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PCP - Situation has changed, what to do with spare cash
jaffabrown
Posts: 6 Forumite
All,
I need advice on a PCP car loan...
A few months ago, I purchased a car through PCP. The car is a keeper - in that I want to keep the car at the end.
It was a 3 year deal - 3.9%, paying £543 a month. I intended to save to make the balloon payment at the end.
Now, my situation has changed. I have managed to pay off my mortgage, and have lots of spare cash each month, so was looking to do something with the car finance.
Having spoken to the finance company (BlackHourse) I am free to make additional overpayments - this will give me two options:
1) Reduce the future monthly payments. If I make an initial £1,000 overpayment, my monthly std payment reduces from £543 to £510. So in month 2, I would then overpay by £1,030 (the difference) and keep this going - each reduction gets added to the overpayment amount.
2) Reduce the number of months needed to pay
With both options, the Balloon payment remains the same at the end.
But - whilst the loan was for 3 years, my situation has changed in that I want to retire in 12 to 24months, at which point I will liquidate stuff and pay off my car loan in full. Its therefore just a numbers game - what saves me the most money (in interest).
But the maths are difficult, in which option gives me the best BANG for my overpayment amount.
I could of course put it in a savings account, but I would not get anywhere near the 3.9% on the PHP.
One of the thoughts on my mind is, if I can get the overall balance down to £25,000, then I could take out a standard loan which I could get at 2.9%, pay off the car PHP with the loan, thus pay less % and get rid of the balloon payment.
I would have thought somewhere on the web, there would have been a calculator tool that allows me to work out the maths on this - but I cant find one.
What are peoples thoughts on the various options:
1) Just overpay more and more each month and leave as PHP and settle when I liquidate
2) Overpay until at £25km, convert to standard loan, then settle when I liquidate
3) Just stick it in a bank and earn 0.75%
Thanks
PS - I want to keep this simple. So please, no suggestions of taking out 0% credit cards, or investing the £1k away somewhere to try and beat the 3.9% or similar
I need advice on a PCP car loan...
A few months ago, I purchased a car through PCP. The car is a keeper - in that I want to keep the car at the end.
It was a 3 year deal - 3.9%, paying £543 a month. I intended to save to make the balloon payment at the end.
Now, my situation has changed. I have managed to pay off my mortgage, and have lots of spare cash each month, so was looking to do something with the car finance.
Having spoken to the finance company (BlackHourse) I am free to make additional overpayments - this will give me two options:
1) Reduce the future monthly payments. If I make an initial £1,000 overpayment, my monthly std payment reduces from £543 to £510. So in month 2, I would then overpay by £1,030 (the difference) and keep this going - each reduction gets added to the overpayment amount.
2) Reduce the number of months needed to pay
With both options, the Balloon payment remains the same at the end.
But - whilst the loan was for 3 years, my situation has changed in that I want to retire in 12 to 24months, at which point I will liquidate stuff and pay off my car loan in full. Its therefore just a numbers game - what saves me the most money (in interest).
But the maths are difficult, in which option gives me the best BANG for my overpayment amount.
I could of course put it in a savings account, but I would not get anywhere near the 3.9% on the PHP.
One of the thoughts on my mind is, if I can get the overall balance down to £25,000, then I could take out a standard loan which I could get at 2.9%, pay off the car PHP with the loan, thus pay less % and get rid of the balloon payment.
I would have thought somewhere on the web, there would have been a calculator tool that allows me to work out the maths on this - but I cant find one.
What are peoples thoughts on the various options:
1) Just overpay more and more each month and leave as PHP and settle when I liquidate
2) Overpay until at £25km, convert to standard loan, then settle when I liquidate
3) Just stick it in a bank and earn 0.75%
Thanks
PS - I want to keep this simple. So please, no suggestions of taking out 0% credit cards, or investing the £1k away somewhere to try and beat the 3.9% or similar
0
Comments
-
Check whether you can make partial overpayments on the balloon payment?
Some will not allow (with Ford credit it is all or nothing) - PHP is designed to stop you being able to pay more than 51% and hand the car back.
If you can do what you want great - go for it - otherwise save every month until you have enough to cover the balloon.0
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