PCP Car Loan

Civvy21

A family member is hoping to purchase a new (or ideally pre reg) car. Their preference is to pay "cash". However cash sales don't seem to generate any interest at all from car dealers. It seems the only way we can a decent deal is to go down the PCP route, and benefit from a manufacturers deposit contribution. I have never bought a car in this way before. 
So our intention is to buy a car on PCP and then pay it off ASAP after collection, or within a few months at the latest. Some seem to advise that we take out the loan, pick the car up, and then withdrawal from the agreement and ask for a settlement figure. Others advise that we must not withdrawal from the PCP agreement but just ask for a settlement figure. 
Is their a golden rule on this? Or will it vary from manufacturer to manufacturer? 

Just for the record our preferred option is a Kia. I rang eight of our nearest Kia dealers the week before last and only one got back to me with a semi decent offer. And even then that was half hearted. I made the mistake of saying we were cash buyers. 

DrEskimo

Use broker websites like CarWow, Broadspeed and Coast2Coast to see what the best discounted new price is on your preferred model. This may require you to use finance, or sometimes a cash offer is better (CarWow will show you both options).

Of course the next question is could you save even more by going for an older used model (compare this against best discount new and determine who much of a saving would make it worthwhile). If it's a main dealer used car, it may be that you can haggle a little off the sticker price and then also take it out on used PCP finance to get additional deposit contributions (I got a further £1,000 off my used car this way).

I would personally just stick to settlement. There are very rarely fees on main dealer car finance, so either would result in the same outcome. I settled mine after a week or so.

[Deleted User]

You should check any penalties of paying off early even if it means paying in 2-3 months particularly if there are any dealer contributions or anything like that. However, yes you can do this fine. See if pre-reg has any PCP deals available and in the right spec.

Civvy21

Thank you both.
Are PCP contracts standardised for each manufacturer? Or do they vary from dealer to dealer? If they are standardised can anybody throw any light on penalties or charges for (very) early repayment for a Kia PCP. And if we do go down the PCP route I assume we should put as much a deposit as possible?
No Kia dealer seems to be doing pre reg deals at the moment. Pre reg is always my preferred choice. Nice new car at a sensible price which I then keep for around ten years. 

DrEskimo

Civvy21 said:

Thank you both.
Are PCP contracts standardised for each manufacturer? Or do they vary from dealer to dealer? If they are standardised can anybody throw any light on penalties or charges for (very) early repayment for a Kia PCP. And if we do go down the PCP route I assume we should put as much a deposit as possible?
No Kia dealer seems to be doing pre reg deals at the moment. Pre reg is always my preferred choice. Nice new car at a sensible price which I then keep for around ten years. 

It's very unlikely to have any early repayment fee. But as always, read your terms and conditions carefully. Note, if you ask the dealer they will almost certainly tell you the finance needs to be active for [insert random number of months] otherwise the contribution or freebies (like servicing) are withdrawn. It's nonsense. Don't even bother talking to them about it. Just say you are buying on finance and negotiate the best price on the car. Ignore all else.

You can put whatever deposit you want, it won't make much difference as you will be putting 100% deposit down very soon after.

As I say, do your research and just make sure you are getting the car for a good price.

greatkingrat

Kia are currently offering 0% finance on PCP, so there seems little point paying it off early.

Civvy21

DrEskimo - Thanks. I will try and find a copy of Kia's T&Cs online so I can check them out thoroughly. I found Renault T&Cs which do mention they may recover their finance contribution if you withdraw from the finance agreement. But no mention of penalties if you just settle early.

Greatkingrat - Thanks. As far as I understand it the 0%APR deals do not come with a Kia finance contribution, which is approx £1750 on the car we are looking at. To get the contribution the PCP deal is 4.9%

[Deleted User]

Do the maths of the loan using a calculator online - I did a quick calculation on a £25000 car with £1750 deposit and 4.9% APR would pay £3088.19 over 3 years. Same deal no contribution but 0% means no interest so you save money

DrEskimo

Deleted_User said:

Do the maths of the loan using a calculator online - I did a quick calculation on a £25000 car with £1750 deposit and 4.9% APR would pay £3088.19 over 3 years. Same deal no contribution but 0% means no interest so you save money

The OP is wanting to settle the finance, so the amount of interest is irrelevant in their case.

They are better off taking the deal with 4.9% APR as it gives them a further discount of £1750. 

[Deleted User]

Yes you're right I forgot to read the first post again. Though if it's a dealer contribution, should definitely check the terms to ensure they won't have any right to clawback if the finance is immediately settled as they don't earn anything from the interest

Nebulous2

DrEskimo said:

Civvy21 said:

Thank you both.
Are PCP contracts standardised for each manufacturer? Or do they vary from dealer to dealer? If they are standardised can anybody throw any light on penalties or charges for (very) early repayment for a Kia PCP. And if we do go down the PCP route I assume we should put as much a deposit as possible?
No Kia dealer seems to be doing pre reg deals at the moment. Pre reg is always my preferred choice. Nice new car at a sensible price which I then keep for around ten years. 

It's very unlikely to have any early repayment fee. But as always, read your terms and conditions carefully. Note, if you ask the dealer they will almost certainly tell you the finance needs to be active for [insert random number of months] otherwise the contribution or freebies (like servicing) are withdrawn. It's nonsense. Don't even bother talking to them about it. Just say you are buying on finance and negotiate the best price on the car. Ignore all else.

I'm not sure that is always the case. I bought a Dacia with a very modest dealer contribution, but there was also an extended warranty from 3-5 years. I was told the extended warranty depended on making 3 months payment. The day after the third payment went out the certificate was emailed to me. I paid it off after that, but it certainly appeared to me that the statement from the dealer was correct.