Question about PCP finance

thomas812

Hey all, I just have a quick question as I am unaware of how PCP works exactly with negative equity.

I took a car out on PCP finance in May 2019. The cars value was £18,000 and I am paying monthly and then the balloon payment at the end of the agreed 38 months is £9000

My question is; If I went to lets say BMW tomorrow and wanted to part exchange my car that is in a PCP contract for another 2.5 years what'd happen? Would I lose money? How would the PCP be settled? ETC..?

Notes:
-Let's say the car from BMW is £25,000.
-The car I have right now is worth around £15,000
-The amount paid towards the PCP is roughly £1700
-I just want to know some estimated figures, how it'd be settled, how much money i'd lose (or gain?)

Thanks!

motorguy

If you get a settlement figure from the finance company, then you can see what you owe, relative to what its worth.

Unless you put in a big deposit, you're likely at this stage to owe considerably more than the car is worth.

flashg67

PCP isn't really designed to chop and change early. My last 2 have been about 2 years in (out of 3 years)before they've broken even.
It is possible, but I think you'll find you'll have a (possibly large) shortfall to add to the finance after only 6 months, depending on the deposit you put in originally

hieveryone

Are you even able to get out of a PCP so early without it hitting your credit file like a tonne of bricks?

motorguy

hieveryone wrote: »

Are you even able to get out of a PCP so early without it hitting your credit file like a tonne of bricks?

What would the issue be?

Get a settlement figure, clear the finance (trade in value plus cash), take out another deal.

hieveryone

motorguy wrote: »

What would the issue be?

Get a settlement figure, clear the finance (trade in value plus cash), take out another deal.

Ah, I guess it would go under Voluntary Termination? Surely the OP would be looking at a cash settlement of about £7k?

neilmcl

hieveryone wrote: »

Ah, I guess it would go under Voluntary Termination? Surely the OP would be looking at a cash settlement of about £7k?

No it wouldn't. VT and settlement are two complete different things. You can settle your finance at anytime you like, all you're doing is paying off the remainder of what you owe.

And FYI, performing a VT doesn't "hit your credit file like a tonne of bricks".

sheslookinhot

I doubt the car is worth as much as £15,000, if you paid £18,000 six months ago.

hieveryone

neilmcl wrote: »

No it wouldn't. VT and settlement are two complete different things. You can settle your finance at anytime you like, all you're doing is paying off the remainder of what you owe.

And FYI, performing a VT doesn't "hit your credit file like a tonne of bricks".

I didn't think a VT hit your credit file but I was under the impression leaving a PCP early would :-/

neilmcl

hieveryone wrote: »

I didn't think a VT hit your credit file but I was under the impression leaving a PCP early would :-/

Why would it? Think about it, you can pay off your finance any time you like, why, if you settle all the money you owe is this going to have a detrimental affect on your credit history. If you default on your finance then yes this will have consequences for your credit history, but this is a different thing altogether.

hieveryone

neilmcl wrote: »

Why would it? Think about it, you can pay off your finance any time you like, why, if you settle all the money you owe is this going to have a detrimental affect on your credit history. If you default on your finance then yes this will have consequences for your credit history, but this is a different thing altogether.

Maybe it won't affect his credit, but surely the OP will be absolutely thousands out of pocket - seems a crazy decision :-/