NV2 - Value Manipulation (Negative Equity)

The NV2 - Value Manipulation (Negative Equity) report identifies deals where customers have negative equity or no equity in their part-exchange vehicles. These situations are high-risk and often lead to manipulation of vehicle values to meet the minimum deposit requirements set by finance companies.

Associated Risks

1. Value Manipulation:

   • Negative equity deals can result in artificially inflating or manipulating vehicle values to meet finance company requirements.
   • This manipulation can create compliance risks and inaccuracies in reporting.

2. Discrepancies in Transactions:

   • For sales on Hire Purchase (HP), the supply is made to the finance company.
   • The transaction details provided to the finance company must align with:
     • Order Forms.
     • Sales Invoices.
     • Finance Proposals and Agreements.
   • Any discrepancies may result in non-compliance with HMRC regulations.

Steps to Mitigate Risks

1. Examine Identified Deals:

   • Review all flagged deals in the report to verify their accuracy.
   • Cross-check order forms, sales invoices, and finance agreements for consistency.

2. Ensure Alignment with HMRC Rules:

   • Confirm that transaction details declared to the finance company match those reported to HMRC.
   • No exceptions are allowed under HMRC guidelines for Hire Purchase transactions.

3. Monitor Negative Equity Trends:

   • Use the report to identify patterns of negative equity that may indicate systemic issues.
   • Investigate any recurring anomalies to address potential risks.

Scenarios Where This Report is Useful

• Identifying deals with potential compliance risks due to negative equity.
• Ensuring accuracy in financial transactions and alignment with HMRC regulations.
• Reviewing processes to prevent manipulation of vehicle values in finance agreements.

Key Notes

• Transparency: All transaction details must be transparent and consistent across documents and declarations.
• Finance Company Compliance: Ensure finance company requirements are met without resorting to value manipulation.
• Risk Reduction: Proactively addressing negative equity issues reduces the likelihood of penalties or audit findings.