Paying off PCP - can't get my head round it!!

motorguy

truescot wrote: »

I apologise in advance as there are probably loads of thrads on this but I can tseem to get my head round the info I want to make a simple decision;

• Bought a 1 year old (at the time)car 12 months ago on 4 year PCP.
• Just been gifted some money from parents
• Hate debt
• Want to pay off ALL finance so that I own the car and have no more monthly payments.
• No intention of changing the car until it dies (ie. more than 4 years probably), as cars are just pieces of metal that get me from A to B

This seems like a no brainer to me as I will save the interest, but everywhere I read about how it is not advisable to settle early, but this seems to relate to the negative equity if you want to get rid of the car any time soon.


Given my circumstances above, surely settling this makes sense? And will it effect my credit rating (not quite sure how but saw it mentioned)?

Its only an issue if you were trying to get rid of the car and trade it in. You probably owe more than the car is worth.

Clearing the finance and keeping it is a very good idea.

AdrianC

motorguy wrote: »

Why are you talking about VTs? He wants to clear the finance and keep the car.

Yes, that's what I said when I clarified for him why VT definitely wasn't what he wanted to be asking about.

He will save most of the interest on the deal as they cant charge for interest that has not been accrued yet. Typically at this point in the agreement and with that APR they will get maybe an 8-10% discount off the amount remaining.

Indeed. One year's worth of interest off the three years of credit remaining. Woo.

motorguy

AdrianC wrote: »

Indeed. One year's worth of interest off the three years of credit remaining. Woo.

That could be £1,000+ easily.

AutosGuy

I have a question related to going for a VT on a PCP deal over 36 months - Total amount payable is £23.6K - I put down a customer deposit of £2,200 and got a brand deposit contribution of £3,400. Monthly payments are £283.


So could someone tell me whether in order to get to the 50% VT trigger point of (£23.6K) which would be £11.3K, would this include not only my monthly payments of £283 for each month (22 so far) BUT also my customer deposit and the brand deposit as well ??? I am not certain whether I should included the brand deposit contribution in my VT calculation....


Any suggestions...

motorguy

AutosGuy wrote: »

I have a question related to going for a VT on a PCP deal over 36 months - Total amount payable is £23.6K - I put down a customer deposit of £2,200 and got a brand deposit contribution of £3,400. Monthly payments are £283.


So could someone tell me whether in order to get to the 50% VT trigger point of (£23.6K) which would be £11.3K, would this include not only my monthly payments of £283 for each month (22 so far) BUT also my customer deposit and the brand deposit as well ??? I am not certain whether I should included the brand deposit contribution in my VT calculation....


Any suggestions...

The exact figure will be on your finance agreement paperwork but should include the deposit contribution.

foxy-stoat

AdrianC wrote: »

You do not have a legal right to voluntarily terminate the car until half of the finance (including the balloon) is paid off, which you're nowhere near - a VT would normally result in the car going back.

Not true though is it....you can VT a car at any time within the contract, but if you dont pay the 50% then your credit history will take a hit.

motorguy

foxy-stoat wrote: »

Not true though is it....you can VT a car at any time within the contract, but if you dont pay the 50% then your credit history will take a hit.

That actually a very interesting point you make and indeed was worth noting - you can actually VT at ANY point, however the finance company can only pursue you for in total 50% of the total transaction cost (subject to fair wear and tear)

DrEskimo

motorguy wrote: »

That actually a very interesting point you make and indeed was worth noting - you can actually VT at ANY point, however the finance company can only pursue you for in total 50% of the total transaction cost (subject to fair wear and tear)

The obvious question is why would you...?

Why pay X amount to get to the 50% point early and hand the car back. If you have the money to reach the 50% mark, then pay it in monthly instalments and keep driving the car...

Unless the car is completely unsuitable for your needs I don't see it as being a sensible option.

Of course by the time you reach the 50% mark to VT, you will likely find that the settlement and the value are more aligned, meaning selling would be a better option. Or indeed just keeping a few more months until the end of the agreement and again having use of the car!

neilmcl

DrEskimo wrote: »

The obvious question is why would you...?

Why pay X amount to get to the 50% point early and hand the car back. If you have the money to reach the 50% mark, then pay it in monthly instalments and keep driving the car..

Exactly that, to get out of the deal early. There could be any number of reasons, they no longer like the car they "bought", they've got a company car and no longer need this one, they're moving abroad etc.

DrEskimo

neilmcl wrote: »

Exactly that, to get out of the deal early. There could be any number of reasons, they no longer like the car they "bought", they've got a company car and no longer need this one, they're moving abroad etc.

I still can't imagine many situations where paying to get to the 50% VT is going to be cheaper than getting a fair trade-in...or even a very good private sale price for quick sale.

I mean maybe if the car value completely bottoms out, you get no discount.....?

Would need to look at each example individually, but using some figures from an Audi A3 I had, it certainly was much cheaper to pay the difference between trade value and the settlement, then pay to get to the VT point...