Negative Equity on your car

Gekko

The BBC's Panorama mentioned that some people in the UK who have bought cars recently are now in negative equity if they took out a car loan as prices on some models have dropped very substantially due to changes in the tax system.

As VRT and tax rates have recently changed here, I'd be interested in speaking to anyone who is substantially in negative equity on their car here.

Zorba

Doesn't it go with the territory, as in when u buy a car with a 3 yr loan if u add interest in the chances are the car is worth less than the loan by the time you've paid it off !

monkeyfudge

I wish people would stop posting 'motors' forum threads in the media interaction forum.

A little observation and common sense please, people.

Del2005

What Zorba said is correct. Once you buy a new car, as soon as you drive it off the forecourt you've lost ~€3000 depending on car type. So if you got a loan for it you're in negative equitity straight.

It sounds like sloppy/sensational and badly researched journalism.

TheBazman

The only way you are possibily going to avoid negative equity is to buy something like a limited run car. Thats why I have just put in an order for a Veyron Sang Noir

Repolho

TheBazman wrote: »

The only way you are possibily going to avoid negative equity is to buy something like a limited run car. Thats why I have just put in an order for a Veyron Sang Noir

Or buyt the car without financing, that way you own all the "equity" in the car, whatever it is worth.

cabrwab

That is rubbish jouralism at its best. While everyone would love to be able to have approx 30000 euros to buy a new car somepeople need a loan to help pay for it.

A car never grows in price! its always depriciating, unless your lucky

Eoin

monkeyfudge wrote: »

I wish people would stop posting 'motors' forum threads in the media interaction forum.

But they were interacting about something they saw in the media!

Biro

cabrwab wrote: »

That is rubbish jouralism at its best. While everyone would love to be able to have approx 30000 euros to buy a new car somepeople need a loan to help pay for it.

A car never grows in price! its always depriciating, unless your lucky

The problem isn't borrowing some money to buy the 30,000 car you want. The problem is wanting and buying a 30,000 car when you have the grand total of €0 to put towards it.

-Chris-

Biro wrote: »

The problem isn't borrowing some money to buy the 30,000 car you want. The problem is wanting and buying a 30,000 car when you have the grand total of €0 to put towards it.

The second problem is worrying about negative equity when you're in year one or two of ownership - unless you put down a big lump sum (as you said), the car will always depreciate faster than your monthly payments reduce the amount owed to the bank.

There's a certain equilibrium point where you start having equity in the car (depending on your repayments and the car's depreciation profile).

I agree, this is lazy and sensationalistic journalism - the vast majority of car buyers are in negative equity for a period of their car ownership.

Biro

AudiChris wrote: »

The second problem is worrying about negative equity when you're in year one or two of ownership - unless you put down a big lump sum (as you said), the car will always depreciate faster than your monthly payments reduce the amount owed to the bank.

There's a certain equilibrium point where you start having equity in the car (depending on your repayments and the car's depreciation profile).

I agree, this is lazy and sensationalistic journalism - the vast majority of car buyers are in negative equity for a period of their car ownership.

I'm not surprised, but I'm kind of amazed at the number of people who have no problem with this. I'd hate to own less than at least half of what my car is worth.

Zube

Biro wrote: »

I'd hate to own less than at least half of what my car is worth.

I know lots of people who just look at monthly repayments, without considering what the car will actually cost or is really worth, or worrying about paying off loans, ever. I don't understand it, myself.

copacetic

monkeyfudge wrote: »

I wish people would stop posting 'motors' forum threads in the media interaction forum.

A little observation and common sense please, people.

didn't the OP specifically ask for people to get it touch with them? presumably for a bit of interaction??

-Chris-

copacetic wrote: »

didn't the OP specifically ask for people to get it touch with them? presumably for a bit of interaction??

a bit of interaction via the medium that is the computer, seems like media interaction to me!

snowman707

Biro wrote: »

The problem isn't borrowing some money to buy the 30,000 car you want. The problem is wanting and buying a 30,000 car when you have the grand total of €0 to put towards it.

+1

in the present time plenty of good cars available @ 10 -15k but if you want to impress mrs jones next door, by all means borrow.

monkeyfudge

copacetic wrote: »

didn't the OP specifically ask for people to get it touch with them? presumably for a bit of interaction??

Apologies. My fault completely.

I was moving a good few threads this morning and clearly didn't read this one correctly.

Is this another journalist doing some lazy research?

/me waves to newstalk

Guy:Incognito

snowman707 wrote: »

+1

in the present time plenty of good cars available @ 10 -15k but if you want to impress mrs jones next door, by all means borrow.

Why is there always thisd attitude from people who either dont want to buy a new car or cant afford to?

Not everyone buys a car to impress othes, most of us buy the cars we want and like oursleves.

Biro

Stekelly wrote: »

Why is there always thisd attitude from people who either dont want to buy a new car or cant afford to?

Not everyone buys a car to impress othes, most of us buy the cars we want and like oursleves.

I don't have an attitude against people who like to buy a new car, but a lot of new car owners can't afford them either. Going in, buying a €25k car completely on finance, a year or two later going in again, upgrading for a brand new car of the same type and financing the difference (and the existing finance is already more than the trade value of the car it's against) is just madness to me. And it does happen. A lot.

