VTing my PCP but will my guarantor be liable?

[carrtim1]

I have 8 months left on my PCP with BMW Finance. I've estimated my mileage will be 32k over the agreed 48k. So this works out roughly £2,064 in excess mileage charges.

I am considering VT'ing my contract to avoid any losses. My wife signed BMW Finance form titled "Guarantee and Indemnity subject to the Consumer Credit Act 1974".

If I VT, will my wife be liable and thus they will go after her?

Many thanks in advance.

[R0b]

Re: VTing my PCP but will my guarantor be liable?

Hello,

Are you able to provide a cop of this indemnity from BMW? If it is a typical guarantee then yes, then your wife could be liable to pay but it depends of the terms of the guarantee and indemnity - did she seek any legal advice on it?

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

I just have a paper copy a the moment but can scan these in.

On another point. in the sales contract un the section of Termination it says I can terminate at any time but I am liable for the excess mileage. If it states it, does that mean I will have to pay the excess mileage charge?

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

It says:

Termination
You can terminate this agreement at any time before your final repayment falls due by giving us written notice . You will have to return the vehicle and pay (i) any arrears and any other sums which have become payable under the agreement before the termination (including any Excess Mileage Charge), plus (ii) the amount (if any) by which one-half of the total amount payable exceeds the aggregate of the advance payment and repayments you have paid, plus (iii) if you do not return the Vehicle in good repair and condition, the sum required to compensate us for this. This will be your maximum liability if you comply with these requirements.

[Joanna C]

Re: VTing my PCP but will my guarantor be liable?

It says:

Termination
You can terminate this agreement at any time before your final repayment falls due by giving us written notice . You will have to return the vehicle and pay (i) any arrears and any other sums which have become payable under the agreement before the termination (including any Excess Mileage Charge), plus (ii) the amount (if any) by which one-half of the total amount payable exceeds the aggregate of the advance payment and repayments you have paid, plus (iii) if you do not return the Vehicle in good repair and condition, the sum required to compensate us for this. This will be your maximum liability if you comply with these requirements.

Is there a final balloon payment- how much is currently left owing on the PCP?
Yes you will have to pay the excess mileage (though I haven't seen the remainder of the contract).

You can return the car at any point and your only liability to the agreement itself is to pay the balance outstanding of 50% of the PCP (not including excess mileage). If you have already paid more than 50% then there is no more to pay on the PCP itself (except for the excess mileage charges). Your wife is only liable as guarantor for the amount you would be liable for under contract.

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

Hi,

Thanks for the reply.

The PCP was for 48 months. I have 8 months remaining.

Here is what it says from my account:
Agreement Type
Personal Contract Purchase
Agreement APR
3.9%
Agreement Term
48 months
Remaining Payments
8 months
Deposit
£ 13,350.00
Residual Value
£ 12,519.36
Overall Amount
£ 31,492.41
Agreement Status
Active
Last Payment Amount
£ 475.97
Last Payment Due Date
28/01/2017
Payment Day of Month
28
Payment Frequency
Monthly
Payment Method
Direct Debit
First Payment
£ 475.97

So if I VT, my wife is not liable for anything and I do not have to pay the excess millage?

[R0b]

Re: VTing my PCP but will my guarantor be liable?

I am making the assumption that the termination statement comes from your finance agreement and not the guarantee document your wife signed, and in that respect I disagree with Joanna that you are liable for the excess mileage charges.

Section 100 of the CCA states that you are only liable for 50% of the total amount payable plus any overdue monthly instalments and to take reasonable care of the car. The section specifically excludes any penalty charges, compensation or damages for breach of the agreement - excess mileage would fall within the compensation and/or damages category.

Can you confirm if there is another clause within your agreement that is headed "Termination: Your Rights"?

As for your wife's liability I would expect that the guarantee would say somewhere in the terms that your wife is only liable for any amount which you would be liable for, so I do agree with Joanna on that point. Therefore if you were to VT then your wife would not be liable for the excess mileage.

The information above is based on the limited information you've provided so far and my knowledge of VT but without seeing the agreements, I can't really comment any further as to whether your wife is going to be liable.

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

Hi Everyone

Thanks for your replies. I'm very nervous about VT'ing now.

I've attached the paperwork that myself and my wife signed for you to look at. Your thoughts are greatly appreciated.

