Pcp car help

nick100*2007 · 23 December 2016 at 4:57PM

I have 2 cars on PCP, I want to avoid having to pay off negative equity at the end of the deal. Is it a good idea to make over payments on these loans?

A though I had is that if I don't make over payments, I may be able to negotiate the negative equity when I buy the next car which I intend to do rather than make the final payment.

Has anyone any experience of either scenario? Is there anything I've not taken into account?

Merry Christmas one and all.

Duckyduck · 23 December 2016 at 5:22PM

Do you mean the bubble payment at the end of the deal? PCP is basically a rental agreement, you don't own the car, but at the end of the agreement you have the option to pay a lump sum and then you will own the car outright. Or you can hand it back. If the car is worth less than the optional final payment, then it's in your interest to simply complete the PCP period then hand the car back, if the car is worth more than the final payment then you are financially better off paying the ballon payment. Whether you choose to sell it on immediate for something new or keep it a while is a separate choice.

If it was hire purchase/a personal loan, the. Yes making overpayments to reduce the interest paid would be a good idea. However as it is akin to a rental then I think you would be best off paying the minimum amount to this, especially if you have no intention of keeping it after the end of the deal, and particularly if you think it will be in negative equity.

You could use the amount you would have overpaid by to save a deposit/purchase on your next car, which will make it cheaper than using finance to pay for it. PCP has low monthly payments, but when you add it all up is often the most expensive way of owning a car, the benefit of it is the risk of negative equity/depreciation is the finance companies, not yours.

nick100*2007 · 23 December 2016 at 5:34PM

Okay great, thanks for your help, I was under the impression I would have to pay the difference if it was less.

fatbelly · 23 December 2016 at 5:58PM

As always, Martin has an article about it

http://www.moneysavingexpert.com/car-finance/personal-contract-purchase

rogue999 · 23 December 2016 at 9:14PM

With PCP you get a guaranteed future value, which will be detailed in your original contract, so your repayments are calculated to get you to that value when it's time to hand the car back. This applies if the car is in good condition and you've stuck to your agreed mileage (the charge for additional mileage will be in your original agreement)

You don't need to make overpayments at all.

DevilsAdvocate1 · 23 December 2016 at 9:58PM

nick100*2007 wrote: »

I have 2 cars on PCP, I want to avoid having to pay off negative equity at the end of the deal. Is it a good idea to make over payments on these loans?

A though I had is that if I don't make over payments, I may be able to negotiate the negative equity when I buy the next car which I intend to do rather than make the final payment.

Has anyone any experience of either scenario? Is there anything I've not taken into account?

Merry Christmas one and all.

Don't overpay. I've just been in the situation where my car was £6000 below the guaranteed future value. I effectively handed the car back. I had to make a small payment of £300 because I had exceeded the mileage by nearly 5000 miles. I've bought the same car again, again on PCP so that if this happens in 3 years I can hand it back again.

Jattinder_Singh · 30 December 2016 at 10:49PM

Hi guys - this has helped massively. So I'm in a situation where I got an "expensive" car because of the offers on the PCP. It is not unrealistic in price and I'm financially stable BUT want to remain financially savvy.

I called for a settlement quote 1.5 years into the 4 year PCP and they said if I pay £22k now then I save £2k in interest. Sounds good - and the car is amazing and I intend to keep it. So the question is:

- should I make overpayments on the PCP (defies the point of a PCP as people only do this on HP?)
- should I continue as it is and pay the balloon value BUT this means paying interest at 4.8% APR for 4 years
- OR should I do a money transfer and pay it off and owe the money to another lender at a better rate? (Or unless I've got this wrong, I can just get a loan from the bank and make overpayments on that?)

Either way I'm not paying 4.8% and want some direction on how to play this one out if possible?

Pcp car help

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free