Understanding my new PCP deal

Beaumont176

A bit of background information. I've sold my car to a garage for cash to help with our wedding next year. Worked out I lost 4000 over 15 months = 266 a month fair enough I thought.

I then took a Used car on a PCP deal as it ticked all the right boxes. It seems more and more cars are being bought like this and so I thought I'd give it a go. I'd like the idea of paying for a car a month hand it back buy another so long as the monthly payments are comfortable which in this case they are.

Value of car 14495 deposit 500 credit required 13995

First repayment 444.63
46 Monthly repayments 245.63
Optional Final repayment 5929
Total amount payable 18172.61

So as you do getting back home excited then I have a read of the actual agreement after it's too late and realise I'm paying back 4 grand above the price of the car.

My question is am I calculating this out right. I want to hand the car back after 2 years and want to know how much the car needs to be worth to clear the balance.

So deposit + first month repayment 944.63
2 years = 23 months repayment @ 245.63 / month - my first month that's been paid above

Gives a total of 6594.12 paid over 2 years

Total amount payable 18,172.61 - 6594.12 = 11578.49

So £11578.49 is what the car needs to be worth In order to fully clear the finance?

Or am I totally wrong in doing this calculation. That is for your time and feedback it's appreciated.

Oakdene

If you wish to hand the car back you will need to have paid 50% of the contract price, so that would be £18271/2=£9135.50.

9135.50-500(deposit) =£8635.50
(£8635.5-444.63)/245.63= 33.34 months of repayment. So you would have to make the equivelent of 33.34 months payments before being able to VT.

You say youd like to hand back after 2 years, in which case you would have paid £6339.75 so you would have a balancing figure of £2995.74 to pay to terminate.

Pixie5740

Will you no longer need/want a car in 2 years time?

Beaumont176

Thanks to you both for your reply. Makes more sense and yes I did see the note regarding the 50% balance.

I'm new to this process so forgive me I'm just trying to see what the benefits of this PCP are.

Obviously you will never make money buying nearly new cars so I'm just trying to lose the least and thought this PCP would be the way to go. But can't seem to find any pros about it.

As for the length of time we keep the car it was just we kept our last one only 15 months as the depreciation was so fast so had to sell really.

After the 33 months then am I right to say the £9xxx owed to settle the PCP balance we can use as a deposit on our next car. So really we are continuously paying monthly for a car and never actually paying out the £18xxx

Apologies if this doesn't make sense.

Oakdene

No not exactly, if you choose to VT you call up the finance house & say I want to VT & I've made the 50% payments can you collect the car please. You're then free to go back out & get a new PCP.

You can go to a dealer at any time & look at a new deal where they PX your car & the difference in vehicle value to amount outstanding on finance is either:

used as a deposit if you are in positive equity - so the car is worth more than is outstanding,
or added to the new finance contract if you owe more than the car is worth.

Beaumont176

Sorry I don't understand the term VT.

In turn then regardless how I look at it will have to pay £18000 for a £14000 car.

Then if I wish start the whole process over again, on a different car?

There isn't any real advantage to taking out PCP if you have the money to buy it outright then?

Oakdene

VT is voluntary termination, which is what you are entitled to do when you have paid 50% of the contract. If you oay all you monthyl payments then the balloon at the end you will own the car.

If you have the money to buy it outright, the only advantage to getting a PCP is that you often get special offers such as free servicing if you take the PCP but with this you can take the PCP then call up the finance house & clear the finance before intrest is payable.

Beaumont176

Yep so as I thought I've made a £4000 mistake.
Well we live and learn I suppose.

Clive_Woody

Beaumont176 wrote: »

There isn't any real advantage to taking out PCP if you have the money to buy it outright then?

Not unless you have a savings account that pays a higher interest rate than what you are being charged for the PCP.

I think there are som 0% PCP deals on new cars which would work in your favour even if you had cash up front, but as your deal included £4k interest I suspect the APR is high.