Settlement Figure V's Car Value

cvisser

Hi Guys,

Have had alot of these this year and was wondering how bad people are in Negative equity and what was the biggest gap between what somebody owed on a car with the Finance Company and what the car was worth, 2 examples i had this week was.

07 Nissan Tiida 1.6 5-dr, 15,000 km's Sett: € 17,500 Value € 9,000

03 Citroen C5 2.0 HDI 100,000 MLS, Engine/ABS/Airbag lights on, needs about € 1,500 spent on body work, plus what i could'nt see, owed € 15,000!!!!!

I explain to Customers i cant do anything @ all with them and the best way around this is to keep the car and pay as much finance as possible or give me a good chunk of cash to get them out of this situation, 9 times out of 10, nobody has cash, i have followed up with customers in this situation and some have told me Joe Bloggs from the garage down the road is not looking for any cash and they can finance for X amount per month, I explain to them they are only digging them selves into a bigger hole, But all they see is there New or Used Car.

Thanks Guys C.

EPM

cvisser wrote: »

03 Citroen C5 2.0 HDI 100,000 MLS, Engine/ABS/Airbag lights on, needs about € 1,500 spent on body work, plus what i could'nt see, owed € 15,000!!!!!

How the hell could you do this?!? Whover the fcuk ok'd that loan should be shot!

Saab Ed

€23,000 negative with an 06 Jeep Grand Cherokee....and that was early last year :eek:. He owed 53 and I was putting 30 into it. Its probably not worth half that now.

Owen

cvisser wrote: »

I explain to them they are only digging them selves into a bigger hole, But all they see is there New or Used Car.

Unfortunately, there are some guys out there who will overfinance the new car, which as you said is like sticking your fingers in your ear and shouting 'lalalalalalala' to try and forget just how much you're in debt.

Worst I've ever seen was a guy who had a Merc worth 42k (And this was before the VRT changes btw), wanted to finance - begged and pleaded to get it too - 82k, to buy a 52k car because his settlement on the Merc was 71/72k. I couldn't fathom why someone would want to do that, but I told him I wouldn't be doing it. There's no justification in doing that.

-Chris-

We have a Touareg customer who's getting a phonecall that they're €25k in negative equity today. I also have a customer with an SUV who owes €48k on a car but the trade is valuing it at €12k....

PauloMN

Am I missing something here? I know the value of cars has plummeted recently, but are people not putting enough money into the monthly payments to have at least "caught up" with the depreciation? I mean, how can someone be €25k in negative equity on a car? Or are these cases where people simply haven't been paying any monthy payments on the cars?

Are these hire purchase type deals or something? Sounds like people really over-extended. The finance houses should not have been giving out these types of finance packages unless people can afford decent monthly payments on them.

Saab Ed

PauloMN wrote: »

Am I missing something here? I know the value of cars has plummeted recently, but are people not putting enough money into the monthly payments to have at least "caught up" with the depreciation? I mean, how can someone be €25k in negative equity on a car? Or are these cases where people simply haven't been paying any monthy payments on the cars?

Are these hire purchase type deals or something? Sounds like people really over-extended. The finance houses should not have been giving out these types of finance packages unless people can afford decent monthly payments on them.

Paulo with all due respect...Where have you been for the last 12 months ?

PauloMN

Saab Ed wrote: »

Paulo with all due respect...Where have you been for the last 12 months ?

Nowhere near a bank obviously.

I understand how it works, I'm just a bit surprised at how bad a situation some people can get themselves in. Just trying to understand how someone can be €25k in the red on a car. That's insane. I'd be a nervous wreck if I owed that kind of money on a car that was worth a fraction.

niceirishfella

AudiChris wrote: »

I also have a customer with an SUV who owes €48k on a car but the trade is valuing it at €12k....

Blimey - have a nice weekend ehhhhhhhh! :pac:

Drummerboy08

Say you buy a car worth 50k on finance. Straight away you could owe 55k + to the finance house. As soon as you drive out the door, your new 50k car is now only worth 35-40k. There's 15k in one day, straight away.

I suppose for higher end stuff, it would only be worse.

Stephen

This makes the €3.5k I owe on my car look fantastic :pac:

Saab Ed

PauloMN wrote: »

Nowhere near a bank obviously.

I understand how it works, I'm just a bit surprised at how bad a situation some people can get themselves in. Just trying to understand how someone can be €25k in the red on a car. That's insane. I'd be a nervous wreck if I owed that kind of money on a car that was worth a fraction.

Id be a nervous wreck too but thats the kinda crazy spending that went on for the last few years that has the world in this mess. So people ( who would have considered themselves well off ) over spent for the last few years and now everything is worth a lot less than it should be its left a mighty hole in the middle.:(

PauloMN

Drummerboy08 wrote: »

Say you buy a car worth 50k on finance. Straight away you could owe 55k + to the finance house. As soon as you drive out the door, your new 50k car is now only worth 35-40k. There's 15k in one day, straight away.

I suppose for higher end stuff, it would only be worse.

