With BMW's Hire Purchase you dont actually own the car untill the final payment is made.
Under HP it's your car and you own it, but the finance company has a loan secured on it, restricting what you can do (like a mortgage on a house - it's your house...we don't say it's 'the banks until you make the final payment'). In fact as long as the agreement is regulated, they can't even reposess it after a certain figure is paid - should say in the Key facts of the document
mcbeee said:
question: when the dealers value the car is done on wholesale value or retail (private sale value) ?
Very interesting. I've never seen any deal like this over here. when you buy a car here, it's yours, you can't give it back.
It's 'valued' based on the equivalent of your Blue Book, which here is Glasses. Finance companies 'predict' what it will be worth at the end of the agreement....here, we have
Contract Hire - ('Leasing') - the finance company owns the asset and if you hand it back before agreed, you owe something like 60% of the outstanding rentals as a penalty. CH isn't very popular on private cars here (tends to be expensive, best for base spec cars) - it's more for companies who can reclaim part of the VAT on the monthly payments.
HP - Hire Purchase - you own it. Say, £10,000 over 48 months = £250 a month, and at the end you own the car outright (no loan).
PCP - Personal Contract Purchase, or some derivative there of - the same as HP but a 'balloon' figure, a final sum payable, is added on the end. Say, £23,000 over 48 months = £350 a month, final payment in month 49 of £4,500.
The last two are generally limited to 3/4/5 years, we don't tend to see 6/7/8 year HP loans....those customers go with a PCP, and the car has to have a value at the end of the term (no 5 year old Fords etc). So a PCP is basically like a 72 month deal where the last two years payments are in one big one. If you don't, you give them your car in lieu, and they are happy with this as they set the 'future value' (balloon) figure at the end in the first place...so it should be worth more than that.
If you want to settle before the end, you phone for a settlement figure and clear the loan. In good times this all works fine. However, when things are rough like now and cars are depreciating like lead balloons, the GFVs set by the finance firms on 06/07/08 are starting to appear a bit optimistic and lot's more people are finding their settlement figures much higher than the resale value....so rather than get a sale price they need to 'top up' to clear the current settlement figure, consumers start to exercise their other right to VT the agreement once 50% is paid. Why we have the right to terminate after 50% I am not sure! It used to be quite a rare thing to do.
So....as such the kind of value finance companies are willing to 'guarantee' or offer as a balloon figure at the end of the 3/4 year term are starting to be much lower, maybe 1/2 of what the car is realistically going to be worth at the end of the term just to be safe. That makes the monthly payment higher.
Phew.
