[RichardJ]

I'm VT'ing my car soon. I have the forms from BMW, just waiting for an estimated collection date for the replacement car I've ordered.

BMW say once I've sent the forms back BCA will contact me to arrange collection and I need to fit in with their timescales so have no choice in when the car goes back.

For those that have been through the VT process, were you able to agree a mutually convenient date? Surely they can't force you to give up the car when it works for them ignoring your availability?

[NISFAN]

Originally Posted by RichardJ

I'm VT'ing my car soon. I have the forms from BMW, just waiting for an estimated collection date for the replacement car I've ordered.

BMW say once I've sent the forms back BCA will contact me to arrange collection and I need to fit in with their timescales so have no choice in when the car goes back.

For those that have been through the VT process, were you able to agree a mutually convenient date? Surely they can't force you to give up the car when it works for them ignoring your availability?

From memory you are not even allowed to use the car once you've formally triggered VT, as it no longer belongs to you. So it is in your best interest to speed up collection. Mine wasn't picked up for about 3 weeks, but it was supposedly a busy period. I wanted it gone sooner as insured two cars at that point.

[Nobby Clark]

Originally Posted by NISFAN

From memory you are not even allowed to use the car once you've formally triggered VT, as it no longer belongs to you.

If you are VT the vehicle, presumably it never belonged to you

[Randolph13]

I have noticed the term VT on here recently and now know it means Voluntary Termination.

Can someone please explain what it entails and the advantage of it.

Thanks R

[NISFAN]

Originally Posted by Randolph13

I have noticed the term VT on here recently and now know it means Voluntary Termination.

Can someone please explain what it entails and the advantage of it.

Thanks R

Once you have paid more than 50% of a credit agreement, you can VT, handing back the asset early.

Why do it? Quite often a car can be in negative equity. Meaning you owe more than the car is worth to the trade. Can save a few thousand £'s.

[scottc]

Originally Posted by NISFAN

From memory you are not even allowed to use the car once you've formally triggered VT, as it no longer belongs to you. So it is in your best interest to speed up collection. Mine wasn't picked up for about 3 weeks, but it was supposedly a busy period. I wanted it gone sooner as insured two cars at that point.

Did you still have to make the monthly while you were waiting for collection?

[NISFAN]

Originally Posted by scottc

Did you still have to make the monthly while you were waiting for collection?

No.

[ronime]

Originally Posted by NISFAN

Once you have paid more than 50% of a credit agreement, you can VT, handing back the asset early.

Why do it? Quite often a car can be in negative equity. Meaning you owe more than the car is worth to the trade. Can save a few thousand £'s.

It goes on your credit file and can affect your credit rating as the lender loses out when you VT to walk away from negative equity. There are plans afoot to exclude PCP deals from the consumers right to VT in the future.

[Nobby Clark]

Originally Posted by NISFAN

Once you have paid more than 50% of a credit agreement, you can VT, handing back the asset early.

Why do it? Quite often a car can be in negative equity. Meaning you owe more than the car is worth to the trade. Can save a few thousand £'s.

I'd be interested to know if that is the real reason people VT.
I can understand it happening on a repayment loan but most here seem to VT on PCPs. If you let the PCP run, you'll owe, at most, the GFV. Is the GFV ever more than market value assuming the vehicle is in the agreed condition and mileage?

I can only really see VT being a benefit on a PCP if your personal cercumstances change and you need an early out, you haven't looked after the car, or you have excess mileage.

[NISFAN]

Originally Posted by ronime

It goes on your credit file and can affect your credit rating as the lender loses out when you VT to walk away from negative equity. There are plans afoot to exclude PCP deals from the consumers right to VT in the future.

Strange, as the company I VT'd with said it wouldn't have a negative impact on my credit file. They also said it was a standard clause which was open for the lendee to option.:

To back that up, some dealers even suggest you VT to get you in the best position to buy another car with the same finance company.

[NISFAN]

Originally Posted by Nobby Clark

I'd be interested to know if that is the real reason people VT.
I can understand it happening on a repayment loan but most here seem to VT on PCPs. If you let the PCP run, you'll owe, at most, the GFV. Is the GFV ever more than market value assuming the vehicle is in the agreed condition and mileage?

