So confused with PCP - please help!!

kwt123

Hi all,

Please can someone just explain to me in layman's terms.

I am buying a car for £18.9k
Because it’s only PCP, they will accept a deposit of £5600 maximum. Because I am trading in my car they have to give me back £7.7k cash back.
So total amount I am borrowing is £13,300.


They have said I owe them 36 x £196.00 with GMFV of £10k after the three years.


I have decided that after the 1st payment of £196.00, I will phone the finance company and make that payment of £7.7k back to them so left on the loan is £5600 after I minus it from the 13.3k that I borrowed.



But people have said regardless of the over payment, the GMFV is set in stone at 10k - why would I owe that that amount if I make over payments?


Sorry if I am sounding lost but I need someone to explain it to me. I want to own the car outright after 3 years and not change. PCP was offered to me because of the perks such as 2 year warranty and breakdown and servicing.


Thanks so much in advance.

chanz4

I doubt they will let you pay the balloon payment, HP will be so much better for you

kwt123

But if I continue to make one off over payments how can I still own them that same balloon payment at the end. Surely that would fall as the loan I own them gets smaller.

[Deleted User]

Your loan payments don't include paying the 10k.

It's assumed that after 3 years the car will be worth that but it might not. If it's worth more you can use the equity for another deposit, if it's worth less you can give the car back.

You will end up paying £12656 + £10000 for a car that is £18900. Seems quite a high interest rate?

If you want to pay the £10k off too perhaps a standard loan is better for you.

Brooker_Dave

You need a loan, not PCP/Lease.

Brooker_Dave

kwt123 wrote: »

Hi all,

Please can someone just explain to me in layman's terms.

I am buying a car for £18.9k
Because it’s only PCP, they will accept a deposit of £5600 maximum. Because I am trading in my car they have to give me back £7.7k cash back.

So you have a car worth £7700, and you are paying a £5600 deposit?

So essentially £13300?

The car you want is £18900, so you need £5600 to make up the short fall?

But the solution sold to you is £7056 in rentals and a £10000 balloon??

Tiddlywinks

Read the guide here:

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

You have completely misunderstood how PCPs work.

Read your contract - are you within the time limit to withdraw from the agreement? You'd need to have alternative funds in place to pay the dealer.

tidds

Definitely sounds like HP is a better option if you have a 50% deposit! As at the end of the term you'll own the vehicle without penalty or issues.

Double_V

Yeah, for your case its HP as you own the car in the end or by making early payments.