With a VT, will I owe 50% plus the car, or can the car contribute to the 50%?

[Manai112]

Hi,

Unfortunately, I need to execute a VT. I have paid less than 50%.

When I use the template on this forum allowing them to pick up the car, will they sell it and the value be taken off the 50% owed? (i.e. will I owe the difference once sold).

With the amount owed to make it up to 50%, will they finance company be likely to offer me repayment terms or expect the sum immediately?

I haven't got money to pay off the loan, at almost any percentage!

[Amethyst]

You would need to have paid 50% and give the car back - the car doesn't make up any part of the 50%.

Does your agreement give details of the VT figures ? How far off the 50% are you ?

[Manai112]

The 50% figure is £12,300 and i've paid £4,000

[Manai112]

Am i screwed? IE i need to return the car and pay c. £8k? What happens if I don't have the money?

I have approached Step change and they're suggesting Bankruptcy, but i need to avoid this due to my trade being in financial services (don't laugh!)

[Amethyst]

Ahhhh - bugger. So you've got £8k to go before you could VT without consequences on your credit file. Bankruptcy seems extreme from StepChange though they will know more on your financial circumstances. DO you own your own home? Other debts? Credit file okay otherwise? Are you currently working ? and is it your circumstances have changed, or you figured out the car was just far too expensive and unaffordable on your normal income. Do you know how much the car would currently be worth ?

Oops bit question time there.

If you hand back now I believe it would be a default, the car would be sold at auction etc and then you would have to pay the shortfall between what they get for the car and the total finance agreement - but check that with R0b des8

[R0b]

I would agree with Ame about the bankruptcy in that it seems to be an extreme decision when there are other options out there. What is the reason for wanting to return the car? Are you having problems making the repayments?

The below quote is taken from another recent post which might answer your question on the repayment plan.

You are not legally required to pay 50% before you can terminate the agreement. In fact, you have the right to terminate at any point in the agreement so long as the last payment is not due at the time of termination. The remaining balance then becomes a debt for which you are liable to pay but as this is a regulated agreement, the FCA rules apply (particularly the CONC rules) and Barclay must comply with.

So for example, those who are struggling with repayments could VT before reaching the 50% amount and then offer a repayment plan to pay off the remaining balance to make up the 50%. The lender would not be able to refuse this repayment plan (unless perhaps they offered £1 per month and the hirer could afford something more) because the CONC rules says that lenders must give forbearance and due consideration to those who struggle to keep up with their repayments.

Now, the lender might object and argue otherwise which is where it might eventually end up in court, though you could kickstart a formal complaint against them and then go to the Financial Ombudsman in the hope they side with you and see our offer of repayment as fair and reasonable. The lender might also want to see an income/expenditure form from you to show you can't make the repayments.

There may be an alternative option in that section 100(3) of the Consumer Credit Act gives a court discretion to make an order to reduce the lender's sum of money owed to them if you can prove the loss is less than the outstanding amount needed to meet the 50% mark. So for example:

Total amount payable under the agreement = £22,000
Total paid to date = £4,250
Amount required to meet 50% (£11,000) = £6,750
Value of the car at date of VT = £16,000

From the above example the lender's loss under the agreement is a maximum of £22,000 as that's what they would have been paid had the agreement been performed. When you add together the value of the car and the amount you've paid to date that comes to £20,250 so the lender's loss under the agreement is only £1,750. If you paid the remaining £6,750 then the lender would have profited from the agreement more than what would have been expected so section 100(3) would apply in this scenario and the court would likely make an order that you pay the £1,750 instead of the £6,750.

You will need to provide evidence such as a car valuation, perhaps quotes from dealerships, WhatCar, Parkers etc. and get an idea of how much the car is worth. As above, I've never done this route before but it might be a case that you may have to issue court proceedings for the court to make a declaration that the lower sum should be paid or, if the lender ended up taking you to court, you would use this as a defence mechanism and ask the court to exercise their right under section 100(3).

The reality is that the first option of a repayment plan might sound the easiest and simplest way to resolve the matter, even if the lender does make a profit on the agreement but it is entirely your decision as to what route you wish to take and you should sit down and work it all out before you go ahead.

