Incorrect finance?

[SP8]

Hello,
Hoping someone can make more sense of this than me! We purchased a car in April 23, the purchase price was £11,999. We part exchanged our vehicle which had equity of £3500, so we put this down as a deposit. We HP financed the remaining balance with an interest rate of 11.9%.
The car is no longer fit for purpose after spending thousands trying to maintain it. The finance have said we have an outstanding balance of £9,149.11 but if we settle early it will be £7805.22. This makes the car in negative equity by a large amount. We have made 22 payments of £239.88 which totals £5277.36

This doesn’t seem to be adding up.
£11,999 take away the deposit leaves £8499.00 add on 11.9% apr £9510.38 that should of been financed?

Am i completely misreading it and this isn’t how it works? I just can’t get my head around how we have £9,149.11 left to pay on a vehicle that cost £8499.00 that we have been paying off for almost 2 years and that we have paid more than £5000 off..

I’m going to be calling the finance company but wanted to make sure that i’m not missing something?!

Thank you☺️

How many years was the finance over?

@Mrsttcno1 Sorry should have included that! 60months

So if it was 60 months and you’re paying £240 a month you would actually be paying them £14,400. So if you have paid 22 months you still owe 9,200

@SP8 these were rough numbers. Do you have gap insurance?

edited to say: either never get a car on finance or have gap insurance.

I don’t think you actually understand the finance agreement, you have just added 11.9% and that’s incorrect. 11.9% is your ANNUAL Percentage Rate, so basically with a finance agreement while you are making payments the amount you owe still goes up, because the interest is added on. With a price of £8499 and 11.9% APR if you continue with the finance and make every payment you would end up paying around £13,500 altogether. So by trying to get out of it after only 2 years, you are going to have a good whack left to pay.

This doesn’t seem to be adding up.
£11,999 take away the deposit leaves £8499.00 add on 11.9% apr £9510.38 that should of been financed?

This isn’t how interest works.

The finance have said we have an outstanding balance of £9,149.11 but if we settle early it will be £7805.22. This makes the car in negative equity by a large amount.

This is often the case when trying to sell back a car relatively soon into a finance deal.

@Ph3 Gap insurance was included in the purchase price, would love to be able to buy a car out right but sometimes it’s just not possible

Thanks everyone, think we’ve gathered i have no idea how finance works hence why i needed to ask on here :)

Then your gap insurance should cover the difference between what the current market value and what is left on finance.

@Josiezu We've spent over £6500 fixing the car in the short time we’ve had it and more has gone wrong unfortunately. The finance company have said we can voluntarily terminate which is what we are likely to do.

@Ph3 Oh that’s really interesting to know, i had no idea. I thought this was only in the case of an insurance write off. I will look into this further

This is not correct.

Gap insurance will pay out in specific circumstances- those being if your car is written off due to accident or if it is stolen. It doesn’t pay out just because it’s breaking.

No OP you’re right, Gap insurance isn’t going to cover you. That is specifically for when your car has been written off in an accident OR stolen.

That will depend on the policy - specifically under “covered loss”.

Also did you take out a mechanical breakdown insurance by any chance as I am assuming this is not a new car?

Can you give an example of any GAP policy that would cover this?

Gap insurance typically covers: total loss due to accident, theft, natural disaster, sometimes vandalism.

I’ve never seen or heard if a Gap policy that would cover mechanical issues, wear & tear, the likes of which OP is describing.

Can you tell us the make of car OP? Just so I can make a note never to buy one!

@Ph3 No i didn’t take out mechanical breakdown insurance, i did take a warranty but it didn’t seem worth the paper in was written on when everything went wrong

@PuzzleFrog Its a BMW 3 series, i can honestly say it has been the worst car we’ve ever bought!

That explains the 6500 quid thats been spaffed away on repairs.

European cars, especially German cars, are fucking shit.

Toyota, Lexus, Honda - thats what you want. Something reliable and NOT costly to repair if things do go wrong.

I wouldnt touch a European car with a shitty stick!

I have had Volkswagens for the last 15yrs and have never had any issues. Always flew through the service. I’ve not spent a penny on maintenance in that time.

You need to go back to them and ask for clarification. Voluntary termination is a very specific term in car finance where once you have paid 50% of the total amount payable including interest and fees you can hand the car back with nothing to pay.

So, just using the figures above, if the total amount owed was £14.4k, £7.2k is your 50% figure. If you’ve paid £5k already then you can either sell/stump up the negative equity or pay £2.2k and VT it, whichever is cheaper.

VW are consistently below average in just about every reliability index and survey these days. Absolute junk.

That’s not how gap insurance works

it will pay the shortfall if the car is written off, for example, not just because someone decides they don’t want the car anymore

Was it a new car? How come repairs weren’t covered by a warranty? I thought 2 years was pretty standard?

as to your financing, I found out the hard way that loans are often front loaded. So say you have a 5 year loan, the first year or so you pay off the interest, then you start paying the capital.

so if you have a larger than expected amount left, it could be because you’ve spent the last two years paying off the interest (calculated on the whole loan term) and have only just started on the capital.