Buying on PCP and early settlement

w0nKy

Morning all, 
my wife is looking to replace her car Shortly and has been looking at various possibilities. The deals seam much more attractive taking up the PCP offers. The question is, can you still settle the finance early with only two months interest penalty?
I have also read of the possibility of making overpayments of just short of the final outstanding balance and then asking for a settlement figure a few weeks later. Are any of these options still possible?

Thanks for any input.

Grumpy_chap

It seems to be common to take PCP for the incentives and then settle very quickly.  Check the terms of the specific finance offer.

DrEskimo

I've rarely seen early settlement charges on a PCP. You typically only get charged the interest for the days you have it before you settle.

As above tho, check your agreement fully.

WaywardDriver

https://www.thecarexpert.co.uk/what-is-deposit-contribution-asktce/ says you can cancel your finance agreement within 14 days of it being activated, with no penalties or charges and no affect on your credit score  - read full article.

Nearlyold

If you are settling outside of the 14 day withdrawal period then many PCP providers will apply the settlement rebate calculation as per the UK early settlement regulations which basically means you'll be paying up to 58 days extra interest. The interest arises because the regulations allow the lender to  post date the assumed date of settlement by up to 58 days from the date of the request for a settlement figure and it's not reduced if you clear the loan earlier than the "valid up to" date in the settlement quote. Lenders are also allowed to apply the same calculation to any overpayments (aka partial settlements). You'll need to check with the lender for their individual terms and conditions.

w0nKy

Thank you all for your input.
I think that the best option if we go down the PCP route would be to settle or withdraw within the 14 day period from what you have posted.

lcc86

If you pay off in full within 14 days do a withdrawal not a settlement - should work out cheaper from my memory of working in this field (something to do with interest being added to settlements but not withdrawals).

Grumpy_chap

The OP may benefit from this nearly identical thread.
https://forums.moneysavingexpert.com/discussion/6182950/pcp-deal-and-the-14-days-cooling-off-period#latest

greatcrested

My sister bought on PCP last month and got a dealer contribution of £1K.

Rang up the leasing company next day, got a settlement figure and paid off in full.

If she'd bought for cash the day before from the dealer would have cost £1K more.

No brainer.

Grumpy_chap

How much was the interest or fees within the settlement figure?
What you sister did is different to cancelling within the 14-day cooling off period, as others suggested.  I assume then the incentive would be cancelled also.