PCP - Clarify?

matteh_2

Hi,

I'm entering a PCP contract on a new car.

I understand the principle of PCP.. lower monthlies then the baloon at the end. You are able to hand it back after 50%.

The salesman got my monthlies lower by lowering the miles i would be doing. He basically said that the miles only come into play with the cars GFV (Guaranteed future value) at the end of the term. Then said that if i part ex at 50% i would not have to pay any additional money, and that he would be able to match my current deal on a newer car when i get to 50%.

Can someone please clarify that this can be done? Or will i be hit with a bill when the mileage is in excess of 10k over the agreed amount?

Any replies are appreciated.

Thanks.

daveyjp

If you are having to play games to get the payments down ask yourself if you can really afford the car. You can't part ex at 50% as you don't own the car. You will have to pay off the finance first. Best you can do is hand it back and start again.

The only time you will be hit with a bill for excess mileage will be if you decide to hand the car back and the mileage is higher than agreed.

rs65

Excess mileage charge will be applied if the PCP runs the full term and you hand the car back. If you keep the car (and pay the balloon) you don't get charged excess mileage.

You can trade in at any time - doesn't have to be at 50% and you can trade in to any manufacturer. You won't be charged excess mileage if you trade in but the mileage will affect the trade in value.

Note that the 50% refers to the total amount of credit not 50% of the term.

You can VT at 50% but check the PCP contract about VT - it will specify the amount you have to pay to be able to VT and it also might mention excess mileage charge at that stage.


ps I don't know how he can possibly say that he will be able to match the deal when you get to 50%. He won't know what deals are available next month never mind in a couple of years.

matteh_2

Thank you both for your replies!

I wanted to get the monthlies as low as possible, but i can afford to crank it up a little if i know i will be stung with excess mileage fees if i part ex or VT it.

Yeah it does sound a little suspicious hence why im asking for advice. He said that 90% of people who take PCP will part ex it for a newer car for the same monthlies when they reach 50% of the term. I thought that sounds too good to be true!

Please forgive my naivety.

Thanks.

motorguy

matteh wrote: »

Hi,

I'm entering a PCP contract on a new car.

I understand the principle of PCP.. lower monthlies then the baloon at the end. You are able to hand it back after 50%.

The salesman got my monthlies lower by lowering the miles i would be doing. He basically said that the miles only come into play with the cars GFV (Guaranteed future value) at the end of the term. Then said that if i part ex at 50% i would not have to pay any additional money, and that he would be able to match my current deal on a newer car when i get to 50%.

Can someone please clarify that this can be done? Or will i be hit with a bill when the mileage is in excess of 10k over the agreed amount?

Any replies are appreciated.

Thanks.

The 50% reference comes from your right under the Consumer Credit Act to be able to hand the car back with nothing further to pay. This was designed to allow people who had had a dramatic change of circumstance and who couldnt afford to continue the agreement to completion to walk away without being pursued by the finance company for further monies.

However it has since been exploited as a loophole, particularly with PCP deals.

You would need to formally hand the car back to the finance company, then start another agreement.

rs65

matteh wrote: »

Yeah it does sound a little suspicious hence why im asking for advice. He said that 90% of people who take PCP will part ex it for a newer car for the same monthlies when they reach 50% of the term. I thought that sounds too good to be true!

I don't know if 90% is correct but salesmen I've spoken to get a list of customers to call to see if they can do a new deal. I suspect what they'll do is monitor the outstanding balance vs the value of your car and have a good idea of when a deal can be done.

motorguy

rs65 wrote: »

You can VT at 50% but check the PCP contract about VT - it will specify the amount you have to pay to be able to VT and it also might mention excess mileage charge at that stage.

It can mention excess mileage charge if you VT, but its not enforceable

rs65

motorguy wrote: »

It can mention excess mileage charge if you VT, but its not enforceable

That's good to know.

matteh_2

Would it be wise to increase my monthlies to include the higher mileage, or stick to my current deal? I know for a fact i will do over the miles i've stated. I won't be keeping the car for the term, i will VT or part ex.

Thanks.

motorguy

matteh wrote: »

Would it be wise to increase my monthlies to include the higher mileage, or stick to my current deal? I know for a fact i will do over the miles i've stated. I won't be keeping the car for the term, i will VT or part ex.

Thanks.

If you absolutely know you're not going to hand it back at the end of the term, then the only downside is that the car is likely to be worth less come trade in time, but you will owe more because the mileage was assumed to be low, so you would have less equity.

I was doing 25K miles per year in my golf but put down 6,000 miles a year as i knew i was never going to hand it back BUT it did leave me with more negative equity when i changed it due to a big change in personal circumstances. Wasnt bothered though.

matteh_2

Thanks Motorguy,

I will 100% not keep it for the term. I've calculated i will probably do 21000 over my stated mileage in 3 years (4 year term). I suspect i will be able to VT or part chop it before the 3 year mark though. I was told it would be £25 more per month to increase it by 7k per year extra miles. I could afford that, but i'm not sure it's worth paying..