Part ex values through the floor?

[Sootchucker]

Well I paid quite a sizeable deposit on my GTD (to keep the monthly payment low) and got an 8% discount off list at the time, and am currently 2 years and 4 months into a PCP, and just starting to look to see if it's worth changing.

Was quite surprised yesterday when I was quoted a part ex value of £500 less than I currently still owe on finance ! Never had that happen before. At this time into a PCP I have always had £1000-£2000 equity in the cars (my MK5 Golf and the Scirocco), never had negative equity.

At this rate, might just have to hand it back at the end of the term and walk away to another marque.

[Restlessnative]

I think (hope) it's a temporary thing as this is such a recent occurrence, I'm sure similar happened with Toyota when they had the issues with the faulty accelerators.

Give it a couple of years and everyone will have forgotten all about this and things will be back to normal. The Golf is a very high quality car, whatever happens with this situation that won't change.

This is true.

[Mk1Macca]

This may be a very stupid question, but can someone help me understand GFV / final payments?

So, just for the sake of simplicity. Lets say that 'final balance' payable is £10,000.

At the end of the PCP term, my car has a trade in value of £12,000. I settle up, trade in and have £2K to put towards a new car. This I understand.

Say the trade in value of the car is only £8,000. What happens at the end of the term? Do I owe VW an additional £2,00 to walk away and hand the car back? Or does it mean that the car is worth, at minimum, £10,000 at trade in, even if the actual value is £8,000? This way, I would somehow have equity for a new car, or it just means I can hand the keys back without penalty?

I'm aware I probably should have understood this before buying the car, but I figured Golfs were safe as houses and would have a high residual at the end of the term.

[Sokkia]

mk1macca - at the end of the deal you can just hand the car back even if it is worth less than the balance payment. the final payment is a Guaranteed future value and as such VW have to accept the car back no matter its real world value. Obviously condition of the car and mileage need to be considered and acceptable within the terms of the agreement. In the past GFV's have been set up to attempt to keep some equity in the car come trade in time as VW would like you to purchase another vehicle and having a nice deposit and a car worth more than you thought it was, even if its on paper at least helps in that regard.

Also be aware at present VW are pushing new vehicles with big discounts and incentive deposits for obvious scandal reasons. Its also the slowest time of year for sales anyway. All these affect trade in prices. My car is just over 2 months old and I achieved an almost 18% discount from list price including the PCP deposit contribution. that has to affect the current trade in values for cars purchased a few years ago. The GFV on my PCP works out at about 46% of the price I paid based on a 4 year deal on 10k per annum. The 3 year deal works out at about 55% of what I paid. Obviously the GFV fairs less considerably against a list price purchase and will then look like much larger depreciation.

[Mk1Macca]

Thanks.

So, in the example of the car being worth £8,000 with a GFV of £10,000:

I wanted to keep the car, i'd have to pay a final balance of £2,000 more than the car is actually worth - based obviously on the agreed price of the car at the time of purchase.

If I wanted to walk away from VW completely, I could just hand the keys back with no further financial penalty.

If I wanted to buy from another marque, I'd need to work with the fact there's no equity in the car and start from scratch.

If I wanted a new VW, it would be assumed that there was no trade in value to the car, so no equity to put against a new VW. They would simply take the car back, and i'd be starting from scratch as if I'd walked in to the dealership with nothing to trade in?

Do these scenarios sound right?


Thanks

[Daz2411]

I personnaly don't know any one who has ever given the car back. Depending on the part ex price from you dealer you would most likely be better off purchasing the car then selling private. I'm sure a well looked after 4year old Gti would fetch more than 10k private

[Sokkia]

Spot on

If you intend to keep you still owe VW £10000 no matter what the current trade in value is. That obviously works the other way too. if in 18 months the scandal is long forgotten and the car is worth £12K  you would still only owe VW £10K and therefore have a nice deposit, exactly the position VW want you in. Negative equity puts people off buying another VW and ending up in the same boat in another 3 years!

Yes you can hand the car back with no penalty as long as within the agreed miles pa and general condition of the car. There will be a charge for damage and for excess mileage.

If changing brands or staying with VW you are in effect giving the car back, leaving you no equity as a deposit. if you tried to trade it in at a BMW dealer they would only give you £8k and you would still owe VW £10K and now have no car to return to clear the finance.

But as Daz2411 says you can always clear the debt and sell privately.

[p3asa]

If changing brands or staying with VW you are in effect giving the car back, leaving you no equity as a deposit. if you tried to trade it in at a BMW dealer they would only give you £8k and you would still owe VW £10K and now have no car to return to clear the finance.

That's not strictly true. When I was coming to the end of my PCP with my MK6 Golf I was getting considerably more for a trade in with it going to a mini than I was trading it in for a Mk7.
In the end I traded it in against an A1 and that just marginally beat the VW trade in price.
It all depends who actually wants your business.

[Sokkia]

Was just using BMW as an example really, well aware different marques and even different dealers may give differing part ex values, always pays to shop around. Suppose its down to how easy they think they will shift the car.

[Bungleaio]

My plan is to keep my car for 5 years so I will be paying the balloon payment (if I don't pay it off before) If the car isn't worth the GFV then I will be seeing if I can do some negotiations with them to pay a lower amount.