PCP partial repayment to reduce term

Newway

I recently purchased a new car using a 3 year PCP and I am looking into the consequences of overpaying my PCP, my confusion is about what happens to the optional balloon payment, can I still return the car to deal? Here is an example:
Suppose I need to pay £300/month for 36 months (e.g. Jan 2023), and the balloon payment is £10,000, let's say I want to overpay £X so that my term is shortened to 12month (Jan 2021), What happens after Jan 2021? 
I can pay the £10,000 balloon payment so that I now own the car, but instead of doing so, can I choose to return the car to the dealer?
If this is possible, then do I have to return the car after just 1 year at Jan 2021? clearly this is not reasonable because the  £10,000 value is based on my car's 3 year depreciation.
On the other hand, if I still can return the car based on my original PCP termination day (Jan 2023), does that mean for the  2-year period (Feb 2021 to Dec 2022) I am not paying anything, even though I still owe £10,000?
What am I missing here?

AdrianC

You are entering a 3yr and x,000 mile contract to effectively hire a car.
At the end of that 3yr term, you have a choice to hand it back or buy it from them.
The buy-from price is fixed at the start of the contract, based on the estimated depreciation over that time and mileage.
The monthly price is based on the estimated depreciation, and on the interest payable on the entire outstanding value - including that buy-from price.

There are two ways to end the contract early.
One is to pay the settlement value - this is what happens if the car gets written off.
The other is to follow the legally-prescribed voluntary termination route - you need to have paid 50% including the buy-from price, which usually puts it close to the end of the contract.

There is no point overpaying. Put the money into a savings account instead.

DrEskimo

Overpayments on PCP finance are tricky. You generally won't be able to reduce the term, only the monthly amount. 

When it reaches a certain amount it will then start paying down the GFV, but it will balance the GFV and some monthly payment over the agreed term. 

Of course any overpayment will still save you some interest on that amount borrowed.

lopsyfa

If you overpay and elect to reduce the term, you will not be able to keep the car beyond the new term. So you will either have to return the car, part-ex it or pay the balloon. This is clearly not a good option as you will have paid most of the depreciation (with some interest savings) and not enjoy the car for too long.
I will advice to keep the term the same and reduce the monthly payment if you choose to make any over-payment. This will still save you some interest but not as much as reducing the term but you can always shorten the term by settling the finance whenever you have enough money. This will keep the option open to run the car for 36 months and then return or part-ex it.