I can only really see VT being a benefit on a PCP if your personal cercumstances change and you need an early out, you haven't looked after the car, or you have excess mileage.

Yes it works on PCP. Don't forget, a PCP averages out the monthly depreciation, when in reality it is an exponential curve, starting steep in the early part. This means that you only go into positive equity late into the contract (assuming a small deposit paid). VT's are nearly always a means of ditching neg eq.

[Nobby Clark]

Originally Posted by NISFAN

Yes it works on PCP. Don't forget, a PCP averages out the monthly depreciation, when in reality it is an exponential curve, starting steep in the early part. This means that you only go into positive equity late into the contract (assuming a small deposit paid). VT's are nearly always a means of ditching neg eq.

I think that's what I said. If you let PCP run, you shouldn't be in negative equity. So the reason to VT isn't to resolve a negative equity problem, it's to solve another root cause for which the solution is to cancel a PCP early.

[MarkG_M5Comp]

The figure they give you to VT takes you up to the next payment due date - so you have paid to that date in any case.

So my monthlies were £674 paid 1st of each month. I VT'd mid July and they gave me a figure of £399 still to pay. The car was mine to use until 31 July and all they tell you is to keep it insured until BCA collect it.

If you are pay the mid point and therefore have no additional payment, you've still paid one month in advance so can keep it until the day before the next payment.

Sure, you have to work to BCA timelines - they have to have a driver available - but I booked 2 weeks in advance and gave them a date/time. Easy as that. The only irritation was that the collection driver was late (the inspector finished, signed off and buggered off - collection guy arrived an hour later!) I could have changed the engine in that time (well, the wheels perhaps!).

Voluntary Termination is a piece of legislation, while the account will be shown on your credit file as voluntary termination, it does not negatively affect you. This is what Experian told me:

"Ending a car finance agreement early using ‘voluntary termination’ is your legal right, as long as you’ve paid at least half of the total amount due and you hand the car back in satisfactory condition. You should then be left owing nothing and the lender should update your credit report to reflect this. The lender may also add a voluntary termination marker to the entry on your credit report which explains to other lenders why the finance was settled early. Your credit score should not be affected, as long as you have paid all of your monthly payments on time up to the point you hand the keys back, so you should not see any late payments registered. Lastly, unless any lender you approach has a policy of not lending to people who’ve opted for a voluntary termination in the past – and I’ve not seen any evidence of this – then it should not affect your chances of securing credit in the future. "

[MarkG_M5Comp]

Originally Posted by Nobby Clark

I'd be interested to know if that is the real reason people VT.
I can understand it happening on a repayment loan but most here seem to VT on PCPs. If you let the PCP run, you'll owe, at most, the GFV. Is the GFV ever more than market value assuming the vehicle is in the agreed condition and mileage?

I can only really see VT being a benefit on a PCP if your personal cercumstances change and you need an early out, you haven't looked after the car, or you have excess mileage.

Remember VT is not necessarily one sided and there is a reason dealers talk about it so much:

GFV used to be intended to give customers a little positive equity so that buying the next car had a bit of a 'feel good factor' if they traded in the car. Unfortunately the ridiculous discounts offered (in my case on an F30) has devalued the cars and all but destroyed used prices. In my case, the GFV was likely to be £3-4k higher than the car's value...

...and this is where the dealer comes in. They want to sell you another car and make some profit on that.

So, hand back at the end of the agreement at a BMW FS 'loss', or hand back a few months early at a BMW FS loss - makes little or no difference other than the potential of losing you as a customer. Either way they are not actually losing.

Had a chat about this with the retentions guys the other day, their strategy is to call people who are a few months before the end of their term, often these people have already started looking. I asked why they don't look at those who are close to VT point and it's something they have been thinking about.

The only way to stop VT-ing is to reduce the discounts including BMW contributions to protect used values but since there is no sign of this happening anytime soon, it's clearly not damaging them much!

