PCP - Settling Early, not your usual question

Orta117

Hi All,

There’s a million and one websites, pages and previous enquiries about ending a PCP early. But all of them seem to give you the same information about needing 50% paid and most seem to be written by people who look down on us “paupers” for having to take out PCP in the first place and tell us how silly we were and that we’re trapped forever in a pit of misery with our ill chosen car and financial product.

The question I’ve been searched in vain for doesn’t seem to have been answered previously, or at least to my satisfaction, and as we’re about to hand over a significant amount of money I really want to have my facts straight.

So here’s the scenario:
My lovely wife gets a new job in a town 30 miles distant. She’s always worked in the town where we lived and walked to work. She’s always had her own car, but this was a hand-me-down she’d had since she first starting driving; which was fine because it was only ever used to ferry the dog about or for her to visit friends / family if I was away for work. Anyway for this new job of hers we decided buying a new car would be prudent. Something reliable and economical. We opted for a Peugeot 108 (And other’s experience aside ours has been great). We signed her up for a 3 year PCP with 18k miles a year. This was last March. 
We’ve been really fortunate throughout Covid-19. I’m an essential worker, and my wife has been working from home since Lockdown began. So no complaints, but since then her car (There’s already my two cars and our VW camper in the family as well), hasn’t turned a wheel. It just wasn’t needed, and it certainly won’t be doing 18k this year! We’ve been dutifully paying the finance still, knowing that she’ll be returning to the office at some point and needing it again. I had it MOT’d and service’d just before the insurance and tax was up. The car’s now sorned. 
Anyway she’s just been told that they’re closing her branch permanently. There’s no redundancies, but now her team is expected to work remotely, permanently! So the car is totally surplus to requirements, and tbh the thought of paying £114 a month for a vehicle that hasn’t turned a wheel since March makes me sick!
So my question about PCP: We’re with Alphera Financial, wasn’t our choice arranged by the dealer, and their trustpilot scores terrify me; but that’s another story. My wife called them, of course they refuse to speak to me as it’s my wife’s finance, and they’ve sent her a letter called “Your recent Voluntary Termination Enquiry”. It has a “Total amount due to settle the agreement” of £3708.81, made up of balance at last payment - rebate + interim repayment = settlement figure.
She’s been left with the impression that paying this “settlement figure” will clear the finance and leave us OWNING and KEEPING the car outright. This works for us as the quote we’ve had from We Buy Any car is £4250, so even after they’d done their knocking us down dance, we will still clear the £3708.81, with maybe even a little bit back of the £500 deposit we put down originally left over. This seems great and this is what we want. To be rid of the car as thankfully it appears in positive equity.
My concern comes in the FAQ section of this letter it constantly makes reference to how and when we return the car. And every single website, or forum post I read, it always talks about handing the car back. Never paying them off and owning it (Albeit planned to be briefly in my case).

So what I’m terrified of is thus: Are we paying them £3708.81 AND giving the car back? We’ve never had a PCP before so apologies if this sounds ignorant. Or are we paying them this £3708.81 AND keeping the car, free to do with it as we please? 

Any help would be appreciated because I’m in knots here over what to do. 

AdrianC

Orta117 said:

There’s a million and one websites, pages and previous enquiries about ending a PCP early. But all of them seem to give you the same information about needing 50% paid

Yes, that's the legal requirement for a Voluntary Termination. 50% including the balloon - because that's money you've borrowed.

We opted for a Peugeot 108 (And other’s experience aside ours has been great). We signed her up for a 3 year PCP with 18k miles a year. This was last March. ... £114 a month

So you're ~18mo into a 3yr/54k mile contract, £114/mo, with just a £500 up-front payment.
How much balloon?
What age was the car (you mention an MOT, so clearly not new), and what price? What APR on the finance?

My wife called them, of course they refuse to speak to me as it’s my wife’s finance, and they’ve sent her a letter called “Your recent Voluntary Termination Enquiry”. It has a “Total amount due to settle the agreement” of £3708.81, made up of balance at last payment - rebate + interim repayment = settlement figure.
She’s been left with the impression that paying this “settlement figure” will clear the finance and leave us OWNING and KEEPING the car outright. This works for us as the quote we’ve had from We Buy Any car is £4250, so even after they’d done their knocking us down dance, we will still clear the £3708.81, with maybe even a little bit back of the £500 deposit we put down originally left over. This seems great and this is what we want. To be rid of the car as thankfully it appears in positive equity.
My concern comes in the FAQ section of this letter it constantly makes reference to how and when we return the car. And every single website, or forum post I read, it always talks about handing the car back. Never paying them off and owning it (Albeit planned to be briefly in my case).

