Some PCP questions

typeractive

Hi all,

I've done some searching and think I know the answer to some of my questions but thought it's worth checking.

1. My other half is looking for a new car on PCP. I read (elsewhere) that it is possible to agree a deal with the manufacturer, then pay the finance within 2 weeks with a loan at a lesser %apr. Then pay the loan back over the term (e.g. 47 months). Is this possible? Because if so, I wish I knew this when I bought my car!!

2. I am 2 years into paying my PCP. Could I now take out a loan and pay the remaining finance off, as in question 1? :rotfl:

3. The other half's car has considerably gone over it's mileage allowance due to lifestyle changes. She has done circa 25k miles more, and puts the car in £2,250 negative equity off the guaranteed minimum value. This is causing a bit of a pickle when trying to get a new deal with the same manufacturer as they're adding that into the deal (which I understand). Any advice / tips on this. Should we just pay the fine and hand it back, or keep pushing for a deal?

4. Car we're looking at is from Audi, circa £40k. They're wanting 5k deposits, and stating they're throwing in £4k (in various different pots). I'd prefer the deposit from us to be less but they're blaming the negative equity.

I'm sure I will have more questions but any help on these would be super.

Thanks! :j

DrEskimo

typeractive wrote: »

Hi all,

I've done some searching and think I know the answer to some of my questions but thought it's worth checking.

1. My other half is looking for a new car on PCP. I read (elsewhere) that it is possible to agree a deal with the manufacturer, then pay the finance within 2 weeks with a loan at a lesser %apr. Then pay the loan back over the term (e.g. 47 months). Is this possible? Because if so, I wish I knew this when I bought my car!!

2. I am 2 years into paying my PCP. Could I now take out a loan and pay the remaining finance off, as in question 1? :rotfl:

3. The other half's car has considerably gone over it's mileage allowance due to lifestyle changes. She has done circa 25k miles more, and puts the car in £2,250 negative equity off the guaranteed minimum value. This is causing a bit of a pickle when trying to get a new deal with the same manufacturer as they're adding that into the deal (which I understand). Any advice / tips on this. Should we just pay the fine and hand it back, or keep pushing for a deal?

4. Car we're looking at is from Audi, circa £40k. They're wanting 5k deposits, and stating they're throwing in £4k (in various different pots). I'd prefer the deposit from us to be less but they're blaming the negative equity.

I'm sure I will have more questions but any help on these would be super.

Thanks! :j

1. Yes, you can settle the PCP whenever you like. Whether that's money from a loan, or savings is neither here nor there. The monthly will be higher though, as it will be paying back the entire amount with no balloon payment. You will save a considerable amount in interest though, even with the same APR.

2. Yes

3. Are you sure you are getting the best discount on the new car? Have you looked at online brokers like CarWow, Coast2Coast, OrangeWheels, etc.? The additional mileage will need to be paid one way, either excess mileage charge, or through a reduced valuation. You could look at VT and try to get away with not paying the excess mileage charges, but there is no guarantee they won't chase you for it...

4. You can put in as little or much as you want. You will just increase or decrease the monthly amount. Look at how much you will be paying back in total, thats the important figure. How you divide that in terms of upfront and monthlies is largely irrelevant (will more upfront will save you in interest, but not a huge amount. Reducing the GFV will save you much more in interest, but at the cost of higher monthlies, which defeats the point of PCP....).

Kit_Katt

Just homing in on your negative equity problems due to driving more miles.


PCP deals are regulated..if you have paid back half of what you have borrowed including any deposit you can early terminate the car. You are still liable for the excess mileage charge pro rata , but the advantage is you get out of a bad deal faster .. sign a new deal with realistic mileage and off you go again.

typeractive

Hi Dr Eskimo :wave:

Thanks for the quick reply. I have some more questions:

DrEskimo wrote: »

1. Yes, you can settle the PCP whenever you like. Whether that's money from a loan, or savings is neither here nor there. The monthly will be higher though, as it will be paying back the entire amount with no balloon payment. You will save a considerable amount in interest though, even with the same APR.

