Help with mother's PCP

gt568

Hey dudes

My elderly recently widowed mother has a PCP for a Honda that is due balloon payment in Sept...

I've never held a PCP as I always buy cars in cash so I'd like a little help....

I understand she can pay the balloon and the car is hers....or she can use any potential equity (and I suspect there will be a fair bit - it's lower mileage and immaculate) towards a new car.

If hands the car back, is the "equity" lost forever....I imagine so, but wanted some clarity on that as I don't think she will be driving for much longer...

Herzlos

So when the PCP ends there are 2 numbers you care about. The balloon payment value and the current value.

If you want to keep the car you pay the balloon figure and it's yours.
If you want to trade the car, the difference in value is the equity for the next car.
If you hand the car back, then any difference (either way) is lost.

So if you don't want a car and the value is more than the balloon payment, you may get some money back by buying the car at the agreed price and selling it for the value. You do take a risk that you can finance the payment and can get a buyer at the value.

Ectophile

Yes.  It sounds like you have it right.

If she has the money, the best option may be to pay the balloon, and keep the car.  If she no longer needs it in the future, she can sell it free of finance.

AdrianC

gt568 said:

My elderly recently widowed mother has a PCP for a Honda that is due balloon payment in Sept... 

I've never held a PCP as I always buy cars in cash so I'd like a little help....

I understand she can pay the balloon and the car is hers....or she can use any potential equity (and I suspect there will be a fair bit - it's lower mileage and immaculate) towards a new car.

If hands the car back, is the "equity" lost forever....I imagine so, but wanted some clarity on that as I don't think she will be driving for much longer...

It's a very simple either-or.
1. Buy the car for the balloon.
2. Hand the car back, paying any damage or excess mileage charges.
Both end the contract.

If she does 1, she can of course then sell it. That may all be seamless, with the dealer she "trades it in at" doing 1 on her behalf.

If the dealer's buy price genuinely is above the balloon, 1 would be the sensible choice.
Bear in mind the balloon will be predicated on the car being in good condition and with no more than the contracted mileage on.

gt568

As I expected, thanks.

motorguy

gt568 said:

As I expected, thanks.

Another option is to try the likes of WBAC, Evans Halshaw and your local dealers and see what they are offering.  They will all clear the finance for you and simply write a cheque / BACS payment for the difference.

A final option would be to sell the car privately on the understanding with the buyer that they are clearing the finance directly (easily done) and paying your mother / you the balance.  

If she otherwise needs a car the easiest solution would be to pay the residual

My wifes aunt tended to get sucked in to the new car every 3 or 4 years scenario (even though shes in her 80s now and does next to no miles), usually enticed by some 0% finance offering and a fear of having an "unreliable" car out of warranty.  I found her a local indy just down the road from her who now looks after her now 6+ year old car at a fraction of the cost of the depreciation on a new car.