So what I’m terrified of is thus: Are we paying them £3708.81 AND giving the car back? We’ve never had a PCP before so apologies if this sounds ignorant. Or are we paying them this £3708.81 AND keeping the car, free to do with it as we please?

It will depend entirely on the finance package - but I'd say it's more likely that it's going to be the former than the latter. VT would normally result in the car going back, yes.
There's still £2,052 in the ~18 x £114 payments remaining.
You say the car is currently worth £4,250, so the balloon in 18mo is unlikely to be <£3k, possibly £3.5k - which means you're more likely to still owe ~£5k+ to keep the car.

facade

Orta117 said:

So what I’m terrified of is thus: Are we paying them £3708.81 AND giving the car back?

I think so.

A 108 is about £12,000.

You have paid £114 x 7 = £798  plus any deposit. (or do you mean  March 2019 which would be 19 x £114 =£2,166 ?)

that plus £3708.81 is less than half of what the car would have been.

You asked them about Voluntary Termination- to do this you have to have paid half the financed amount, including the guaranteed final value, and hand the car back in good order.

You want the settlement figure to clear the finance and own the car, after 7 or 19 months it will certainly be more than the car is worth (unless you paid a huge deposit)

AdrianC

facade said:
A 108 is about £12,000.

New, but the OP's is clearly used - going by the fact he's MOTd it during lockdown.

Assuming "last March" does indeed mean 2019, that means it must have been at least 18mo old at the time of taking the finance out. £4250 value now would probably put it around 2016.

And, of course, used car PCPs tend to be non-trivial APRs.

facade

I didn't twig the used part, I did wonder why he'd MOT'd it, and I've no idea what a 108 is worth to WBAC, £4250 seemed a bit low for a 7 month old one, but could be right for a 19 month old one...

The finance agreement should say how much needs to be paid to VT it, subtract the repayments made and deposit from that figure.

AdrianC

facade said:

I didn't twig the used part, I did wonder why he'd MOT'd it, and I've no idea what a 108 is worth to WBAC, £4250 seemed a bit low for a 7 month old one, but could be right for a 19 month old one...

Be a very nice deal if a £12k new car could be driven away for £500 down, then 7 x £114 monthlies, plus £3,700 to cancel the finance and keep it...

facade

AdrianC said:

facade said:

I didn't twig the used part, I did wonder why he'd MOT'd it, and I've no idea what a 108 is worth to WBAC, £4250 seemed a bit low for a 7 month old one, but could be right for a 19 month old one...

Be a very nice deal if a £12k new car could be driven away for £500 down, then 7 x £114 monthlies, plus £3,700 to cancel the finance and keep it...

Which is why I thought it was £3,700 to VT it (and hand the car back)

Orta117

Hi All! Thanks for getting back to me so quickly.
The exact amount paid for the car and the APR are lost to antiquity now, I remember the latter being competitive and the purchase price, perhaps £6,000? And my apologies I should’ve specified when batting around the word “new” when discussing a car, it was indeed used. A 2016, “16” plate car, so car was about 3 years old when we purchased it. 

So the consensus is we DO in fact need to pay them this £3708.81 AND give them a £4250 car back to clear the debt? Or pay another £2052 over the next 18 months and let the stupid thing sit on the drive and hand it back with no questions asked at the end? Seems peculiar, but I’d be nearly £1,700 better off I guess! 

The terminology here is getting the best of me admittedly, so I’ve uploaded a phone of the email she’d had thru. Hopefully with all the sensitive data blurred out. Slight error on my part the monthly payments seem to be £99.76, £114 is the payments on another finance product we have. 

facade

It says in your screenshot

Voluntary terminate = £1052.90 and give them the car

Settle = £3708.81 and own the car.

EDIT:  That seems to be pay £3708.81 AND your payment on Oct 1st of £99.76 will still go out as the last payment.

Lomast

I might be wrong but looking at that message I read it as 1052.90 to voluntary terminate or 4002.44 to settle the agreement which would mean you own the car

AdrianC

Yep, facade and Lomast have it...

That doesn't seem a bad deal at all.

£500 + 18 x £99.76 = £2,295.68 paid.
Plus £3,708.51 = £6,004.19
If the car was indeed £6k cash price, then a year and a half's finance has cost you about the price of a pint.