Clarity required on paying off PCP instantly

luiza8

Looking into buying a 2019 vehicle within the next few months and I have the cash to buy the vehicle outright. 

I've seen two comments (first and second) on this thread that state they paid off the PCP pretty much straight away, and because they were offered a discount from the dealer, they ended up saving money.

I've never taken out PCP so don't know too much about it, especially what the two comments refer to (paying it off straight away).

Can somebody with some knowledge on this please explain the process of paying the PCP off straight away, and what possible negative affects/problems I may encounter if I decide to go down this road.

I assume it's only going to be beneficial for me to take out the PCP and pay off immediately if the dealership offers me a discount for taking the PCP? I would assume I don't tell them I plan on paying it off straight away? Not sure if it would matter to them as they would still get their commission from the finance company no matter when I pay it off?

Thanks for any help.

feolojad

OK so first of all typically manufacturers will offer deposit contributions, discounts or incentives such as free servicing on PCP finance.

Secondly in the UK financial regulations specify a mandatory minimum 14 day cooling off period for any borrowing.

So how you take advantage of this is that you buy a car on PCP to take advantage of the offer. You then pay the finance off in full within the 14 day cooling off period. You then get to benefit from the offer on the PCP deal whilst being a "cash buyer".

The dealership won't care you're going to cancel, they get commission either way.

Car_54

When I did this it was the dealership who suggested it.

luiza8

feolojad said:

OK so first of all typically manufacturers will offer deposit contributions, discounts or incentives such as free servicing on PCP finance. 

Is this only on new vehicles or are the discounts offered on second hand vehicles (2 years old)?

Am I correct in thinking that it's the manufacturer who offers the discount on PCP and NOT the car dealership?

AdrianC

luiza8 said:

feolojad said:

OK so first of all typically manufacturers will offer deposit contributions, discounts or incentives such as free servicing on PCP finance. 

Is this only on new vehicles or are the discounts offered on second hand vehicles (2 years old)?

Am I correct in thinking that it's the manufacturer who offers the discount on PCP and NOT the car dealership?

New, and yes.

PCPs on used vehicles tend to be horribly expensive. They're mostly financially backed by the manufacturer, and the manufacturer doesn't want to shift second-hand cars (except to prop up residuals for new ones).

daveyjp

Its a minor point of order, but the dealer can't incentivise you to take a PCP by lowering the price. i.e cash price £10,000, PCP price £9,000.

The PCP incentive is usually a contribution to a deposit, or an offer to pay the first three months of the loan etc.

Incentives for PCPs on used cars are less generous and may be limited to a competetive loan rate.  For a used car it may be less hassle to simply negotiate a good price and pay in full.

luiza8

Thanks very much to all for clearing his up for me!

Mobeer

Don't forget to haggle for a discount from the dealer - just because the manufacturer gives a deposit contribution doesn't mean you should pay list price.

DrEskimo

Finance contributions on used cars are possible. Along with additional benefits like free servicing.

For example my 2-yr used car from a main dealer had a £1,000 deposit contribution and 2 free services if bought with PCP. Yes the rate is high, but that is irrelevant if paying off in full straight after.

I negotiated a discount off the stick price, and then paid by PCP to get the further discount from the deposit contribution. Of course, as with new cars, it's worth researching and looking at prices in general to ensure the discounted price (with the deposit contribution) is still competitive. I spent the best part of 6-months searching for mine at a price I wanted to pay. They were typically anywhere between £17-21k (with a brand new one being had for £18k discounted). I nearly gave up and just bought brand new, but then the used one came up for £15,800 and I knew it was well priced. Negotiating it down to £15,500, and then getting the £1,000 deposit contribution made it a compelling buy.

I imagine these are restricted to main dealerships. In which case, once you have been accepted for the finance and drive off, you will typically get a log-in to the finance portal. Here you can overpay or ring the company to get a full settlement figure. It's just a case of paying that settlement, getting a confirmation through the post and then you're done.

Car_54

DrEskimo said:

Finance contributions on used cars are possible. Along with additional benefits like free servicing.

Indeed. I got "contributions" of £1,000 from the manufacturer, and £500 from the dealer, on an "approved used" Jaguar.

Grumpy_chap

The approach to getting any car is to first negotiate the best possible price for cash, and then negotiate the competitive
finance and incentives (if applicable).
If the OP is buying a 2019 vehicle, it is worth checking on-line broker sites for the same vehicle new in case it comes near.