Many thanks.

[Joanna C]

Re: VTing my PCP but will my guarantor be liable?

I am making the assumption that the termination statement comes from your finance agreement and not the guarantee document your wife signed, and in that respect I disagree with Joanna that you are liable for the excess mileage charges.

Section 100 of the CCA states that you are only liable for 50% of the total amount payable plus any overdue monthly instalments and to take reasonable care of the car. The section specifically excludes any penalty charges, compensation or damages for breach of the agreement - excess mileage would fall within the compensation and/or damages category.

.

I disagree with Rob and I have now reviewed the agreement.

In this situation section 100(4) of the CCA is applicable here with regard to the excess mileage charges. It says:-

(4)

If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have shall have effect accordingly


I have reviewed the the hire purchase agreement and it is clear on the face of the document (not on the reverse) under the section headed "Excess mileage charges for depreciation" that they will charge pro rata on early termination. I think a court is likely to consider it to have been drawn to your attention and that therefore the term would be deemed fair.

In a similar situation the Financial Ombudsman took this view.


http://www.ombudsman-decisions.org.u...x?FileID=65660

i have also reviewed the indemnity & guarantee. Your wife is only liable for what you would be liable for. However, did she receive a copy of the agreement you signed within 7 days of you signing it ( she appears to have signed the indemnity and guarantee in advance of the wording)?

In answer to your question I would suggest the following:

1. Obtain an up to date valuation for your car.

You have 7 payments @ £475.97 and a final payment of £12,529.36. A total of £15,861.15 ( if my maths is correct!)

so - if the car is of higher market value keep it and sell it yourself. If it is of lower value maybe return it asap to maximise the saving which will offset the excess mileage charge.

2. Calculate the excess mileage @ 6.45p a mile ( pro rata) first in order to help you to make your decision.

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

Thank you for the reply. The car is currently worth less that the £12,529.36.

My annual allowance is 48,000 miles, it's currently done 70,104.

How do I work out the Pro Rota mileage cost?

I relation to my wife and the contract, she signed it in the dealership on the day we picked the car up. She never received anything through the post after that.

Thanks again for all your time on this.

[R0b]

Re: VTing my PCP but will my guarantor be liable?

With respect to @Joanna C, she appears to have fallen into the same trap as everyone else by applying the contractual term to s.100(4) of the reasonableness condition. The Ombudsman are not legally trained (perhaps some with some legal background) and they generally look at what is fair and reasonable. The decision posted by Joanna doesn't explain at all how or why the car was unreasonable due to the excess mileage so I'd take their decisions with a pinch of salt, especially when the Courts have previously decided on occasions that the Ombudsman's decision is wholly wrong.

There are a number of provisions that need to be read together to understand how voluntary termination works and the starting point is to look at the terms of the contract.

Immediately, I can see that there are two termination provisions in the contract at page 2.



The difference between the two is the 'Excess Mileage Charge' in the upper statement which gives rise to a higher liability than the lower (and arguably that 'good condition' is a higher standard than 'reasonable condition'). There is a clear conflict of provisions and so the contra proferentum rule applies i.e. the court will seek to apply the most favourable provision to the debtor, that is the lower statement that doesn't include the Excess Mileage Charge. It is also explicit in saying that if you have complied with the provision you will not have to pay anymore.

If that's not good enough then we refer to the Consumer Credit (Agreements) Regulations 2010, Schedule 1: Information to be included in regulated consumer credit agreements



The above requirement is provided for under Schedule 2 of the Regulations: forms of statement of protection and remedies available to debtors



You will see that the above statement mirrors exactly the statement at page 2 of the agreement. Therefore, BMW cannot enforce the contractual of excess mileage at the rate stated in the agreement.

An alternative way of looking at it is the interpretation set out in the CCA.

S.100 says the following:

Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.

The agreement doesn't provide for smaller payment, so you are liable to pay one half of the total price. 'total price' is defined as:

the total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement

There are three categories which do not apply when you termination under s.100: Penalty charges, compensation or damages for breach of the terms. Arguably, the Excess mileage could fall into compensation but certainly falls into the breach of terms category. As it is explicitly excluded from the total price calculation, BMW cannot recover that sum of money.