That's fair enough, but even in the "good times" when car depreciation was at a normal level, how would a finance house give a 50k loan on a 50k car? Surely that's madness. Would they not expect at least 10% to 20% of the value to be covered by the client so that the initial hit on a new car is not included in the loan?

Edit: Sorry, don't know what I was thinking when I posted that.... these are the same banks that gave people 120% mortgages!!! :eek: :eek:

Saab Ed

PauloMN wrote: »

That's fair enough, but even in the "good times" when car depreciation was at a normal level, how would a finance house give a 50k loan on a 50k car? Surely that's madness. Would they not expect at least 10% to 20% of the value to be covered by the client so that the initial hit on a new car is not included in the loan?

nah... you see at the start of this boom thats the way things were but as times went on people were earning more and more so banks became slack in their lending rules. The more money that was lent the more people spent and so on and so on. Then when people started to get loaded with debt things did start to slow for a while but managers in banks set targets based on the previous years numbers and so the lending criteria just became so slack anyone could get credit. The managers etc etc got their bonuses, we sold cars , everybody is busy and so it seems eveyones a winner. At one stage we got a member of an ethnic minority ( they live in caravans ) finance based on social welfare payments which to be fair were alot . Is it any wonder we are where we are

PauloMN

Saab Ed wrote: »

At one stage we got a member of an ethnic minority ( they live in caravans ) finance based on social welfare payments which to be fair were alot . Is it any wonder we are where we are

Feckin. Hell.

I dunno, if I owed €17.5k on an '07 Tiida, I think I'd just throw myself off a bridge. I mean, it's one thing owing that amount of cash on a car, but on a Tiida? Epic Fail.

cvisser

Drummerboy08 wrote: »

Say you buy a car worth 50k on finance. Straight away you could owe 55k + to the finance house. As soon as you drive out the door, your new 50k car is now only worth 35-40k. There's 15k in one day, straight away.

I suppose for higher end stuff, it would only be worse.

This is exactly how it is happening, an expensive day out.

cvisser

Stephen wrote: »

This makes the €3.5k I owe on my car look fantastic :pac:

Good man :-)

BlackWizard

I'm the same as stephen with his loan. I've two more months to go. I thought getting a 4000 euro loan on a car was unsettling at the time, I don't think I could stomach a 40+ thousand euro loan.

-Chris-

PauloMN wrote: »

Am I missing something here? I know the value of cars has plummeted recently, but are people not putting enough money into the monthly payments to have at least "caught up" with the depreciation? I mean, how can someone be €25k in negative equity on a car? Or are these cases where people simply haven't been paying any monthy payments on the cars?

Are these hire purchase type deals or something? Sounds like people really over-extended. The finance houses should not have been giving out these types of finance packages unless people can afford decent monthly payments on them.

Imagine you borrowed the full amount to buy a €60k Touareg in August 07. That finance is costing you €70,776 according to aib.ie.
Over 5 years you'll pay €1,179.60 per month. So at this stage (20 months in) you have €23,592 paid and €47,184 outstanding.

In the meantime your Touareg's normally depreciating 20% per annum. Under normal circumstances it'd currently be worth probably €38,400 (because it's 2 years old by the reg).

Now take into account that the market for SUVs has plummeted due to the economy - that'll turn €38k into the low €30k's.

Now add to that the fact that VW have chopped €15k off the price of a new Touareg, and yours is only 18ish months old so it'll be compared directly to the price of a new Touareg - that'll turn the low €30k's into low €20k's.

Et voila! You owe €47k and your vehicle is worth low €20k's - €25k negative equity!!


If you rolled any outstanding finance from a previous vehicle into this finance arrangement, don't forget to add this to the €71k finance you borrowed.


It's a bad situation to be in, but it's entirely possible and really quite common at this stage.
The proper answer is that it's crazy to change your vehicle after 18 months in the current environment, but some people who are needing to change vehicles due to a change in their life circumstances are encountering these kind of figures.

Anan1

AudiChris wrote: »

The proper answer is that it's crazy to change your vehicle after 18 months in the current environment, but some people who are needing to change vehicles due to a change in their life circumstances are encountering these kind of figures.

The proper answer is that borrowing for a car is one step up from borrowing for an ice cream cone.;)

Owen

TBH, the only answer is with PCP's, or Personal Contract Plans. The UK does these, and BMW do them too in Ireland (If any other manufacturer does them, please list them here for people to see). Basically, it's similar to 2/3 year financing with a baloon at the end, but instead of a baloon, it's a guaranteed residual value from the manufacturer.

So, for example, at the end of the 3 years, you hand back your car, and even if the arse has fallen out of the market, the value of the car is still underwritten, and you can hand it back, and get your next car keeping the payments similar to what you had been paying.

PCP's are huge business in the UK, because people don't want the uncertainty of HP, or HP with a baloon. It makes a lot of sense, especially in the current climate.

PauloMN

Thanks for the example there AudiChris. Frightening. It kinda backs up my belief that I'll never buy a new car ever again (except for when I win the lottery, but then I won't be needing finance).

