Firstly, don’t panic! We at Vizion Finance, will help to identify solutions that work best for your circumstances. These suggested solutions might include: Do nothing Keep making your payments until the end of your HP agreement or hand the car back at the end of your PCP agreement Pay the difference You could sell the vehicle, provided your lenders permit this, and cover the difference with your own savings or money. Apply for negative equity car finance Find a new loan agreement than can cover the cost of the settlement and new car Voluntary Termination If you have paid 50% of the total amount (+ balloon in a PCP agreement) you can terminate your agreement and hand the car back.

Let us take an example: You take out a PCP finance agreement for a £40,000 ticket price car over 48 months at 8.9% APR, placing a £4,000 down payment. The guaranteed minimum future value of the car is set at £25,000 after 48 months. You complete 48 monthly payments of £459. You discover that the value of the car at the end of your agreement is actually £20,000. This means you would be in a negative equity of £5,000. You could choose to (a) Return the car (b) Pay the £25,000 balloon payment and own the car for £5,000 more than market value (c) Apply for negative equity car finance for a new vehicle. By choosing option (c) you ask a lender to cover the cost of both your new car as well as the negative equity in your old car. Your lender pays the balloon payment (£25,000), and the £20,000 value of your new car goes towards your next agreement, however your lender then requires you to cover the cost of the negative equity in your next agreement too. So, your next car costs £35,000, minus the trade-in value of the old car (~£15,000) and adding the negative equity (£5,000) your total amount to finance is £25,000. You choose to pay this over a further 48 months and your lender offers you a new rate of 6.9% with a GMFV of £17,500, bringing you a new monthly payment of £280. However, Negative Equity Finance isn’t always available and depends on the value of negative equity and the cost of the car.

Whilst you can take measures to protect the value of your investment, you cannot guarantee positive equity outcomes. It is difficult to predict the market and depreciation. However, remembering a few key things can go a long way: Brand new cars will depreciate rapidly in the first 3 years especially Used cars have taken the depreciation hit already and will be more stable A larger deposit will reduce the costs involved in your loan Do your research! Observing market trends for cars that meet your purpose can go a long way, choosing a car with a renowned history of having a strong residual value will give you massive savings and increase the likelihood of exiting with positive equity.

Here at Vizion Finance, we believe car finance is more than just a new car. It’s a journey to improving everyday life. Whether you need a car for your new job, to carry the kids to school or just to be proud of your achievements, we’ll work with you and our lenders to bring you guaranteed car finance and competitive interest rates and terms, helping you get the car you need or want. We’ll help you assess your circumstance, collaborate with our panel of lenders, read the fine print for you, and provide you with a point of contact adviser to guide you through the decision.

Get a free no-obligation quote by filling in our quote form. If you’ll be approved in theory by one of our panel lenders, we will reach out with your offers and explain what you have available. We will be able to answer any questions you may have and we will leave you to find your perfect car (or you might already have one in mind!). You can search our vehicle stock or let us know about a car you have found elsewhere. Use our calculator to find out how much you could afford to repay monthly.