The first car I PCP'd was a Mazda 5, GFV was around £5k less than market value, the car was also under mileage and fitted with dual DVD changers/TV - bought and sold the mar making a fortune. The first BMW I 'made' £1500 on, the next one a few hundred, reducing to my 335 being so negative. It's their own doing, cars are disposable these days.

[RichardJ]

Originally Posted by NISFAN

From memory you are not even allowed to use the car once you've formally triggered VT, as it no longer belongs to you. So it is in your best interest to speed up collection. Mine wasn't picked up for about 3 weeks, but it was supposedly a busy period. I wanted it gone sooner as insured two cars at that point.

Yeah, this is my concern, having to insure 2 cars for a week or two.

I think I'll process the VT and just nick the wife's 4 Gran Coupe if I'm left car-less for a few days.

[Nobby Clark]

Originally Posted by MarkG_M50d

GFV used to be intended to give customers a little positive equity so that buying the next car had a bit of a 'feel good factor' if they traded in the car. Unfortunately the ridiculous discounts offered (in my case on an F30) has devalued the cars and all but destroyed used prices. In my case, the GFV was likely to be £3-4k higher than the car's value...

...and this is where the dealer comes in. They want to sell you another car and make some profit on that.

The first car I PCP'd was a Mazda 5, GFV was around £5k less than market value, the car was also under mileage and fitted with dual DVD changers/TV - bought and sold the mar making a fortune. The first BMW I 'made' £1500 on, the next one a few hundred, reducing to my 335 being so negative. It's their own doing, cars are disposable these days.

May be I'm not being clear with my question, may be I'm just not understanding the answers...

The above just says to me you were expecting to have profit in the GFV at the end of the term. I think this is a mistake many make when taking out a PCP.
The only thing you can guarantee at the end of a PCP is the GFV. Banking on more is fantasy. Consider it a bonus if it happens. If the the vehiclevalue is less than GFV at the end of term, hand the car back. You've still not lost anything, it was in the original calculation.

So to clarify, negative equity only really happens if you want to end a PCP early.

As NISFAN correctly said, PCPs draw down a curve to the end of term where GFV should equal the market value and nobody loses. where people think they are loosing is they want to jump ship early, before that curve has met GFV or when value of the car is less than GFV at the end of term when the buyer wanted to keep it.

So back to my original point, it's only when someone wants to end a PCP (or loan agreement) early that negative equity occurs. The question is why do people want to end a loan early? The answer is not to avoid negative equity.

[MarkG_M5Comp]

Originally Posted by Nobby Clark

The above just says to me you were expecting to have profit in the GFV at the end of the term. I think this is a mistake many make when taking out a PCP.

Understand how you read that but no, I was not 'expecting' a profit but it is how PCPs have always been sold to me - 'you should be in a positive position sir'.

Originally Posted by Nobby Clark

The only thing you can guarantee at the end of a PCP is the GFV. Banking on more is fantasy. Consider it a bonus if it happens. If the the vehiclevalue is less than GFV at the end of term, hand the car back. You've still not lost anything, it was in the original calculation. end of the term. I think this is a mistake many make when taking out a PCP.

Agreed, 100%

Originally Posted by Nobby Clark

So to clarify, negative equity only really happens if you want to end a PCP early.

As NISFAN correctly said, PCPs draw down a curve to the end of term where GFV should equal the market value and nobody loses. where people think they are loosing is they want to jump ship early, before that curve has met GFV or when value of the car is less than GFV at the end of term when the buyer wanted to keep it.

Well kind of. I wouldn't say 'nobody loses' because if there is negative equity, someone always loses (BMW FS). However, it's not a loss, I'm sure it's factored into their business model. Ie. in my case, even if I waited to the end, there would still be a difference of several thousands.

Originally Posted by Nobby Clark

So back to my original point, it's only when someone wants to end a PCP (or loan agreement) early that negative equity occurs. The question is why do people want to end a loan early? The answer is not to avoid negative equity.

In short, yes - it's only when exiting the agreement early that ADDITIONAL negative equity occurs (above what BMW FS may have anticipated). As for the second part of your questions (why end early?) - to take advantage of a new deal, to get the latest model, in response to the salesman's call... lots of reasons.

