How We Help with Negative Equity

We understand that negative equity can seem daunting, however, we are here to explain and to help you navigate your options.

What is negative equity?

Plainly, negative equity is when the amount you owe a finance company for your vehicle, currently exceeds the amount your car is valued at.

Do not worry, this is not unusual. For example, with new cars, the vehicle value drops in the early days of ownership, after it leaves the forecourt and is an unavoidable result of the car losing its ‘brand new tag.’

Negative equity can arise in two scenarios: either at the end of a contract or if you choose to switch your vehicle before the agreed-upon financing term, a situation commonly encountered with Personal Contract Purchase (PCP) agreements. In a PCP agreement, a final payment, known as a balloon payment or guaranteed minimum future value, plays a crucial role. If this balloon payment surpasses the car's current value, it may result in negative equity. However, in cases where the final payment is a guaranteed minimum future value payment, the lender assumes the responsibility, irrespective of market value, mitigating the associated risk.  Please note: the lender will guarantee the value providing the contractual requirements have been met (for example, the car is within the agreed mileage, and has been maintained according to agreed servicing requirements). 

Hire Purchase (HP) agreements typically involve a minimal end-of-contract payment fee, often around £10. As an example, if all payments within the agreed term are completed, it won't lead to negative equity.

How to deal with negative equity on my car

Dealing with negative equity on a car can be difficult if you settle the agreement early, as it is impossible to accurately predict how much a car’s market value will depreciate before it does.

There are insurance products such as an Asset Protection Plan (GAP insurance) which can help protect you against scenarios whereby you may be exposed to negative equity, including having to reach into your own pocket in the event of your car being written off, stolen, or the car being worth less than you paid in the eyes of your insurance company.

Want to settle the car you have?

If you have a car in negative equity, there are a couple of options you can choose from, and we are happy to discuss these. Deciding what your best move is really depends on your financial situation and how much negative equity there is attached to the vehicle.

Our expert team at your local Vertu Motors dealership will be happy to talk through your options with you.

Want to finance another car with us?

You may want to finance another vehicle with us. Not a problem. All we need is a settlement figure from your current lender, which we can get on your behalf with your consent.

What documents do I need to provide?

If you have a car with negative equity and financing a new vehicle is the right path for you, we will need visibility on a couple of things:

With these documents, we can help support you by discussing your options. Our knowledgeable team are available to guide you through the process. 

Browse our Newsroom for further tips and advice.