Thousands In Negative Equity on their Cars

Food for thought


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Contract Hire is an agreement between you and a leasing company to run a car over a specific period and mileage. In return you pay a monthly rental. You never own the car but pay for its use. One of the existing advantages of contract hire is the smoothing of cash flow requirements, it also keeps open other lines of credit, such as bank loans and overdrafts for business development

Plunging car prices are leaving thousands of Motorists in ' Negative Equity' on their vehicle loans experts have warned.Many predicted future values on which car finance deals are based are well above what the actual vehicle will be worth.

 

It means many car buyers are in the same position as those whose mortgages are larger than the value of their home.The problem is worse for those who have bought their cars on Personal Contract Purchase deals which totalled £ 2.3 billion in 2007 PCP's  involve making monthly payments over a fixed period and then a final payment to secure ownership based on what the predicted value of the car would be worth. However these estimates are now highly inaccurate with predicted future values proving much higher than current values.

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