ones it wont affect too much are those who put in a monster deposit.....defeats the point of taking a PCP in my mind and will have just gone up in smoke in any case.

VAT free scheme seemed to work much better for residuals as you were typically buying the car at a more realistic list price than the overly ambitious RRP you tend to pay on the 0% deal. I think it will likely be my last Skoda, shame as they are a v good car and were always in my mind (until now) the thinking mans VW. With these kinds of poor residuals alas no more!