Financial sensibility woes during a PCP

J89eu

Hi all

In January 2018 I bought a brand new Golf GTD Estate on PCP, it currently stands at 12k miles and has a tiny dent and a 2 wheels could do with a refurb or replacement (They're cheap 2nd hand in good nick). I say that as I'm thinking about giving it back, but I can't decide if I can or how I can.

It costs me £350 a month, I pay about £1100 a year in insurance but I generally cycle to work and do not do many miles, it'd still be under 9k but I drove to Poland and back a few weeks ago which is something I do not intend to do any time soon. I'd guess I'm near £500 a month when all said and done for the costs.

I have been getting into the FIRE world and trying to get all my finances in order and this one seems the worst thing I currently have.. Other than this I have a mortgage and the H2B equity loan.

I am not struggling for money but I can't see the sense in pay £500 a month for a car I barely use. I do love the car, the mod cons etc but I think I could manage a few years in a 5k or so car, pay off the H2B equity loan and overpay on the mortgage what I can and then look for something better, I am a petrolhead so it is difficult but I have seen a few cars I would be happy to drive.

The question is how do I return it, I'd guess I need to fix the wheels and the dent which isn't much of a problem, is there anything else I need to think about? Do I just return it and walk away? Should I?

I have an emergency fund and a S&S ISA but not really much spare money otherwise so I'd either need a small personal loan at low APR or pick up a 0% card to buy a car. This would be the family car for myself and my partner who drives occasionally, later on I may think about adding a 2nd car, again a very cheap one, around 3-4k for myself only so that in the winter we could both drive to work (no option of commuting together currently) in the winter when it's a bit too much to cycle (which is what we both generally do)

Please help!! I'm having a bit of a meltdown trying to work out what to do.

motorguy

OK....

First thing would be to get a settlement figure.

Next would be to try the dealer you bought it off, and see what they would offer to buy it back. Also try WBAC, Evans Halshaw used car buyer, and any other VW & Specialist dealers you can with regards to getting a trade bid on it.

You could also try selling it privately as this could recoup more.

I think you will be in negative equity. Significantly.

Have you got £5K to buy this other car with?

J89eu

The settlement figure on the car is just under £19500, forgot to mention this.

I have 5k but it forms part of my emergency fund, would prefer not to touch it but I could recoup it fairly quickly with the monthly savings, alternatively I could get a personal loan or use an 0% CC I guess.

The payments remaining before I have the option to give it back or "upgrade" would be roughly £10,000.

motorguy

J89eu wrote: »

The settlement figure on the car is just under £19500, forgot to mention this.

I have 5k but it forms part of my emergency fund, would prefer not to touch it but I could recoup it fairly quickly with the monthly savings, alternatively I could get a personal loan or use an 0% CC I guess.

The payments remaining before I have the option to give it back or "upgrade" would be roughly £10,000.

You might not be that far in negative equity. I would try your VW dealer and see what they say about buying the car back.

That will give you a good starting point.

J89eu

So I called VW and for a voluntary termination I'd be looking at a shortfall of roughly £5000. The settlement figure is £19500 and WeBuyAnyCar would give me £17000 for it (before actually seeing it) so perhaps I could part ex it or sell privately for a not bad figure?

AdrianC

J89eu wrote: »

So I called VW and for a voluntary termination I'd be looking at a shortfall of roughly £5000. The settlement figure is £19500 and WeBuyAnyCar would give me £17000 for it (before actually seeing it) so perhaps I could part ex it or sell privately for a not bad figure?

So that's a £2,500 shortfall. That's over seven months of monthly payments, straight off.

You don't say how long the PCP is - three years? If so, then with the 20 months you're into it, plus the seven months you're losing there, that's only 8-9 months short of completing the contract.

You're doing ~5k miles/year in it. How many miles are you contracted for? Would reducing the contracted mileage reduce your monthlies?

I have to admit that I struggle at the concept of a diesel Golf estate being any kind of "dream car", but that might be me.

J89eu

PCP is for 4 years so another 28 months to go.

Contracted for 10k miles, I can ask about that, didn't know that was an option to be honest.

it's certainly not a dream car, bit of an impulse buy after my previous car which was leased went back.

EDIT: just called, no option to reduce the mileage.

smuk

I think if you're doing substantially less mileage than you're allowed to under your PCP then your car may be worth more than the guaranteed value for them to buy it back at the end of your term so at least you may end up with a little equity at end of contract if you part ex it elsewhere. Sorry it's not helpful for now, but a possible silver lining for the future maybe!

J89eu

Thanks, Smuk, I do think that perhaps it's not as clear cut as just giving the car back and saving money now, in fact, it could be worth just carrying on through and like you say, I may have something to show for it at the end to either get a smaller cheaper car as a second car and then get something for the longer distances/dog carrying duties. I guess the point of a PCP is to be hard to get out of!

AdrianC

J89eu wrote: »

I guess the point of a PCP is to be hard to get out of!

They're actually easier to get out of than most multiple-year contracts, because of the consumer credit regs that allow VTs.