For clarity, S.173 forbids any contracting out, and it states:

A term contained in a regulated agreement or linked transaction, or in any other agreement relating to an actual or prospective regulated agreement or linked transaction, is void if, and to the extent that, it is inconsistent with a provision for the protection of the debtor or hirer or his relative or any surety contained in this Act or in any regulation made under this Act.

Where a provision specifies the duty or liability of the debtor or hirer or his relative or any surety in certain circumstances, a term is inconsistent with that provision if it purports to impose, directly or indirectly, an additional duty or liability on him in those circumstances.

The Excess Mileage Charge is inconsistent with the debtor's rights and also purports to impose additional liability above the maximum liability allowed. It is therefore void and unenforceable.

If you were to apply Joanna's reasoning under S.100(4) that the car is in an unreasonable condition, then I would say that based on the information you have supplied to us, Joanna's view is no more than an assumption that any person could make. There is no definition of what is reasonable but I would consider a car in a reasonable condition to mean that it is in a roadworthy condition, maintained, serviced in accordance with the service manual, free from major defects, dents, chips although minor defects such as stone chips from motorway driving would be acceptable.

In the Court of Appeal case Brady v St Margaret's Trust, Lord Denning said the following with reference to the agreement and the statutory legislation at the time which was the Hire-Purchase Act (the predecessor of the CCA):

As I read this clause, the hirer's duty is to keep the car in the condition in which it might reasonably be expected to be if he had looked after it properly. He need not put it in a better condition than it was when he hired it. He need only keep it in the condition in which a reasonably minded hirer would keep it. Thus he would repair it if there was an accident, and he would do the immediate repairs in the course of running the car, but no more. The hire-purchase company should give evidence of any default on his part in that duty.

I think it is pretty clear from the above that excess mileage cannot be claimed contractually when terminating under s.100 of the CCA. If BMW wished to claim damages for unreasonable condition then they have to provide evidence that the excess mileage caused the car to be put in an unreasonable condition, however given that the purpose of a car is to drive it, I think BMW are going to struggle to argue that point. Even more so, if the car has been regularly serviced and maintained.

Just because the car exceeded mileage under the contract as agreed in the terms, it does not, mean the car is put in an unreasonable condition. Unless an expert report is provided by BMW to the court, the case would most likely fail on that point.

[Joanna C]

Re: VTing my PCP but will my guarantor be liable?

Thank you for the reply. The car is currently worth less that the £12,529.36.

My annual allowance is 48,000 miles, it's currently done 70,104.

How do I work out the Pro Rota mileage cost?

.

perhaps use an excess mileage calculator such as this:

http://auto.bizcalcs.com/Calculator....=Lease-Mileage

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

I was trying to find something like this but google wasn't playing game. Thank you

[Joanna C]

Re: VTing my PCP but will my guarantor be liable?

With respect to @Joanna C, she appears to have fallen into the same trap as everyone else by applying the contractual term to s.100(4) of the reasonableness condition. The Ombudsman are not legally trained (perhaps some with some legal background) and they generally look at what is fair and reasonable. The decision posted by Joanna doesn't explain at all how or why the car was unreasonable due to the excess mileage so I'd take their decisions with a pinch of salt, especially when the Courts have previously decided on occasions that the Ombudsman's decision is wholly wrong.

There are a number of provisions that need to be read together to understand how voluntary termination works and the starting point is to look at the terms of the contract.

Immediately, I can see that there are two termination provisions in the contract at page 2.



The difference between the two is the 'Excess Mileage Charge' in the upper statement which gives rise to a higher liability than the lower (and arguably that 'good condition' is a higher standard than 'reasonable condition'). There is a clear conflict of provisions and so the contra proferentum rule applies i.e. the court will seek to apply the most favourable provision to the debtor, that is the lower statement that doesn't include the Excess Mileage Charge. It is also explicit in saying that if you have complied with the provision you will not have to pay anymore.

If that's not good enough then we refer to the Consumer Credit (Agreements) Regulations 2010, Schedule 1: Information to be included in regulated consumer credit agreements



The above requirement is provided for under Schedule 2 of the Regulations: forms of statement of protection and remedies available to debtors



You will see that the above statement mirrors exactly the statement at page 2 of the agreement. Therefore, BMW cannot enforce the contractual of excess mileage at the rate stated in the agreement.

An alternative way of looking at it is the interpretation set out in the CCA.

