Options when settle PCP early (positive equity)

Catta_coombes

About a year and a half ago I was commuting from Colchester to Basildon to get to work. I decided to get a new car for the reliability and got a Hyundai i10 on a 3 year PCP deal for £106pm which was a great deal. At the time my mileage was about 27000 miles per year and my PCP deal reflected that.

I now live around the corner from work and no longer need the car like I did when I got it, my annual mileage is like 6000 miles now. As nice as the car is I would now rather have a 1) automatic for London traffic and 2) a convertible because I want one. I am now looking at getting a second-hand car that I would own outright.

My question is that if I settle my finance early do I have the option to settle, sell the car back to the dealer and they either pay me the equity (between the settlement figure and how much the car is worth) or use that equity to purchase one of their cars all in one deal.

Obviously, I could settle (buy) the car, then sell it separately, then use the money to buy a new car separately. However, this requires lots of steps and potentially a period without a car. I would also like to avoid having to pay out the £4000 for the settlement figure (I can afford it but it means taking money out of my Help to Buy ISA which I cannot put back in if I have any left after the car swap.

Does anyone know if this is a possibility? Any experience with settling PCP finance early like this? I will obviously discuss this with the finance company and dealership but I want to know what I am talking about before I approach them.

Note: I am certain that my car is worth more than the settlement figure so I don't need to worry about negative equity in this circumstance.

motorguy

Catta_coombes wrote: »

About a year and a half ago I was commuting from Colchester to Basildon to get to work. I decided to get a new car for the reliability and got a Hyundai i10 on a 3 year PCP deal for £106pm which was a great deal. At the time my mileage was about 27000 miles per year and my PCP deal reflected that.

I now live around the corner from work and no longer need the car like I did when I got it, my annual mileage is like 6000 miles now. As nice as the car is I would now rather have a 1) automatic for London traffic and 2) a convertible because I want one. I am now looking at getting a second-hand car that I would own outright.

My question is that if I settle my finance early do I have the option to settle, sell the car back to the dealer and they either pay me the equity (between the settlement figure and how much the car is worth) or use that equity to purchase one of their cars all in one deal.

Obviously, I could settle (buy) the car, then sell it separately, then use the money to buy a new car separately. However, this requires lots of steps and potentially a period without a car. I would also like to avoid having to pay out the £4000 for the settlement figure (I can afford it but it means taking money out of my Help to Buy ISA which I cannot put back in if I have any left after the car swap.

Does anyone know if this is a possibility? Any experience with settling PCP finance early like this? I will obviously discuss this with the finance company and dealership but I want to know what I am talking about before I approach them.

Note: I am certain that my car is worth more than the settlement figure so I don't need to worry about negative equity in this circumstance.

Yes. The dealer can clear the finance then pay you the difference either directly, or use it towards your next car / deposit.

Catta_coombes

Thanks for your response. Do you know if the 'fair wear and tear'/'reasonable care' conditions apply if I do this?

If I was to give the car back either at the end of the PCP deal or as Voluntary Termination they would charge me for unreasonable damage. e.g. I have some pretty scuffed hubcaps (not alloys) and the antenna got chewed on by a monkey (Longlete Safari) so I would be charged for this. But in this situation am I not selling it to them? So they just pay a certain price (possibly slightly lower but still negotiable due to conditions) rather than charge for damage.

I guess the same question applies to additional milage charges but I this won't affect me.

Catta_coombes

Also, will they just pay the part exchange value or the actual value (i.e. if sold privately or to a dealer)?

DrEskimo

Any wear or tear will be reflected in the price they are willing to give you for the car.

Not many dealerships will just buy the car outright without doing it as a part exchange on another car though. Some do, but will offer a pretty poor price for it. Remember, they will be trying to get it for the lowest possible price. If you are planning to buy the used car from a dealer, you can P/X against it, but again remember this is likely to be less than you want....they won't offer you anywhere near dealer price or even private sale.

You can try places like WeBuyAnyCar or Evans Halshaw for a straight forward sell, but don't be surprised if they too give you a poor valuation that is less than the finance settlement figure.

I had luck with a website called Tootle, which puts you in touch with local dealers, where they all bid on your car. Took some haggling, but I managed to get a good price that was close to what I would have advertised the car for privately.

Failing all the above, you best bet really would be to pay off the finance and sell privately. Depending on the market and what you are offered, this could amount to a substantial saving.

amandacat

I have done this in the past. I didn’t take it back to the original dealer because they only offered to take the car back and write off the PCP (as I wasn’t in negative equity) but they wouldn’t pay me the positive equity as they said I was breaking the agreement and in fact were going to charge me extra for some motorway stone chips.

In the end I traded it in at another dealer where I bought another car, they paid off my finance and gave me the positive equity towards the car I was buying with them. I did get quotes from webuyanycar and Evans Halshaw as they were happy to pay off my finance and give me what was left over. But I got the same amount when trading it in.

AdrianC

Hold on a sec - are you thinking the end-of-contract balloon figure can be paid to buy the car now, part-way through the term...?

You have a 3yr/81k contract.
That contract gives a balloon price for a 3yr/81k mile car.
You want out after 1.5yrs and about 30-35k miles.
VTing requires 50% of the full finance amount to be paid - that includes a lot more than just half of the monthlies.

You will need to speak to the finance house to find out what options you have now - but, basically, you're looking at paying up to the 50% mark to hand the car back. They may give you a "buy-it-now" price, but it's going to be a lot more than the end-of-term balloon figure...

DrEskimo

I don't think the OP thought that at all.

You can get a settlement figure on a PCP loan just like every other loan.

I think the OP is being slightly optimistic in what a dealer will offer them for the car though....

AdrianC

DrEskimo wrote: »

I don't think the OP thought that at all.

You can get a settlement figure on a PCP loan just like every other loan.

I think the OP is being slightly optimistic in what a dealer will offer them for the car though....

May I respectfully refer you to...

Catta_coombes wrote: »

I would also like to avoid having to pay out the £4000 for the settlement figure

...which does rather suggest that the OP thinks £4k is going to see them driving away in their 18mo car, doesn't it?

There's another £1900 or so in monthlies until the end of the deal, plus whatever the balloon is, so it's possible £4k is the VT-and-walk-away figure, but I rather suspect it's the 3yr/80k balloon.

DrEskimo

AdrianC wrote: »

May I respectfully refer you to...


...which does rather suggest that the OP thinks £4k is going to see them driving away in their 18mo car, doesn't it?

There's another £1900 or so in monthlies until the end of the deal, plus whatever the balloon is, so it's possible £4k is the VT-and-walk-away figure, but I rather suspect it's the 3yr/80k balloon.

They referred to it as the settlement figure, so I assumed it was the settlement figure. Not the GFV.

£4k for a i10 on a 3yr PCP with 80k is far too high. Looking at their PCP calculator it would be closer to £2,5k.

I also don't understand why you keep mentioning VT? PCP is a loan like any other HP loan, just with a larger final payment. You can settle the loan in full and own the car at any point during the term of the agreement.

AdrianC

DrEskimo wrote: »

They referred to it as the settlement figure, so I assumed it was the settlement figure.

Yes, the keys-back-and-walk-away figure, whether it's strictly VT or not. Yet the OP appears to think that'll see them driving away in the car.