VT my PCP

Becky_harding93

I am considering Voluntarily Terminating my PCP as my car is worth about £2500 less than the GMFV which my agreement doesn’t end until April 2019.

After enquiring today, I have just paid more than half but they advised of the process and told me that when the car goes to auction they will expect me to pay the difference from what it sells to the settlement figure. This doesn’t sound right to me and it doesn’t state this in my T&Cs.

I’ve read a lot of people who ignore letters from them etc but at the end of the day I don’t want bad credit history.

Please could someone offer me some advice? My PCP deal is with Barclays.

Thanks

wgl2014

If you are eligible to VT then that is the end of your financial obligations so long as the car is returned in satisfactory condition.

What the finance company do with it afterwards is their problem.

Why do you want to end the agreement early? One of the plus points of a PCP deal is low monthly payments because of the balloon payment at the end so by VTing the car you loose some of this benefit.

Mercdriver

Becky_harding93 wrote: »

I am considering Voluntarily Terminating my PCP as my car is worth about £2500 less than the GMFV which my agreement doesn’t end until April 2019.

After enquiring today, I have just paid more than half but they advised of the process and told me that when the car goes to auction they will expect me to pay the difference from what it sells to the settlement figure. This doesn’t sound right to me and it doesn’t state this in my T&Cs.

I’ve read a lot of people who ignore letters from them etc but at the end of the day I don’t want bad credit history.

Please could someone offer me some advice? My PCP deal is with Barclays.

Thanks

What is the total amount on the agreement including fees and interest, and how much have you paid?

neilmcl

Are you sure you've paid 50% of the total amount payable? Unless you paid a large deposit it would be quite unusual for you to be in a position to VT with another year to go until your PCP ends.

Was this a new car purchase, how long was the finance period for?

Becky_harding93

Yes I would need to pay £260 which then means I have paid half, or I can wait two more months and then again I would’ve paid half. It wasn’t a brand new car, 3 years ago when I got it in all honesty PCP wasn’t explained to me very well.

I am just cautious that if they’re saying this now, can they then do this at the end of the term? For example my guranteed payment value is £5250, but at the moment my car is worth £3800, can they make me pay the difference at the end?

Cornucopia

Becky_harding93 wrote: »

I am just cautious that if they're saying this now, can they then do this at the end of the term? For example my guranteed payment value is £5250, but at the moment my car is worth £3800, can they make me pay the difference at the end?

No. If this contract follows the normal principles of PCP, then the car's present value is irrelevant to your obligations at VT or end of term. Your estimated negative equity of £2500 is a reason to keep the agreement until end of term, rather than VT.

In the case of VT, your obligation is limited to having paid 50% of the total amount due, and at end of term, you have the option to walk away with nothing more to pay.

From what you say, it sounds like Barclays are advising you on the basis of a settlement of the Finance due to financial distress, in which case the present value of the car would be relevant (because you would be liable for the difference between what you owe and what the car is worth).

There's some useful explanation of PCPs in this MSE guide:

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

neilmcl

Becky_harding93 wrote: »

Yes I would need to pay £260 which then means I have paid half, or I can wait two more months and then again I would’ve paid half. It wasn’t a brand new car, 3 years ago when I got it in all honesty PCP wasn’t explained to me very well.

Please make sure you're not confusing paying half of your scheduled monthly payments with what you need to pay which is half of your Total Amount Payable as listed in your finance agreement. The total amount payable is the total amount borrowed plus interest and fees and includes the GFV, as mentioned this figure will be shown in your PCP agreement.

The whole point of a PCP is that the risk of negative equity lies with the finance provider so at the end of the agreement you can simply walk away and let them take the hit.

AdrianC

Becky_harding93 wrote: »

...in all honesty PCP wasn’t explained to me very well...
...
For example my guranteed payment value is £5250, but at the moment my car is worth £3800, can they make me pay the difference at the end?

You ain't wrong!

Right, the G is for Guaranteed. That's what they PROMISE the minimum future value will be. That promise is backed up by putting their money where their mouth is - in that, if the car is worth less, they will "buy it back" for that amount. The way it works is that you simply hand the car back and that's it. End of. Doesn't matter if it's worth 20p, so long as it isn't damaged beyond the wear and tear standards.


Let's put some random numbers up so you can see how it works...

So you borrowed £12k.
Over three years you repay £7k, at just under £200/mo.
At the end, you still owe £5k.
You can repay that £5k by handing the car (which they promise is worth £5k) back - or by paying the £5k and keeping the car.


If you want to VT, then you need to have repaid half of the £12k you borrowed, so £6k, which would come at around month 31 of the 36. So VTing simply means you end the contract five months early, in return for a possible ding on your credit record.


Obviously, that illustration ignores interest - which you pay on the entire amount you still owe, including the balloon.

Becky_harding93

Ok thankyou, very useful! Think I am just best keeping the car until the end, I know if you VT it leaves a mark on your credit report but I have read so many things where people have ignored letters about further charges etc and it does sound like a hassle.

I just hope it’s as easy as giving the car back at the end!

Thanks all!

AdrianC

The flip side is that VT (theoretically) is outside your contract, so if you're WAY over mileage or the car's outside wear and tear, you may be better off. They're the bits that are a legal grey area, though, and the bits that people get invoices for. Whether they'd stand if they were taken to court and actively defended is the big question.

almillar

I am considering Voluntarily Terminating my PCP as my car is worth about £2500 less than the GMFV which my agreement doesn!!!8217;t end until April 2019.

You do know that no matter how much your car is worth, you can just hand it back at the end with nothing to pay, as long as you're not over mileage or fair wear and tear. You shouldn't really care how much a PCP car is worth.

For example my guranteed payment value is £5250, but at the moment my car is worth £3800, can they make me pay the difference at the end?

NO! The guaranteed payment/value is just that, guaranteed. At the end of the agreement, you will OWE them £5,250 for the car. Pay them that and drive away in it, or hand the car back and walk away.

If they start talking about negative equity (the situation you describe above) they're just trying to get more money out of you.