Paying off PCP in one go

myoung48

I am looking at PCP deals on a new renault Zoe. I have the cash to buy outright, but the PCP deals work out cheaper as Renault offers a "Deposit contribution" of £2k which exceeds the interest on the loan.

My understanding of PCP is that you loan the car for a few years (3 in the case of the deal I'm looking at) paying:
- A deposit of £x
- A monthly fee of £y
- A balloon payment of £z at the end of the three years if I decide I want to own the car

The monthly fee is composed of a part paying off the value of the car and a part that is interest on the three year loan I am taking. Now my question is, with other types of loan I could elect to pay off the loan early and avoid paying more interest. Can I do the same with PCP? That is, can I do the following?

- Take out a PCP deal, pay the maximum deposit.
- Rather than pay a monthly fee for 3 years, terminate my finance early and pay the monthly fee £y * 36 minus whatever interest I would have paid.
- At the end of 3 years, elect to keep the car or pay the balloon payment as usual.

If not, why not? Or why is this not a good idea? Essentially I want to pay cash for the car but get the benefit of the Renault "Deposit contribution" to reduce the price, which is only available on PCP deals.

foxy-stoat

You won't be able to take out a PCP deal and settle the monthly cost and defer the balloon payment for 3 years interest free, you will be asked to settle the whole finance cost.

DrEskimo

As above. You have to settle the entire loan, which includes the GFV. You are borrowing the entire amount, so you pay interest on borrowing the GFV as well. It's just that you defer the GFV until the final payment.

The Zoe has a massively pessimistic GFV, so there is no real benefit for keeping it anyway.

Can I ask which model you are going for, and how much you have been quoted? I spent the best part of 6-months researching before I picked up my Zoe in February, so know the market well...!

AdrianC

Don't forget the "balloon" is money you're borrowing, too - so even if you did pay off the monthlies to save the interest on them, you're still paying interest on the balloon.

lopsyfa

AdrianC wrote: »

Don't forget the "balloon" is money you're borrowing, too - so even if you did pay off the monthlies to save the interest on them, you're still paying interest on the balloon.

I agree with this.

Also there will be a minimum monthly amount depending on the finance company which will still include some interest. I am currently paying £25 a month for a BMW finance which is the minimum they will allow. I am now saving to pay the balloon early to save the interest. If I settle today, the current value/settlement is about £7500 compared to about total payment of £8800 if I pay the monthlies and balloon in about 2.5 years.

myoung48

Thanks everyone, I hadn't considered that the balloon payment was financed too but in hindsight that makes sense.

Is it possible to settle the entirety of the PCP contract on day 2 of the agreement, including the balloon payment? Really what I'm trying to do here is realise the lower price offered on PCP due to the "deposit contribution" but to effectively pay cash.

myoung48

DrEskimo wrote: »

As above. You have to settle the entire loan, which includes the GFV. You are borrowing the entire amount, so you pay interest on borrowing the GFV as well. It's just that you defer the GFV until the final payment.

The Zoe has a massively pessimistic GFV, so there is no real benefit for keeping it anyway.

Can I ask which model you are going for, and how much you have been quoted? I spent the best part of 6-months researching before I picked up my Zoe in February, so know the market well...!

It was the basic trim renault zoe R110 and I've been offered it for £13,967 which seems like a pretty good deal to me. But I'd be interested in what you think.

facade

How much is the lease on the battery over the life of the car?


They are twice that with batteries included.

marlot

myoung48 wrote: »

...
Is it possible to settle the entirety of the PCP contract on day 2 of the agreement, including the balloon payment? ....

Yes, I've done that several times. You have up to 14 days.


What you need to ask for is to withdraw from the finance. I've just paid over the phone with a debit card. In each case, I got to keep the manufacturer finance contribution.

DrEskimo

myoung48 wrote: »

Thanks everyone, I hadn't considered that the balloon payment was financed too but in hindsight that makes sense.

Is it possible to settle the entirety of the PCP contract on day 2 of the agreement, including the balloon payment? Really what I'm trying to do here is realise the lower price offered on PCP due to the "deposit contribution" but to effectively pay cash.

Absolutely. You can can settle the loan at any time. I bought a used Zoe and got it on PCP to get £1,000 deposit contribution and 2 free services, then settled in full.

myoung48 wrote: »

It was the basic trim renault zoe R110 and I've been offered it for £13,967 which seems like a pretty good deal to me. But I'd be interested in what you think.

So the Dynamique trim is fine, just be aware you don't get reversing camera or heated seats. I don't like the beige trim on the Signature, although I think they changed that on the new S trim?

The R110 is fine, They used to have a Q90 motor that had quick charging (43kW), but to be honest, the real world benefit was minor (about 15mins faster 20-80%) as the peak charge rate can only be achieved over certain State of Charge % (typically 5-60%) and at optimal battery temperatures (20°C).

With regards to battery lease vs battery owned, I have been over the numbers time and again and the lease model is a false economy. Whilst it may be £6k more to purchase, the battery owned model holds it's value well, and so is typically worth about £4-5k more than a battery lease model at the same relative age/mileage/trim. As such, it's not the cost differential at purchase that is important, it's the depreciation cost difference. So if the cost difference is only around £2k, even on the cheapest battery lease at £59 over just a few years, the battery owned model will cost similar/less.

Fundamentally, the lease model punishes you for driving more, and keeping the car longer. It's the same reason I dislike PCP/PCH. The battery owned model gets cheaper the longer you keep it/more you drive it. It's also easy to trade/sell as some dealers won't accept the lease as they have to pay it after 3months, and private buyers have to pass a credit check from RCI.

The problem I had was I didn't want to spend £20k on a Zoe...! So I went used. I got a 66-plate 41kWh R90 (slightly less power than the R110 at the 30-60MPH), with just 5,000miles for £14,500. Unfortunately prices have already gone up, and the PCP contribution on used has been cut to £500, but you can get one for about £15,500 now.

I got it from Masters of Beckenham, and after searching for months (even going to car auctions), this was the cheapest and the dealer knew the models well...I had so many that had no idea about lease vs owned, 22kWh vs 41kWh...etc etc...

You get 4yrs on the car warranty at this age, and 8yrs on the battery. So if you extend the warranty on the car from years 4-8 for £289 per year, you can own this used Zoe for 6yrs, and be under full warranty for that time for just an extra £1,156.

That would be my advice :money:

neilmcl

marlot wrote: »

Yes, I've done that several times. You have up to 14 days.


What you need to ask for is to withdraw from the finance. I've just paid over the phone with a debit card. In each case, I got to keep the manufacturer finance contribution.

You have 14 days in which to cancel (withdraw) without penalty, however you can settle the finance any time you like.