How PCP works when it finishes

Stu6781

Hi all

I have a car from Evans halshaw on a 3 year PCP. The guaranteed value after the 3 years (providing I stick to the agreed mileage) is £6995.

Now, when the 3 years is up I understand I have 3 options:
-give the car back and walk away
-pay the balloon payment and own the car
-trade the car in for another using the equity

Financially the 3rd option seems the obvious choice. But if I say did a straight swap for a car that was worth the same value as the car I’m trading in, but I then completely own that new car? Basically the plan would be to sell that new car straight away. Is this all okay to do?

Thanks all

wgl2014

Kind of.....

You are correct that at the end of the plan you can either hand the car back or pay the final balloon and own the car.

The third option you have out depends on what the car is valued at Vs the GMFV. There may be some positive equity, there may not. What seems to happen quite often is a dealer will claim there is negative equity and get you to add this on to a new finance package.

As for trading the car in against one of similar value..... You would still need to pay the balloon payment to own the replacement car. I can't see why you would do that just to sell it on. It could make sense to pay the balloon and then sell the car you have IF the private sale price is a decent amount higher than the balloon payment (that's a big IF).

Stu6781

But if my GMFV is let’s say 7k and they’re happy that it’s worth that, if I then trade that car in for a car that is priced exactly 7k, surely I then just own that new car and I can do what I like with it?

lockedout69

I think this thread should be titled "not how PCP works".

Cetshwayo

At some point you have to pay the £7k. You can keep the car if you pay £7k. They could return the car but you would have to pay £7k for the new car which you could then sell for £7k (or more likely £5k). So you would be £2k down.

The car does not belong to you until you pay the £7k .

Merlin139

PCP enables people to have access to new cars. Many people would not be able to afford HP or taking out a loan to pay for the whole car. The beauty of PCP is that you only pay for 66% or 75% of the car if you hand it back at the end in the condition it should be.

Without PCP many people would never own a new car, and the car industry would not sell as many new cars.

Stu6781

I’m so confused. If I’ve built 7k worth of equity in a car (the GMFV) SURELY I can then trade that car in for 7k for a car worth 7k and walk away. Why on earth would I have to pay another 7k?? What’s the point of me paying my monthly payments for 3 years? Lol.

Stu6781

Another way of putting it: if I’m trading my car in for the GMFV -7k- and trade it in for a 7k car. What payments do I have to pay?

lockedout69

Stu6781 wrote: »

Another way of putting it: if I’m trading my car in for the GMFV -7k- and trade it in for a 7k car. What payments do I have to pay?

How about 7K for the 7K car. Are you in a PCP? When is it due to end?

Stu6781

Right. So you’re all telling me that I’m essentially rent my car at the moment, and that I’m not actually building any tangible equity? I was led to believe I could trade my car in as if I was giving them 7k cash. And I could then make a decision on what I do. As long as I trade it in for one of their cars (I can’t just walk away with 7k cash)

facade

That's how it works. You misunderstood. They want you to trade in the car for another, because they trap you in another finance deal. You might have "nothing to pay" because the 7k you still owe is added to the next "deal"


You pay the last monthly payment and you still owe £7K. But the car is guaranteed to be worth £7K to them, so you have to give it back to pay off the £7K you owe.


If the car is actually worth less than £7k, you just give it back, and imagine that you have "won" somehow


If you could sell the car for loads more than £7k, or you want to keep it, you pay the £7K you owe, and get to own the car.