Why do you buy a new house before paying off your mortgage? Why buy a new phone before the old one breaks?

For the record - this is the first time I have VT'd a car (at the recommendation of the dealer!) but having had 4 previous PCPs, this is also the first time the agreement has been in negative equity 6 months prior to the end of the agreement (in fairness however, this PCP was takes at the highest mileage so perhaps the curve would have been different to the others).

[scottc]

Originally Posted by MarkG_M50d

Understand how you read that but no, I was not 'expecting' a profit but it is how PCPs have always been sold to me - 'you should be in a positive position sir'.

Agreed, 100%

Well kind of. I wouldn't say 'nobody loses' because if there is negative equity, someone always loses (BMW FS). However, it's not a loss, I'm sure it's factored into their business model. Ie. in my case, even if I waited to the end, there would still be a difference of several thousands.

In short, yes - it's only when exiting the agreement early that ADDITIONAL negative equity occurs (above what BMW FS may have anticipated). As for the second part of your questions (why end early?) - to take advantage of a new deal, to get the latest model, in response to the salesman's call... lots of reasons.

Why do you buy a new house before paying off your mortgage? Why buy a new phone before the old one breaks?

For the record - this is the first time I have VT'd a car (at the recommendation of the dealer!) but having had 4 previous PCPs, this is also the first time the agreement has been in negative equity 6 months prior to the end of the agreement (in fairness however, this PCP was takes at the highest mileage so perhaps the curve would have been different to the others).

So I am in the same position, I have never vt'd a car but I have a year to run and selling it would mean I am £3k out pocket.. Would much prefer to sell but the choice of handing back and costing me nothing or paying £3k there is no real option..

Plus I would rather spend the £3k on a mpe exhaust for my new M4 that is arriving in the next couple of weeks

[NISFAN]

Originally Posted by Nobby Clark

I think that's what I said. If you let PCP run, you shouldn't be in negative equity. So the reason to VT isn't to resolve a negative equity problem, it's to solve another root cause for which the solution is to cancel a PCP early.

Depends how you look at it.

You could have a £40k invoice value car, two years old it might be valued at £20k, with £23k outstanding finance on it.
Your options are to stick with the agreement for the final year when the asset value and finance value reach the same, the GFV.
.....or you save £3k by doing a VT, which is getting rid of negative equity.
Bear in mind that a replacement car will most likely cost similar monthlies, but on a brand spanker.
If you choose to see out the agreement in the above example, you end up paying £3k over what the natural depreciation of that car is at that stage. As mentioned that is factored into the original agreement, but gives PCP'ers a nice little windfall if they decide to change early.

[Ashway]

Originally Posted by ronime

It goes on your credit file and can affect your credit rating as the lender loses out when you VT to walk away from negative equity. There are plans afoot to exclude PCP deals from the consumers right to VT in the future.

Rubbish, its a right you have and is stated in black and white in the pre contact agreement. We've done this twice because of negative equity and a better deal on the new car. It makes no difference to your credit file, you haven't defaulted on a payment.

[mcdokika]

Why is a VT a better option than selling then settleing with BMW Finance. For example if you can't pay your monthly payments and you have not paid the half of the credit.

So you have to sell the car don't you ? Or settle first (if you have savings ) and sell the car.

Either way, you loose money , do you ?

[MarkG_M5Comp]

Originally Posted by mcdokika

Why is a VT a better option than selling then settleing with BMW Finance. For example if you can't pay your monthly payments and you have not paid the half of the credit.

So you have to sell the car don't you ? Or settle first (if you have savings ) and sell the car.

Either way, you loose money , do you ?

In your example, yes, you lose money.

If you haven't paid half the total finance amount, you have the choice to a) make additional payment and hand the car back (you have no car but have paid the future payments = lost money) or b) pay the settlement figure (buying the car from BMW outright) then sell the car; if the settlement figure is more that you sell the car for = money lost.

VT should never be relied upon as a way out as Nobby has rightly suggested. It's a piece of legislation to protect consumers from uncontrollable debt which we (me included, but also dealers) are taking advantage of.