Anan1 wrote: »

The proper answer is that borrowing for a car is one step up from borrowing for an ice cream cone.;)

Ah c'mon.... 99s are getting bloody expensive these days, what's a guy suppose to do?

-Chris-

ned78 wrote: »

TBH, the only answer is with PCP's, or Personal Contract Plans. The UK does these, and BMW do them too in Ireland (If any other manufacturer does them, please list them here for people to see). Basically, it's similar to 2/3 year financing with a baloon at the end, but instead of a baloon, it's a guaranteed residual value from the manufacturer.

So, for example, at the end of the 3 years, you hand back your car, and even if the arse has fallen out of the market, the value of the car is still underwritten, and you can hand it back, and get your next car keeping the payments similar to what you had been paying.

PCP's are huge business in the UK, because people don't want the uncertainty of HP, or HP with a baloon. It makes a lot of sense, especially in the current climate.

As far as I know LeasePlan and Merrion Fleet (as well as some of the other fleet managment/leasing companies) will do personal leasing.

Some garages do it themselves too - I know we do.

Anyone who took out a PCP over a HP deal in the last few years dodged a serious bullet.

R.O.R

AudiChris wrote: »

As far as I know LeasePlan and Merrion Fleet (as well as some of the other fleet managment/leasing companies) will do personal leasing.

Some garages do it themselves too - I know we do.

Anyone who took out a PCP over a HP deal in the last few years dodged a serious bullet.

And anyone who's getting these cars back at the moment are looking at serious losses on them.

No chance of getting the same car at around the same monthly cost as 2 or 3 years ago though.

Drummerboy08

Leaseplan wont, we wont, i dont think Merrion do it either. Premier might do it. Or ask R.O.R. nicely......

-Chris-

PauloMN wrote: »

Thanks for the example there AudiChris. Frightening. It kinda backs up my belief that I'll never buy a new car ever again (except for when I win the lottery, but then I won't be needing finance).

Bear in mind that we've had a perfect storm for used values in the last 12 months - the VRT change, the decrease in overall demand, the reduction in available credit, the economy etc. etc. - that's had a massive effect on used values.

Any of these factors on their own would have put a dent in the used market, but would have been recoverable from, but when you have them all happening at the same time it's a disaster!

I wouldn't ever expect to see a period of such decline again in my lifetime (fingers crossed...).

-Chris-

Drummerboy08 wrote: »

Leaseplan wont, we wont, i dont think Merrion do it either. Premier might do it. Or ask R.O.R. nicely......

LeasePlan used to have a product called PersonalPlan, have they gotten rid of it?

Drummerboy08

AudiChris wrote: »

LeasePlan used to have a product called PersonalPlan, have they gotten rid of it?

As far as i know, Leaseplan have gotten out of the Personal leasing side of thins for a few months now. THey seem to concentrate on the big boys with 10-20 cars +.

I might be wrong on this, but as far as i know they dont.

R.O.R

Drummerboy08 wrote: »

Leaseplan wont, we wont, i dont think Merrion do it either. Premier might do it. Or ask R.O.R. nicely......

We steer well clear of that sort of thing . I just direct everyone to Benchmark if they are looking for that.

Think Personal Plan has gone missing from the LeasePlan website (never any business there anyway), but I'm sure Merrion will still do it if there are a couple of pennies to be made and the customer can pass credit checks.

niceirishfella

AudiChris wrote: »

As far as I know LeasePlan and Merrion Fleet (as well as some of the other fleet managment/leasing companies) will do personal leasing.

Some garages do it themselves too - I know we do.

Anyone who took out a PCP over a HP deal in the last few years dodged a serious bullet.

yep, a collegue of mine works in leasing and feels like putting a buttet in his brain!:eek:

cvisser

ned78 wrote: »

TBH, the only answer is with PCP's, or Personal Contract Plans. The UK does these, and BMW do them too in Ireland (If any other manufacturer does them, please list them here for people to see). Basically, it's similar to 2/3 year financing with a baloon at the end, but instead of a baloon, it's a guaranteed residual value from the manufacturer.

So, for example, at the end of the 3 years, you hand back your car, and even if the arse has fallen out of the market, the value of the car is still underwritten, and you can hand it back, and get your next car keeping the payments similar to what you had been paying.

PCP's are huge business in the UK, because people don't want the uncertainty of HP, or HP with a baloon. It makes a lot of sense, especially in the current climate.

Did a few of these in the Past, Called them Preference Deals and the garage Garrenteed the Value of your trade-in 2/3 Years, GMV, Customer had the option of Keeping the car, and paying the GMV, handing the car back or do another Pref on a new car again & again , was great, customer would allways come back to change with me only, as nobody could touch my deals as they were so good and beat the socks of any 4/5 year deal, But you wont get me doing that for a while yet, i'm Deffo not going to stand by a standing value on a car in the current climate, hopefully in 2 years when we get back on our Feet i will, My Crystal Ball is out of action till 2011, he he he