Mercedes PCP early settlement. Keep or sell car and when?!

hannahc_94

I wonder if anyone would be able to help me best analyse my situation? I am looking to settle my PCP with mercedes early as a condition of a mortgage application (in order to borrow the amount I need). 

I took out a 24 month PCP contract in December 2019 and have paid 15 of my monthly payments in addition to the deposit but have not reached 50% of the credit. The balloon payment is quoted as £16,600. I had always intended to continue the agreement to the end and then either hand the car back or get another on a new deal. However, I am now looking to purchase a house so I would instead need to settle early in order to get the mortgage I want for the house I want. 

The settlement quote is £19,537 which I could afford to pay with an interest free loan from a family member. Having got a few quotes (from wbac, mercedes used approved etc)  the car would currently sell for between £19800-£22600. Would I be correct in thinking that if I were to settle early and then sell the car that I would likely break even and would only have lost out on time spent driving the car as opposed to any financial loss (aside from the obvious loss which I was always aware of in terms of the depreciation factor when plumping for a new car). 

I have use of another car so can live without this one if it means me being approved for the mortgage. 

Similarly, would waiting a few more months (doesn’t have to be settled until mortgage application is approved which would be a few months away) and then getting a new settlement quote be better value. I would have paid a few more of my monthly payments and this means the settlement quote would be lower, and I can’t see the cars value declining significantly in those few months to the extent that I would make a loss if I were to then sell it. It isn’t being driven much due to lockdown and working from home so mileage would remain low (around 7/8000 most likely). 

Or, would I be better to settle early and keep the car for the foreseeable future, paying my family member for the loan over a few years and then using the car until it reaches the end of its life? 

Apologies in advance if I haven’t provided the relevant info here but am curious to hear what others would think is best in this situation. Many thanks! 

AdrianC

Everything else apart, paying for nine months of monthly payments on a car you aren't really using and don't need seems a tad extravagant, doesn't it?

hannahc_94

AdrianC said:

Everything else apart, paying for nine months of monthly payments on a car you aren't really using and don't need seems a tad extravagant, doesn't it?

Yes I agree haha, so you’d settle and sell on without loss (hopefully, if valuations remain correct) or settle and keep car for many more years? 

AdrianC

Well, if I didn't need the car and wasn't using it, then... no, I don't think I'd pay £20k to buy it...

DrEskimo

Unless you you want to maximize the resale value and try selling privately, you could cut the loan from the family member entirely and simply sell to a Mercedes garage, Audi garage or any used car dealer that will offer to buy it from you, or WBAC (depends which will give you the best price) and they will buy it from you and settle the finance. That will leave you pocketing the surplus or paying the shortfall depending on how much they offer.

If you decide to use the interest free loan, I would do it as soon as possible. Keep it on a PCP loan is just costing you in interest.

hannahc_94

AdrianC said:

Well, if I didn't need the car and wasn't using it, then... no, I don't think I'd pay £20k to buy it...

I should have added that access to another car would not be long term. I’d be looking to get another at some point within a year or so. 

facade

If you like the car, need the car, will use the car, and can afford the car- buy it and keep it. Otherwise sell and clear the pcp.