PCP Early Payment via cheaper personal loan

feralspecies

Hi

I’m taking a 4 year PCP out on a now BMW, the current total value is 23,480, with a residual value of 8900 based on 17k miles a year.

Because PCP is pretty expensive, I essentially want to pay off the loan of circa 15/16K myself using a much cheaper personal loan. Does this mean I now wont pay anything until I reach the 4 year end point, and then have the choice to purchase or hand back? Or, does it just shorten the length of the agreement?

Essentially I’m just looking at how I can reduce payments further over and above financing via a PCP, and this seemed like a good option.

[Deleted User]

You'll shorten the agreement, so you will need to find the residual value as well if you want to pay the whole loan off.

feralspecies

So you can’t just reduce monthly payments rather than shorten the agreement? Are you sure?

photome

feralspecies wrote: »

So you can’t just reduce monthly payments rather than shorten the agreement? Are you sure?

Ask the lender.


I would agree with camelot though

wgl2014

Could you not just pay for the car via the personal loan?

foxy-stoat

feralspecies wrote: »

Hi

I’m taking a 4 year PCP out on a now BMW, the current total value is 23,480, with a residual value of 8900 based on 17k miles a year.

Because PCP is pretty expensive, I essentially want to pay off the loan of circa 15/16K myself using a much cheaper personal loan. Does this mean I now wont pay anything until I reach the 4 year end point, and then have the choice to purchase or hand back? Or, does it just shorten the length of the agreement?

Essentially I’m just looking at how I can reduce payments further over and above financing via a PCP, and this seemed like a good option.

Check your paperwork about overpaying the PCP - the 4 years worth of payments arent a loan they are the contracted PCP payments then you pay the £8900 to keep the car.

You need to get a loan for £23K or what ever the settlement figure is to clear the finance if you want to make it cheaper for you.

daveyjp

OP in true MSE style why not buy a car you can afford rather than try and find convulated ways of buying something which is out of reach.

For your £16k you could be in a nearly new car, stick on a private plate, no one knows how old it is. Pay it off over a couple of years and you are then the owner of a vehicle worth £6-7k you can do with as you see fit.

4 years is a long time for a PCP, You need to factor in that towards the end of the period the vehicle will be approaching 60,000 miles and repairs are to be expected.

Under PCP you are usually contracted to use main dealers. Are you happy to pay main dealer prices for repairs outside of warranty, as well as payments to rent a car you may well be handing back a few months later?

I once had a 5 year HP agreement buying a car I couldn't afford. I ended up terminating the agreement and handing the car back to avoid expensive repair bills.

After that I borrowed what I could afford and paid it off quickly. If I kept the car I saved what I was paying and used it to buy my next car.

LandyAndy

wgl2014 wrote: »

Could you not just pay for the car via the personal loan?

There are probably 'contributions' to the cost associated with taking the PCP

feralspecies

daveyjp wrote: »

OP in true MSE style why not buy a car you can afford rather than try and find convulated ways of buying something which is out of reach.

For your £16k you could be in a nearly new car, stick on a private plate, no one knows how old it is. Pay it off over a couple of years and you are then the owner of a vehicle worth £6-7k you can do with as you see fit.

4 years is a long time for a PCP, You need to factor in that towards the end of the period the vehicle will be approaching 60,000 miles and repairs are to be expected.

Under PCP you are usually contracted to use main dealers. Are you happy to pay main dealer prices for repairs outside of warranty, as well as payments to rent a car you may well be handing back a few months later?

I once had a 5 year HP agreement buying a car I couldn't afford. I ended up terminating the agreement and handing the car back to avoid expensive repair bills.

After that I borrowed what I could afford and paid it off quickly. If I kept the car I saved what I was paying and used it to buy my next car.

I appreciate the guidance, but I receive a car allowance plus 45ppm and I have significant savings, so I can afford this car. However, I would rather keep the capital and have this as an operational expenditure. I feel the - purchase what you can afford - i.e what you have in cash, is a little outdated in this age.

I generally terminate my PCP within 3 years, so essentially I am simply leasing. But its cheaper to lease through this method than an actual lease due to the mileage i do. I do not see value in buying anything that will depreciate in value, and I ultimately like to drive a nice car that I can easily afford.

It is not always black and white.

feralspecies

wgl2014 wrote: »

Could you not just pay for the car via the personal loan?

Yes I can cancel the PCP and pay off on a personal loan within 14 days if I like. This is also an option.

So i essentially have taken all the dealer contributions and then can pay off. I’ve spoken to the dealer about this and they don’t mind.

feralspecies

photome wrote: »

Ask the lender.


I would agree with camelot though

This is a good shout, I have not signed the documents yet, just agreed a price. I can certainly give them a call within 14 days and weigh up my options.

I worked out that through a personal loan (currently 2.9%) i can pay off the entire car and pay about 80 more a month give or take, but I am saving circa 4k on the interest payments in the long run.

However, it just depends if i want to keep the car. I usually swap over 3 years to avoid tyre replacements & the expensive service.