Would I need to pay the FULL amount of the car, or can I just pay the 47 monthly payments? Does that make sense? Basically leave the balloon payment at the end when we would hand the car back. Am I being too ambitious, as everyone would just do this? :rotfl:

3. Are you sure you are getting the best discount on the new car? Have you looked at online brokers like CarWow, Coast2Coast, OrangeWheels, etc.? The additional mileage will need to be paid one way, either excess mileage charge, or through a reduced valuation. You could look at VT and try to get away with not paying the excess mileage charges, but there is no guarantee they won't chase you for it...

No, but I've just signed up to carwow. I will look at the other ones too. :beer: What is VT?

4. You can put in as little or much as you want. You will just increase or decrease the monthly amount. Look at how much you will be paying back in total, thats the important figure. How you divide that in terms of upfront and monthlies is largely irrelevant (will more upfront will save you in interest, but not a huge amount. Reducing the GFV will save you much more in interest, but at the cost of higher monthlies, which defeats the point of PCP....).

Got you - makes sense to me. So we need to get the overall price down, and then (if possible) get a loan to cover the monthlies which I might have crossed wires on?

typeractive

Kit_Katt wrote: »

Just homing in on your negative equity problems due to driving more miles.


PCP deals are regulated..if you have paid back half of what you have borrowed including any deposit you can early terminate the car. You are still liable for the excess mileage charge pro rata , but the advantage is you get out of a bad deal faster .. sign a new deal with realistic mileage and off you go again.

A friend told me something about "paying back over half of the borrowed amount and you can just hand it back, without any costs on the extra mileage" ...I did think that would be too good to be true. We're due to hand back in April so not long to go, and need to wait for the new car, so will probably need to hang onto this one longer.

I think I worked out the payments on paying half of the overall costs and it worked out I would reach this point at month 46 rather than 48 or something? Maybe I worked it out wrong?

DrEskimo

typeractive wrote: »

Would I need to pay the FULL amount of the car, or can I just pay the 47 monthly payments? Does that make sense? Basically leave the balloon payment at the end when we would hand the car back. Am I being too ambitious, as everyone would just do this? :rotfl:

Nope, can pay back as much or as little as you like. Essentially you are just borrowing additional money to use as your upfront payment. You do need to think about what your goal is by doing this though? Are you just trying to lower the monthly cost? What APR are Audi charging?

You can pay off a certain amount up until the balloon. Typically they leave a bit over so that you still have a small monthly cost. If you want to reduce total interest payable, it would be far more advantageous to pay down the GFV and maintain the same monthly payment, but that might not be affordable with two loans.

Which brings me to my final point, yes everyone could do it, but remember the headline rates in highstreet banks are representative. Only 51% of applicants achieve them, and will be based on credit history, income, affordability, etc. The lender doesn't know you are using it to essentially consolidate your PCP debt. Borrowing an extra £10/15k while already displaying a £40k debt in your name might prove tricky....

typeractive wrote: »

No, but I've just signed up to carwow. I will look at the other ones too. :beer: What is VT?

VT is voluntary termination. When you have paid the 50% of the total amount payable (have a look at your finance documents, the total payable and 50% amount are detailed) you can hand the car back and pay no more. Generally this is towards the end of most PCP agreements, as it includes upfront payments, monthlies (which includes interest), balloon and any fees.

typeractive wrote: »

Got you - makes sense to me. So we need to get the overall price down, and then (if possible) get a loan to cover the monthlies which I might have crossed wires on?

Just look at the total cost. PCP is just a loan. Anyway you slice it, you are buying a £40k+ brand new car that depreciates at an eye watering rate. You are then agreeing it trade it in at rock bottom market value, exacerbating the depreciation cost further. Finally, you are then borrowing the money to do this using the most expensive form of finance in the way of PCP. Compare the interest you pay on you PCP, to a standard loan of the same amount, same APR and same duration. You will see you are paying considerably more interest...

