How PCP works when it finishes

James2k

The difference between what you paid and what the final balloon payment is, is what they THINK will be the depreciation.

The difference between what you paid and what its worth now, is the actual depreciation

As has been said, you will only get any 'money back' if the car is worth more than the final balloon payment. If thats the case you can sell it and pay off the baloon, or trade in the car directly, they will pay off the baloon for you and use any extra left over as credit towards the new car.

IMO, the most money saving option for you now is to buy the car outright, unless its worth a lot less than the balloon. In which case give it back. If you get another new car it will be a more expensive option, as you are realising now.

Cetshwayo

And your an accountant!

parking_question_chap

Stu6781 wrote: »

If I’ve built 7k worth of equity in a car


What’s the point of me paying my monthly payments for 3 years? Lol.

You have not built up any equity unless you pay the final fee, essentially you paid to rent the car for three years if you just give it back.

neilmcl

Stu6781 wrote: »

Obviously I understand depreciation. The value of the car was £13k. And after 3 years they give the guaranteed value -7k-

That’s the depreciation?

Which is clearly what the finance company require to be paid if you want to settle the finance, if the actual value of the car is higher then this is your equity. Why are you not getting this?

King_Nothing

Stu6781 wrote: »

Obviously I understand depreciation. The value of the car was £13k. And after 3 years they give the guaranteed value -7k-

That’s the depreciation?

Yes, and that's what you've been paying for the past few years, you've paid the interest and depreciation and they've let you use their car in return. You really think they're going to give you a £13k car then 3 year later give YOU £7k for it? If as you've said; paid £200 a month, that's what £7.2k? What is the benefit to them to pay you for the car, and how have you paid any equity when you've paid just over half the cost of the car over a 3 year period?

If you wanted to build equity in the car, you should have financed in differently, most notably with an unsecured loan or on a finance scheme that has no balloon payment. I financed my last car like that, so was always building equity in it when I paid my final payment after the 3 years.

neilmcl

Cetshwayo wrote: »

And your an accountant!

Well he was looking for a career change (plumber etc), you can sort of see why now. :rotfl::rotfl:

neilmcl

King_Nothing wrote: »

If you wanted to build equity in the car, you should have financed in differently, most notably with an unsecured loan or on a finance scheme that has no balloon payment. I financed my last car like that, so was always building equity in it when I paid my final payment after the 3 years.

Doesn't matter how he financed it, you're never going to "build equity" in a depreciating asset.

parking_question_chap

The sad reality is we will probably have to endure years of "Mis-sold your PCP?" adverts on televisions now, because people cant be bothered to read their finance agreements.

Just when "Mis-sold your PPI" were starting to fade away.

:undecided

King_Nothing

neilmcl wrote: »

Doesn't matter how he financed it, you're never going to "build equity" in a depreciating asset.

True, maybe; outright ownership is a better term to use.

foxy-stoat

Stu6781 wrote: »

Obviously I understand depreciation. The value of the car was £13k. And after 3 years they give the guaranteed value -7k-

That’s the depreciation?

I think you need to re-read the agreement and get a calculator.

£13,000 to buy and own the car outright.

You will of paid £200 x 36 = £7,200 (plus any deposit) to rent the car with an option to buy it at month 36/37 less whatever the interest is.

So at the end of the 3 years you have an option to buy it as you dont yet own it.

You will possibly only build up equity if say you based your agreement on say 10,000 miles a year and you only drive say 5,000.

So the GMFV would of been based on the car having 30,000 miles on the clock at the end of the 3 years but actually it will have 15,000 miles so should be valued higher....or you bought a limited run/future sought after model which doesn't normally happen these days.

Post #10 sums up PCP very well so you have got it.