PCP Mini Finance

TBNBC06

Hi, In October I "bought" a Mini One from 2015 with the Chili Pack on it.

I pay £200pm for 4 years and at the end I am supossed to pay £4182 to own it.
I love it and I plan on driving this car until its wheels fall off or I stop loving it. i.e. having serious mechanical problems. I am not the type to exchange a car every 3 years.
My questions is: if I pay extra on the car monthly, and assuming I pay extra enough to take off 2 years off the 4 in the contract, will I reduce the interest? the total I started with was £13,784, interest calculated into this. is there any way to reduce this amount in any way?

I know I'll have to pay the £4182 lumpsum at the end regardless, whether 3 months or another 40 more months.

thanks for the advice

neilmcl

If you plan on keeping the car it might work out cheaper to settle the finance with the combination of a lump sum and a cheap bank loan but to answer your question, yes, an overpayment will reduce the monthly interest, how much will depend on how big and how may times you over pay. You need to read your agreement and speak to the provider as to what they'll allow in terms of extra payments.

Cornucopia

TBNBC06 wrote: »

My questions is: if I pay extra on the car monthly...

Whilst PCP deals differ between Finance Companies, you won't generally be permitted to make monthly overpayments. You are generally only able to either continue with the plan as agreed, or to settle it in its entirety (including the £4182 lump sum), with the possibility of taking a loan from another provider to do so.

If you settle the finance, you will lose any protection against excessive depreciation, though if you plan to keep the vehicle after the end of the PCP term that may not be of value to you.

neilmcl

Cornucopia wrote: »

Whilst PCP deals differ between Finance Companies, you won't generally be permitted to make monthly overpayments. You are generally only able to either continue with the plan as agreed, or to settle it in its entirety (including the £4182 lump sum), with the possibility of taking a loan from another provider to do so.

If you settle the finance, you will lose any protection against excessive depreciation, though if you plan to keep the vehicle after the end of the PCP term that may not be of value to you.

Most main dealer finance providers will allow extra payments.

Cornucopia

neilmcl wrote: »

Most main dealer finance providers will allow extra payments.

I didn't know that.

How does it work - surely it messes up all the original numbers for the deal?

Can you overpay above the maximum deposit amount? What about overpaying "into" the GMFV to get towards a zero-cost option to retain protection against depreciation, and then getting a cheque back if you hand back the car?

neilmcl

Cornucopia wrote: »

Really? How does it work - surely it messes up all the original numbers for the deal?

Why would it? It's pretty simple to recalculate the interest and monthly repayments.

The best thing to do is speak to the provider, they may not allow regular ad-hoc overpayments but they will allow a number of lump sum payments.

Cornucopia

My PCP is 0%, so no advantage, but I'm intrigued by the possibility for a future purchase.

motorguy

Cornucopia wrote: »

I didn't know that.

How does it work - surely it messes up all the original numbers for the deal?

Can you overpay above the maximum deposit amount? What about overpaying "into" the GMFV to get towards a zero-cost option to retain protection against depreciation, and then getting a cheque back if you hand back the car?

I think its a legal requirement

Nearlyold

motorguy wrote: »

I think its a legal requirement

Since the European (Consumer) Credit Directive came into force February 2011 all consumer loans commenced since then must accept overpayments either on a regular or ad hoc basis, in most circumstances no seperate fee is payable, however the lender can still use the early settlement regulations in calculating the interest rebate due, which effectively results in paying up to 58 days interest on each overpayment if the lender uses the prescribed calculation method, (the lender can waive the interest charge if they wish).

The lender is not compelled to collect overpayments automatically (by DD for example).

Followng an overpayment the lender must offer either a reduced payment or reduced term at the lenders discretion (the lender can offer either or both methods but the lender chooses not the customer).

System

Find out what the current settlement fee would be, see if you can find finance for that at a lower interest rate than your PCP is.

neilmcl

Tarambor wrote: »

Find out what the current settlement fee would be, see if you can find finance for that at a lower interest rate than your PCP is.

Already suggested in post #2