PCP - voluntary termination

Granglio

Hello all,

I was looking at doing a voluntary termination on my car as soon I will not be needing it. I phoned the finance company to check how much money I would need to pay in order to VT. I am currently 15 months into a 36 month agreement, so i was expecting the finance company to say 3 months worth of payment (roughly £750) however I was alarmed to find out i would actually need to pay an additional £3350. :eek: Can anyone explain to me how this can be?

I currently pay £256.16 per month. The finance company told me i had an initial loan of £15645.75. How can this be if i only pay £256.16 per month for 36 months? (£9221.76) I believe the difference in figures comes down to the GMFV. Am i required to pay half of this as well in order to VT? If so it seems pointless to have a VT clause in the first place as you will barely reach it before the end of the agreement. Any help would be greatly appreciated. :think:

nimbo

it sounds like they have taken into account the balloon payment. I'm assuming the car was brand new from the figures - and cars depreciate in a front loaded fashion - so although it sucks - it'll be in the small print that the current value of the car is taken into account as well as milage etc.

Granglio

nimbo wrote: »

At the end of pcp agreements I have been looking at there is a balloon payment at the end - have they factored this in?

And had you forgotten about the balloon?

Hi Nimbo,

Thanks for the response. I hadn't forgotten about the balloon (GMFV) It's my understanding that i can choose to hand the car back and walk away at the end of the agreement. So why would the GMFV come into the VT rights? just seems confusing to me. If the balloon payment is factored in, in most circumstances you would only be left with a month or so in which you are able to VT the agreement. Maybe that is actually how it works?

verityboo

The right to VT a vehicle covers all types of hire purchase and the rules were written before PCP type agreements had been invented.

You have the right to VT once 50% of the total sum borrowed including interest and fees etc are paid. With a PCP the balloon payment is initially borrowed (and interest paid on it) so it has to be taken into account when calculating the 50%. This should be outlined in the loan documents and the 50% figure quoted

Granglio

verityboo wrote: »

The right to VT a vehicle covers all types of hire purchase and the rules were written before PCP type agreements had been invented.

You have the right to VT once 50% of the total sum borrowed including interest and fees etc are paid. With a PCP the balloon payment is initially borrowed (and interest paid on it) so it has to be taken into account when calculating the 50%. This should be outlined in the loan documents and the 50% figure quoted

Thanks for the clarification Verity. I assume this means the only viable way out of this agreement would be to sell the car privately and settle any outstanding finance or let the finance run its full term.

motorguy

Granglio wrote: »

Thanks for the clarification Verity. I assume this means the only viable way out of this agreement would be to sell the car privately and settle any outstanding finance or let the finance run its full term.

OR

Hand the car back and pay the £3,350 to take you to the 50% marker

Keep making payments until you get to the 50% and then hand the car back with nothing further to pay.

Nearlyold

verityboo wrote: »

The right to VT a vehicle covers all types of hire purchase and the rules were written before PCP type agreements had been invented.

You have the right to VT once 50% of the total sum borrowed including interest and fees etc are paid. With a PCP the balloon payment is initially borrowed (and interest paid on it) so it has to be taken into account when calculating the 50%. This should be outlined in the loan documents and the 50% figure quoted

To be more precise it's not 50% of the total sum borrowed it's defined as 50% of the "Total Amount Payable"

Granglio

motorguy wrote: »

OR

Hand the car back and pay the £3,350 to take you to the 50% marker

Keep making payments until you get to the 50% and then hand the car back with nothing further to pay.

I think that i'll keep making the payments until i get to 50% and at that point hand the car back. Don't fancy paying £3350 for essentially nothing haha. Thanks for the help everyone.