S.100 says the following:

Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.

The agreement doesn't provide for smaller payment, so you are liable to pay one half of the total price. 'total price' is defined as:

the total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement

There are three categories which do not apply when you termination under s.100: Penalty charges, compensation or damages for breach of the terms. Arguably, the Excess mileage could fall into compensation but certainly falls into the breach of terms category. As it is explicitly excluded from the total price calculation, BMW cannot recover that sum of money.

For clarity, S.173 forbids any contracting out, and it states:

A term contained in a regulated agreement or linked transaction, or in any other agreement relating to an actual or prospective regulated agreement or linked transaction, is void if, and to the extent that, it is inconsistent with a provision for the protection of the debtor or hirer or his relative or any surety contained in this Act or in any regulation made under this Act.

Where a provision specifies the duty or liability of the debtor or hirer or his relative or any surety in certain circumstances, a term is inconsistent with that provision if it purports to impose, directly or indirectly, an additional duty or liability on him in those circumstances.

The Excess Mileage Charge is inconsistent with the debtor's rights and also purports to impose additional liability above the maximum liability allowed. It is therefore void and unenforceable.

If you were to apply Joanna's reasoning under S.100(4) that the car is in an unreasonable condition, then I would say that based on the information you have supplied to us, Joanna's view is no more than an assumption that any person could make. There is no definition of what is reasonable but I would consider a car in a reasonable condition to mean that it is in a roadworthy condition, maintained, serviced in accordance with the service manual, free from major defects, dents, chips although minor defects such as stone chips from motorway driving would be acceptable.

In the Court of Appeal case Brady v St Margaret's Trust, Lord Denning said the following with reference to the agreement and the statutory legislation at the time which was the Hire-Purchase Act (the predecessor of the CCA):

As I read this clause, the hirer's duty is to keep the car in the condition in which it might reasonably be expected to be if he had looked after it properly. He need not put it in a better condition than it was when he hired it. He need only keep it in the condition in which a reasonably minded hirer would keep it. Thus he would repair it if there was an accident, and he would do the immediate repairs in the course of running the car, but no more. The hire-purchase company should give evidence of any default on his part in that duty.

I think it is pretty clear from the above that excess mileage cannot be claimed contractually when terminating under s.100 of the CCA. If BMW wished to claim damages for unreasonable condition then they have to provide evidence that the excess mileage caused the car to be put in an unreasonable condition, however given that the purpose of a car is to drive it, I think BMW are going to struggle to argue that point. Even more so, if the car has been regularly serviced and maintained.

Just because the car exceeded mileage under the contract as agreed in the terms, it does not, mean the car is put in an unreasonable condition. Unless an expert report is provided by BMW to the court, the case would most likely fail on that point.

Your arguments are interesting but are not applicable in this present case.

You say " Unless an expert report is provided by BMW to the court, the case would most likely fail on that point.". An expert report would I am sure confirm that a BMW with 22,000 miles is of substantially higher value than the same BMW with 70,000 miles for the same age and condition. We have for example had a recent case involving a Audi where there was a difference of some £4,000 in the value of the car due to the excess mileage.

You seem to be anticipating that the OP wants to incur the costs and stress for both him and his wife of a court case which in my opinion, based on the information I have so far been provided with, he would be likely to lose on the excess mileage argument.

It is up to the OP whether or not he wants to take the advice as to the law from a trained solicitor who specialises in consumer credit and cases like this or from somebody who does not.

I consider it likely that a court will consider with 22,000 excess mileage over and above the agreed contractual amount of 48,000 miles that the OP has "contravened an obligation to take reasonable care of the goods "and as such s.100 (4) is applicable and an order would be made for the OP to pay the excess mileage as well as any costs awarded to the claimant.

As , the quote from Lord Denning says the OP "need not put it in a better condition than it was when he hired it. He need only keep it in the condition in which a reasonably minded hirer would keep it" .

[carrtim1]

Re: VTing my PCP but will my guarantor be liable?

Hi

I love discussions like this. I makes me want to study law and have a career change.

My car has currently done circa 22,000 above the 48,000 miles.

Do you have experience whereby you have seen BMW, Audi, Merc, etc do a full and final offer over the excess mileage. For example at the end of the lease or if I VT, they charge me say £2,000, would they accept an offer of say half that?