PCP loan disadvantages?

whitejohn

Have been trying a long time to buy a new car with cash I've managed to save but unable to obtain a good discount unless I take out PCP.

I'm just about to sign up for PCP but worried about the disadvantages.

Can I really pay it off in say 3 months with no cancellation charges? And if so how much interest would I pay for 3 months? Though I have the cash, I'm retired on low earnings so could be turned down anyhow.

Is it sensible to go ahead with this and what to watch out for, thanks.

[Deleted User]

You'll be charged up to two months early settlement.

If you have it for three months, you would therefore pay up to five months interest.

noh

You may be charged up to 2 months interest according to the agreement you sign.

The last time I bought a car on finance, in order to get the deposit contribution, I was only charged interest for the number of days the loan was outstanding before I paid it back.

whitejohn

Deleted_User wrote: »

You'll be charged up to two months early settlement.

If you have it for three months, you would therefore pay up to five months interest.

So in effect a cancellation charge of 2 months even if it was theoretically 1 day?

So if I took it out over say 4 years instead of say 2 years then those 2 months payments would be lower?

whitejohn

noh wrote: »

You may be charged up to 2 months interest according to the agreement you sign.

The last time I bought a car on finance, in order to get the deposit contribution, I was only charged interest for the number of days the loan was outstanding before I paid it back.

So did you literally pay it back within a few days without any problems?

jonesMUFCforever

Check the terms and conditions - the last one I had with Ford credit had no early settlement fee so I could have settled within 1 day if I wanted.

[Deleted User]

whitejohn wrote: »

So if I took it out over say 4 years instead of say 2 years then those 2 months payments would be lower?

No, they would be higher, because interest is always charged on the outstanding balance.

DrEskimo

I did this on Feb with a used Renault. As above, no early repayment fees. Could pay it the next day if I wanted. I paid half of it that week, and then paid it in full after a month.

I could be wrong, but I'm not sure I've seen many PCP deals with early settlement fees. Sometimes there is an optional purchase fee of £10, but I've never seen as much as 2-months, like with personal loans.

whitejohn

Deleted_User wrote: »

No, they would be higher, because interest is always charged on the outstanding balance.

That's handy to know, so the best option is to pay maximum initial deposit allowed?

YorkshireBoy

whitejohn wrote: »

That's handy to know, so the best option is to pay maximum initial deposit allowed?

I was told the max I could pay as a deposit was around a third.

The best way is to 'withdraw' from the agreement within the first 14 days. From memory, the £13K or so on my used Jag PCP deal cost me less than £4/day at 10.9% APR. Well worth it for the £1,500 deposit contribution gained.

Settling after 2-3 months does no-one any favours really. You'll incur 4-5 months of unnecessary interest and the dealer probably won't get their commission from the finance house (if indeed you wanted them and the salesman to get any).

whitejohn

YorkshireBoy wrote: »

I was told the max I could pay as a deposit was around a third.

The best way is to 'withdraw' from the agreement within the first 14 days. From memory, the £13K or so on my used Jag PCP deal cost me less than £4/day at 10.9% APR. Well worth it for the £1,500 deposit contribution gained.

Settling after 2-3 months does no-one any favours really. You'll incur 4-5 months of unnecessary interest and the dealer probably won't get their commission from the finance house (if indeed you wanted them and the salesman to get any).

Not exactly what sure what you mean about it doing no one any favours. I would be more than happy to pay it off in 14 days but they asked me to leave it at least a few months which is why I picked 3 months. I thought they would have received their commission by that time but if I paid it off in less than 14 days they would not get it. Plus I find it a lot of hassle doing all of this when I just want to buy and have the cash. Surely the manufacturer could still give the same discount really. I'm very fair and would not want them to miss collecting their commission however. Are you saying that 14 days would be better? Thanks