Hope this helps.

[Manai112]

Thanks for all your help so far. As you can tell this has become quite a difficult situation for me.

The car was valued at £13,995 and a year later i'd assume it to be worth £11,000 but who knows, especially if it's an auction value this is going to be based on.

So with circa £24,000 total including interest: £4,000 paid and £11,000 value still falls well short of 100% (but more than 50% which is where I am confused).

I know this is all my fault, but is there claims for mis-selling? My situation was (and they knew this) that I was in a well-paid by temporary contract role. I expected the contract to renew but it didn't.

I now earn half as much and the car beside rent is my biggest expense.

My outgoings outweigh my income and I have no savings. It's got to the point where I can't even afford a deposit on a new/cheaper house.

EDIT: After reading the forum yesterday I thought the best course of action was a VT so I sent the finance company (Moneybarn) the template. I don't know if this is null and void because the 50% rule doesn't apply after all. Or maybe this will stimulate them to take action.

I should say my payments remain up to date, but this could be the last month that's the case.

[R0b]

If I recall, Moneybarn are a finance company offering credit to those who have had a poor credit history and in turn, they offer a much higher interest rate than the usual lenders as can be seen from your example of the vehicle's value of £13,995 and the total amount payable being around £24,000. Can you confirm why you went with Moneybarn and not anyone else, was it the issue of obtaining credit?

In terms of any mis-selling, do you have any records you can produce which shows that they were fully aware that you were in a temporary contract role and was there any question of how long your contract was for? If they didn't carry sufficient checks then there might be questions raised about whether or not they did enough affordability checks prior to offering you credit.

Equally, I have some sympathy for you but I don't think Moneybarn are solely to blame here. Surely you must have known what the total amount payable was under the agreement before you signed the documentation and I appreciate you were expecting to extend your contract but you must have also known that there is a big risk in you taking on a large amount of debt should the extended contract fall through, which in this case it did.

If you gave notice to VT then the contract will be deemed terminated unless Moneybarn agrees to revoke the termination before it takes effect. I am also aware that they can be difficult to deal with in terms of a VT and sometimes suggest that you are voluntarily surrendering the car as opposed to VT. Also if you've not paid the full 50% I would expect them to push back on that point and not accept your notice until you meet the 50% amount. Whilst this is unlawful you will probably need to follow their complaints procedure if this does occur.

I've tagged Debt Camel to see if she can offer anything else in terms of other options that might be available to you.

Also the FCA note might be of interest to yo -> https://www.fca.org.uk/news/news-sto...-motor-finance

[Debt Camel]

What are your other debts? They could account for StepChange's suggestion of bankruptcy - no one with a halfway reasonable credit record goes to Moneybarn?

I know this is all my fault, but is there claims for mis-selling? My situation was (and they knew this) that I was in a well-paid by temporary contract role. I expected the contract to renew but it didn't.

I now earn half as much and the car beside rent is my biggest expense.

Well if you expected your contract to renew, it's hard to see how Moneybarn could have been expected to get their crystal ball out and realise that it wouldn't...

Sorry but it seems you just bought a car which was much more expensive than was sensible for you. If the payments are unaffordable, it has to go, and you have to look at your resulting debts and take a pragmatic decision.

[Manai112]

Debt Camel

Thank you.

You're right. I did over-estimate my ability to repay. I'm trying to determine what I can do to neutralise the situation. Between step 1 - do nothing and step 10 - jump off a cliff, what can I do? I currently don't have the Bankruptcy fee (and my area doesn't have any grants/charities to help).

The only hurdle really is that my job would be affected, for that reason alone it seems Bankruptcy might not be the right thing to do. For the stress it causes I'd happily accept a painful period of zero credit facility.

There are other debts, but this is the most significant by a long way.

I guess step change look primarily at income v expenditure and realise something has to change. As my debts are over £15,000 there's no other suggestion?

[M4TTH3W5]

I was thinking of voluntary terminating my PCP on my car but I have a older car finance on the top of it so if I VT will it wipe all the debit clean or just on the car I’m PCPing