Guy:Incognito

Biro wrote: »

I don't have an attitude against people who like to buy a new car, but a lot of new car owners can't afford them either. Going in, buying a €25k car completely on finance, a year or two later going in again, upgrading for a brand new car of the same type and financing the difference (and the existing finance is already more than the trade value of the car it's against) is just madness to me. And it does happen. A lot.

So should people not buy houses unless they have a suitcase of cash to buy it outright?

People with huge amounts of money to their name often finance things aswell as it makes more sense not to have your own money tied up in depreciatign assets.

Biro

Stekelly wrote: »

So should people not buy houses unless they have a suitcase of cash to buy it outright?

People with huge amounts of money to their name often finance things aswell as it makes more sense not to have your own money tied up in depreciatign assets.

Kind of an idiotic reply. A house usually does not depreciate, a car definately will (with a tiny few exceptions).
And do you think it's OK that after 4 years of borrowing and upgrading you have €30,000 of car repayments to make on a car worth €19,500? If you do, then best of luck to you in life, you'll probably need it at some point.

-Chris-

Biro wrote: »

Kind of an idiotic reply. A house usually does not depreciate, a car definately will (with a tiny few exceptions).
And do you think it's OK that after 4 years of borrowing and upgrading you have €30,000 of car repayments to make on a car worth €19,500? If you do, then best of luck to you in life, you'll probably need it at some point.

That's also kind of idiotic (with all due respect) - you pay for the utility and comfort of a car, it's not an investment.

If you bought an investment car that you expected to go up in value (a classic, for example), you wouldn't drive it for fear of de-valuing.

If you buy a car for €46k and in three years trade it in for €10k then you've paid €1,000 per month for the car. Whether this €1,000 is paid to a finance company or you paid for the car outright from savings, you still pay €1,000 per month!

Hopefully you got more than €1,000 per month worth of pleasure/use out of it.

Guy:Incognito

Biro wrote: »

Kind of an idiotic reply. A house usually does not depreciate, a car definately will (with a tiny few exceptions). .

Think your opinion of tiny few might differ from all the poeple currently in negative equity on their houses.

Biro wrote: »

And do you think it's OK that after 4 years of borrowing and upgrading you have €30,000 of car repayments to make on a car worth €19,500? If you do, then best of luck to you in life, you'll probably need it at some point.

But you've had 4 years of use of the car , it's not like you just paid 30k for a car worth 20k.

Eoin

As I've said in the other numerous threads about buying new, I wonder if those who smugly congratulate themselves on not buying new also buy second hand clothes. Clothing pretty much depreciates by 100% instantly after all.

Biro

AudiChris wrote: »

That's also kind of idiotic (with all due respect) - you pay for the utility and comfort of a car, it's not an investment.

If you bought an investment car that you expected to go up in value (a classic, for example), you wouldn't drive it for fear of de-valuing.

If you buy a car for €46k and in three years trade it in for €10k then you've paid €1,000 per month for the car. Whether this €1,000 is paid to a finance company or you paid for the car outright from savings, you still pay €1,000 per month!

Hopefully you got more than €1,000 per month worth of pleasure/use out of it.

You miss my point. If you borrow €46k for a €46k car, pay it off, and sell the car for €10k, or reduce the loan to €10k and sell the car to clear the loan and start again, then that's the same as what you say above - €1000 a month for the car, which is fine. My point is keep upgrading and adding on to a finance for a car that's worth considerably less. So after 10 years you've mounted up €40k, they won't lend you any more because that's the max you can pay back, the car you just bought brand new costs €25k, so you are paying €40k on a brand new purchase of €25k. Can you not see where that's stupid? Do you not think that buying a car of €25k should only be worth a loan of €25k at the absolute maximum? Forget what it's worth when you drive off the forecourt, that's different.
I think the last 3 posters are missing my point, and needlessly jumping down my throat. Either that or I'm a fool and paying back a €40k loan on a brand new Polo is a good idea.

alastair

eoin_s wrote: »

As I've said in the other numerous threads about buying new, I wonder if those who smugly congratulate themselves on not buying new also buy second hand clothes. Clothing pretty much depreciates by 100% instantly after all.

I'd be in the 'buy secondhand' (cars) camp, but don't have a problem with those who choose to buy new - different strokes and all that.

There's a world of difference, however, in pissing money up against a wall in costly car finance and avoiding thriftshop clothes. Wouldn't a better analogy be those who buy through fashion catalogues - paying a premium for instant consumer gratification and staged payments, and those who buy in the seasonal sales - the same stuff but a few months older and a hell of a lot cheaper? Blowing money on fashion is all well and good as long as you realise what you're paying a premium for.

-Chris-

Biro wrote: »

I think the last 3 posters are missing my point, and needlessly jumping down my throat. Either that or I'm a fool and paying back a €40k loan on a brand new Polo is a good idea.

I still am missing your point, but didn't mean to jump down your throat - apologies.

Edit: re-reading Biro's post again I get it now.

I'd agree that that snowball debt is madness - where people change cars too frequently and when they find themselves in negative equity, the use the next finance deal to cover the loss.
People may find themselves in the situation once that they need to chance their cars after an unnecessarily short period (wrong choice of car, having to change car after 12 months due to unforseen circumstances), but if you continuously do it you're crazy.

That's a case of the heart overruling the head and our propensity for consumer debt is one of the things that's exposed Ireland to this slowdown in the first place.

We see it all the time though...

peasant

Thread returned to its rightful home (media interaction)