Voluntary Termination or 3 additional months Payment Holiday

suiyat`

Hello
My PCP car is in it's final year of the 4year PCP agreement. It is a German saloon, but due to change in family circs, we ideally need a hatchback or an estate to suit going forward (we have been working around the saloon for 18months).
Car was from a dearlership that was an approved used model, effectively a demonstrator.
I have spoken with a number of dealerships to see if they would be willing to part ex, but my vehicle remains in negative equity in relation to what I owe. Even the dealership where I purchased from suggested that i VT the car with their finance people in order to get a new car.
Now, with Covid, I take take advantage of the 3 month payment holiday, and this month resumed my payments. This has extended my contract by 3 months, and increased payments by approx £20 per month.

Now, with Covid still happening, would it be better to take another 3 month holiday period that is on offer, and VT the car after this, using the car payments to pay off a bit of credit card debt, effectively having use of a car for 6 months for 2 payments (one I just made, and one i will need to pay after an additional 3 month holiday?)

Or would it be worth VTing the car and looking about for a deal on an alternative?

Nearlyold

To VT you have to have paid 50% of the Total Amount Payable, however even if you are at or past the 50% threshold you also have to pay off any arrears - your missed payments (aka your payment holiday) would have to paid off so you wouldn't actually  get to use the car for 6 months for only 2 payments. Without the full context ie car value, amount owing, monthly payments, balloon amount due, condition of car, and mileage covered compared to allowance its difficult to advise.

suiyat`

Hi nearly old.
Original PCP was £22,664.50 all in
VT would be 50% paid, which is £11,332.25
My current outstanding balance is as of today - £10,848.40 - so I have paid over the 50% total amount. (this includes balloon payment of £7,627.10 and also any arrears from 3 month deferral already taken)
 Car value today part ex is around £8,500 - which is why the dealership advised me to VT.
Mileage is significantly under expected (57k on the clock - expected mileage by finance company based on my annual allowance - 75k miles.

I spoke to the finance company who say that a deferral should not affect my option to VT

MinuteNoodles

It shouldn't if the capital amount owed remains at 50% or lower of the original price.

neilmcl

suiyat` said:

Hi nearly old.
Original PCP was £22,664.50 all in
VT would be 50% paid, which is £11,332.25
My current outstanding balance is as of today - £10,848.40 - so I have paid over the 50% total amount. (this includes balloon payment of £7,627.10 and also any arrears from 3 month deferral already taken)
 Car value today part ex is around £8,500 - which is why the dealership advised me to VT.
Mileage is significantly under expected (57k on the clock - expected mileage by finance company based on my annual allowance - 75k miles.

I spoke to the finance company who say that a deferral should not affect my option to VT

It doesn't, as the option to VT is a statutory one. That doesn't mean, however, that you won't be on the hook for the 3/6 months worth of arrears as these cannot be included as part of your 50% liability. You will still need to pay these regardless.

suiyat`

My understanding would be that i would accrue interest arrears over the next 3 months if I took another payment holiday, so my £10,848.40  would increase to that plus 3months interest - not 3 months payments. 

Nearlyold

You are confusing things, the current balance obviously includes the payments you've missed and interest will be charged on the declining balance as usual with any loan and if you keep the vehicle you will just pay the missing payments as agreed at the end of the agreement. 
However with regards to a VT those missed payments are arrears and if you VT the car you still  have to pay any arrears, so delaying a VT and taking a further payment holiday won't mean you can use the car for free  - because the arrears will have to be paid. The fact that paying the arrears takes you further over the 50% point is irrelevant.

ontheroad1970

If you are seriously contemplating using VT, do NOT take the second payment holiday.  

neilmcl

suiyat` said:

My understanding would be that i would accrue interest arrears over the next 3 months if I took another payment holiday, so my £10,848.40  would increase to that plus 3months interest - not 3 months payments. 

I'm afraid you're wrong. The 3 months payment has become the arrears and you will need to pay this as it's they're no longer in the scope of the original contract and therefore not covered by the VT.