Buying new cars is a luxury only a relatively small proportion can afford to do....buying one every few years is even rarer! Look at how much it is actually costing you each time and consider if you are happy with this proportion of your income going towards just depreciation and interest on a car....

Ectophile

DrEskimo wrote: »

Buying new cars is a luxury only a relatively small proportion can afford to do....buying one every few years is even rarer! Look at how much it is actually costing you each time and consider if you are happy with this proportion of your income going towards just depreciation and interest on a car....

But if it wasn't for all the people who keep churning through endless PCP deals every 2 or 3 years, there wouldn't be such a supply of good second-hand cars for the rest of us to buy!


They get to pay all the depreciation. I get a reasonably new car at a much better price.

TheMoonandBack

I would say your other half is paying the £2250 “negative equity” on the trade in with the £5000 deposit they want.
The dealer is then discounting the new car by £4K to get the monthly payment down to whatever level your other half is prepared to pay.
Don’t forget the balloon payment at the end of the Audi as well, which is the buyers debt as well.
The £4K they are putting in isn’t real, the only person paying actual money is your other half, the buyer.

Personally I wouldn’t do it, and I say that as some who has done it.
Your other half is going to be shackled to that Audi for a lot of money. Factor in Audi depreciation and maintenance, GAP insurance, etc and the cost will be even more.

DrEskimo

Ectophile wrote: »

But if it wasn't for all the people who keep churning through endless PCP deals every 2 or 3 years, there wouldn't be such a supply of good second-hand cars for the rest of us to buy!


They get to pay all the depreciation. I get a reasonably new car at a much better price.

Fair point!

The OP maybe one of those who are happy to pay for the privilege of buying new cars every few years, and happy to give finance companies extra thousands £££ in interest as well.
In which case we are all happy :beer:

typeractive

DrEskimo wrote: »

Are you just trying to lower the monthly cost? What APR are Audi charging?

Yes, and the overall payment. I'm more fussed about it than my other half! 5.9% is what they're offering.

You can pay off a certain amount up until the balloon.

That was my thinking - get a lower rate, keep paying the same amount as per the PCP deal, so paying off the loan a bit quicker.

Only 51% of applicants achieve them, and will be based on credit history, income, affordability, etc.

Wasn't aware of that - but thanks!

VT is voluntary termination. When you have paid the 50% of the total amount payable (have a look at your finance documents, the total payable and 50% amount are detailed) you can hand the car back and pay no more. Generally this is towards the end of most PCP agreements, as it includes upfront payments, monthlies (which includes interest), balloon and any fees.

Gotcha.

Just look at the total cost. PCP is just a loan. Anyway you slice it, you are buying a £40k+ brand new car that depreciates at an eye watering rate. You are then agreeing it trade it in at rock bottom market value, exacerbating the depreciation cost further. Finally, you are then borrowing the money to do this using the most expensive form of finance in the way of PCP. Compare the interest you pay on you PCP, to a standard loan of the same amount, same APR and same duration. You will see you are paying considerably more interest...

Yes - this is what I'm finding.

Thanks for all your responses Dr E!

typeractive

TheMoonandBack wrote: »

I would say your other half is paying the £2250 “negative equity” on the trade in with the £5000 deposit they want.

Agreed. It was in the paperwork.

The dealer is then discounting the new car by £4K to get the monthly payment down to whatever level your other half is prepared to pay.
Don’t forget the balloon payment at the end of the Audi as well, which is the buyers debt as well.
The £4K they are putting in isn’t real, the only person paying actual money is your other half, the buyer.

Agreed.

Personally I wouldn’t do it, and I say that as some who has done it.
Your other half is going to be shackled to that Audi for a lot of money. Factor in Audi depreciation and maintenance, GAP insurance, etc and the cost will be even more.

Purely out of interest, what would you do? Get a second hander with some miles? I've also been there and done it (well doing it), and sometimes I think it wasn't the best idea, then other times I think I've done the right thing as my personal circumstances allowed it. I had to change my car for a lot more miles as I used to have a sporty little number which I owned outright and loved - I hope to get another one day!