Getting the most out of a PCP agreement at the end of your arangement.

BOWFER

motorguy said:

The O/P didnt need to take ownership of the car, ownership went straight to the dealer, putting £2,050 directly in to the pocket on the way.

I'm not getting your point here.
Are you saying the dealer would keep quiet about the car being worth £2000 more than the balloon payment and let them walk away unaware?

motorguy

In the past i've had the full range of scenarios which i've tried to steer in my favour.

Car has been worth more than the settlement - sold it directly to a dealer either via a trade in or direct sale (did that several times)

Car has been worth what the settlement amount was, however there was damage on the car that the finance company would have tried to recoup but the purchasing dealer didnt (scuffed alloys, stonechips) (likely the car was worth fractionally more than the residual so the purchasing dealer ended up paying the residual amount for the car once that was factored in).  (did that twice)

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

BOWFER

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

motorguy

BOWFER said:

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

Indeed.  The time it happened for us was around 2010 when the property market crash had put the economy in to deep recession.  I think the residual was maybe £18k on the and we were getting valuations of £14K for the car so we handed it back.

motorguy

BOWFER said:

motorguy said:

The O/P didnt need to take ownership of the car, ownership went straight to the dealer, putting £2,050 directly in to the pocket on the way.

I'm not getting your point here.
Are you saying the dealer would keep quiet about the car being worth £2000 more than the balloon payment and let them walk away unaware?

With a hand back the car doesnt go back to the dealer, it goes back to the finance company (who own the car, not the dealer)

There is no dealer involved unless you proactively approach them for a valuation (either to buy the car off you or as a trade in)

DrEskimo

BOWFER said:

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

It's only a benefit depending on what the GFV is set at, and how much it costs in the form of interest. If you saved £2,000 by handing it back, but it cost you £3,000 in interest then you would have still been better off settling the finance and trading it in at the lower amount.

Not to mention that based on motorguy's experience it seems to only be true in about 1 out of 10 deals. I would much sooner settle the finance and take the guaranteed saving in interest vs. some potential saving in depreciation that may happen in a few years.

motorguy

DrEskimo said:

BOWFER said:

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

It's only a benefit depending on what the GFV is set at, and how much it costs in the form of interest. If you saved £2,000 by handing it back, but it cost you £3,000 in interest then you would have still been better off settling the finance and trading it in at the lower amount.

Not to mention that based on motorguy's experience it seems to only be true in about 1 out of 10 deals. I would much sooner settle the finance and take the guaranteed saving in interest vs. some potential saving in depreciation that may happen in a few years.

If someone is in a position to buy with cash, yes there is the interest saving (but then the interest lost on the savings?) so yes thats clearly an up front decision when buying a car.  We are however, talking specifically here about the end of term PCP options.

I - and Bowfer - were by no means suggesting that people should take PCP purely on the perceived "benefits" at the other end if the market goes significantly +/- in terms of values, merely adding to the original post that sometimes you can save yourself £,£££s if you're prepared to put a bit of thought / effort in.

Its definitely worth looking at all options at the end of the term rather than taking the binary view that its either hand the car back or take ownership in some capacity.

motorguy

DrEskimo said:

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

What tax legislation have GFVs to conform with?

DrEskimo

motorguy said:

DrEskimo said:

BOWFER said:

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

It's only a benefit depending on what the GFV is set at, and how much it costs in the form of interest. If you saved £2,000 by handing it back, but it cost you £3,000 in interest then you would have still been better off settling the finance and trading it in at the lower amount.

Not to mention that based on motorguy's experience it seems to only be true in about 1 out of 10 deals. I would much sooner settle the finance and take the guaranteed saving in interest vs. some potential saving in depreciation that may happen in a few years.

If someone is in a position to buy with cash, yes there is the interest saving (but then the interest lost on the savings?) so yes thats clearly an up front decision when buying a car.  We are however, talking specifically here about the end of term PCP options.

I - and Bowfer - were by no means suggesting that people should take PCP purely on the perceived "benefits" at the other end if the market goes significantly +/- in terms of values, merely adding to the original post that sometimes you can save yourself £,£££s if you're prepared to put a bit of thought / effort in.

Its definitely worth looking at all options at the end of the term rather than taking the binary view that its either hand the car back or take ownership in some capacity.

I know, if you look over my post history you will see it's probably the thing I advise people the most on, whether they are looking to change cars early, VT or hand back at the end of the term.

My point was that it was being framed as a great benefit of PCP. It rarely is.

motorguy said:

DrEskimo said:

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

What tax legislation have GFVs to conform with?

https://www.google.com/amp/s/www.am-online.com/amp/news/finance/2019/03/01/hmrc-s-pcp-car-finance-vat-changes-could-lead-to-pch-dominance

The level at which the GFV is set has implications on how VAT is chargeable. This could lead to more finance companies setting the GFV at below market levels.

motorguy

DrEskimo said:

motorguy said:

DrEskimo said:

BOWFER said:

motorguy said:

Car has been worth significantly less than the settlement figure - handed the car back, not our problem. (did that once).

That's very much a positive of PCP that rarely gets mentioned, the freedom to just 'get rid' of a car that, for whatever reason, has plummeted in value and you might otherwise be stuck with.
Hand back, walk away, start again.

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

It's only a benefit depending on what the GFV is set at, and how much it costs in the form of interest. If you saved £2,000 by handing it back, but it cost you £3,000 in interest then you would have still been better off settling the finance and trading it in at the lower amount.

Not to mention that based on motorguy's experience it seems to only be true in about 1 out of 10 deals. I would much sooner settle the finance and take the guaranteed saving in interest vs. some potential saving in depreciation that may happen in a few years.

If someone is in a position to buy with cash, yes there is the interest saving (but then the interest lost on the savings?) so yes thats clearly an up front decision when buying a car.  We are however, talking specifically here about the end of term PCP options.

I - and Bowfer - were by no means suggesting that people should take PCP purely on the perceived "benefits" at the other end if the market goes significantly +/- in terms of values, merely adding to the original post that sometimes you can save yourself £,£££s if you're prepared to put a bit of thought / effort in.

Its definitely worth looking at all options at the end of the term rather than taking the binary view that its either hand the car back or take ownership in some capacity.

I know, if you look over my post history you will see it's probably the thing I advise people the most on, whether they are looking to change cars early, VT or hand back at the end of the term.

My point was that it was being framed as a great benefit of PCP. It rarely is.

motorguy said:

DrEskimo said:

Because it's a benefit that can costs substantial amounts of money in additional interest that is going to be increasingly rarer as GFV's are reduced to conform with tax legislation.

What tax legislation have GFVs to conform with?

https://www.google.com/amp/s/www.am-online.com/amp/news/finance/2019/03/01/hmrc-s-pcp-car-finance-vat-changes-could-lead-to-pch-dominance

The level at which the GFV is set has implications on how VAT is chargeable. This could lead to more finance companies setting the GFV at below market levels.

If it was being framed by Bowfer as a great and frequently attained benefit, then correct - Its not.  Its a fairly incidental one that over the PCPs that i've taken in the past was only exercised on one (and even then in an exceptional scenario).  

Interesting RE: the change in tax legislation.