To repay early or not???

jkevin

Hi,

I have a car on PCP Finance, originally for 36 months.

There are 15 monthly payments outstanding plus the bubble payment. In total this comes to just over £20,300 (£4500 + £15800).

However, my circumstances have recently changed and I had to take voluntary severance. I was fortunate to be able to also take early retirement so have a lump sum plus a very modest pension (about a third of my previous income).

When I purchased the car initially the idea was to upgrade every few years. That is no longer viable and I'm thinking that my best option is now to purchase the car outright.

So my options are

a) continue with monthly payments and pay final bubble payment, a total of £20,300 or

b) Pay the settlement figure of £19,200, a saving of £1,100.

I'm thinking that option b is by far the best, but is there anything that I'm overlooking?

The only plus side that I can see of continuing with the monthly payments is that I could walk away at the end without paying the bubble payment (which would be useful say in the event of ill-health and I was no longer able to drive. Which is a slight possibility in my case). Other than that and not losing a big chunk of my savings in one go, I can't see any benefit in not paying the settlement fee.

Anyone have any experience of this or thoughts on the best way forward?

Thanks.

Kevin

AdrianC

The saving of £1,100 is simply because you're repaying the money you owe so much earlier - nearly £20k, a year and a bit early.

dipsomaniac

Got to ask. What model Ferrari?

jkevin

AdrianC said:

The saving of £1,100 is simply because you're repaying the money you owe so much earlier - nearly £20k, a year and a bit early.

I realise that and, much as I don't like losing my capital, £1,100 is a decent saving when you have a fixed income. I'm just trying to work out if there are any other benefits of just completing the monthly payments and paying the bubble payment.

Grumpy_chap

If it were me, I'd pay and save the £1k. Stretch the pension lump sum further.  Also, the car is simply mine then.  No issues with a finance company.

jkevin

dipsomaniac said:

Got to ask. What model Ferrari?

Ha! Ha! I wish. It's only a Honda CRV. You'd be amazed at how much a model with a few specific options works out as. I know I was but, unfortunately, not enough to think twice about signing the agreement. :-)  However, I must admit I love the car. It drives like a dream even when towing the caravan. **********Ducks behind sofa***********

AdrianC

dipsomaniac said:

Got to ask. What model Ferrari?

£20.3k is £4.5k in 15 x monthlies + £15.8k balloon...

jkevin said:

AdrianC said:

The saving of £1,100 is simply because you're repaying the money you owe so much earlier - nearly £20k, a year and a bit early.

I realise that and, much as I don't like losing my capital, £1,100 is a decent saving when you have a fixed income. I'm just trying to work out if there are any other benefits of just completing the monthly payments and paying the bubble payment.

No, not really.

You either continue paying the monthlies, as you have been, then pay the balloon to buy the car in 15mo time... or you pay the settlement and buy it now.

BOWFER

Have you phoned the finance company and asked for a figure to buy it?
Working out what's left on paper is one thing, but you may find they're willing to sell it to you for less.
That's how it worked with my Leaf, I bought it off Nissan finance for a fair bit less than the agreement figures.

jkevin

BOWFER said:

Have you phoned the finance company and asked for a figure to buy it?
Working out what's left on paper is one thing, but you may find they're willing to sell it to you for less.
That's how it worked with my Leaf, I bought it off Nissan finance for a fair bit less than the agreement figures.

Yes. The £19200 is the finance company quote. No wiggle room there unfortunately.

DrEskimo

Pay it off. You can still change cars if you want, and can still trade it in if you decide you no longer want it.
The only way the 'hand it back' to the finance company will work out more favourable is if the car is worth less than the balloon payment minus the cost of the interest.

So in this case, £15,800 - £1,100 in interest you will save = £14,700.
How likely is it that 3-yr old Honda CRV in your spec with whatever mileage you have will be worth less than £14,700 to a dealer? If the answer is 'very unlikely' then it makes absolutely no sense to keep the PCP finance in place, as this option to 'hand back' to the finance company is never going to be a viable option. You would always opt to trade it in, and that can be done whether you have finance on it or not.

jkevin

BOWFER said:

Have you phoned the finance company and asked for a figure to buy it?
Working out what's left on paper is one thing, but you may find they're willing to sell it to you for less.
That's how it worked with my Leaf, I bought it off Nissan finance for a fair bit less than the agreement figures.

I think I misunderstood your post. You mean rather than pay off the bubble payment, I make them an offer on the car. I guess, there is the potential  to save money there.