Returning PCP car early - Flag placed on credit file

zippy1973

Thanks all for the replies. I think perhaps gone off topic slightly as I was more asking about the early termination flag going on to my credit file and the future implications of that!

Reading comments on paying balloon payment to buy (not interested in owning) and PCP purchase, I'll just stick with PCH which does me fine, new car every 3 years, know exactly what I'm paying and handing over the keys at the end. 

Grumpy_chap

phillw said:

PCP is like anything on finance, you should compare the total cost of buying for cash compared to the total cost of borrowing the money (the interest might not be the only extra cost for PCP).

The distortions of "incentives" can sometimes mean a car on PCP is cheaper than cash, but then pay the PCP straight away to avoid the finance costs.  I can't quite work out how that is further distorted when a PCP has 0% finance as something has to give.

zippy1973 said:

Reading comments on paying balloon payment to buy (not interested in owning) and PCP purchase, I'll just stick with PCH which does me fine, new car every 3 years, know exactly what I'm paying and handing over the keys at the end. 

Just for clarity, I was not suggesting to pay the balloon payment to buy / own the car.  I was simply suggesting that it may be possible that the equity is more than the remaining finance.  Let's take an example that the balloon is £8k and WBAC would pay £9k.  Take the car to WBAC, they take the car, they pay off the finance £8k, they give you £1k. 

If that applies, what's not to love?
Must be worth 60 seconds or less to check.

[Deleted User]

zippy1973 said:

Deleted_User said:

zippy1973 said:

Just looking for a little advice regarding handing back my current car on PCP early to take delivery of a new one.

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

I have my current car contracted to end of September and went back to the dealership to look at my next one however on looking around,  I can get the same car over £5k cheaper over 3 years. No brainer, but now I am not going with the dealership, I have to deal with the finance company directly. I can hand my current car back early by paying anything outstanding (about £350 outstanding), that's not an issue, what is, is in the small print it says if a contract is terminated early then the finance company will place a 'flag' on my credit file to note this, and which apparently all lenders can see. I'm not looking to apply for any finance anytime soon if at all, but my question is, should I be worried about this 'flag' on my credit file?

Opinions would be gratefully received as I would plan to start the ball rolling to return this car over the next few days as my new one will be ready for delivery around 25th July.

No brainer would be to pay off the PCP and keep the car, rather than continuing a cycle of debt and never "owning" a car but rather renting for a huge amount

Appreciate the reply. I suppose I am one of those who likes to change cars and get a new one every 3 years. I'm not interested in 'owning' a car, depreciating the minute driving off the forecourt,  having to see what my car is worth every 3 years when changing, it's more convenient handing back and getting new. My priority was owning my home and working hard, paying off my mortgage in my early 40's

I don't have any truck with the myth that depreciation is a "cost" or that you "lose money" on PCP because the car is worth less than it was when you bought it (as I don't buy a car with the intention to treat it as an asset for resale). Aside from houses, fine wines (and other niche markets) etc, nothing you buy is suddenly worth more when it's older and used cars are no different.

However, in your situation, if you do go for PCP again rather than PCH, then you ARE losing money on the car even without paying the balloon - you basically pay about 2/3 of the cost of the car and servicing etc (to maintain the GMV) and have nothing at the end if you hand it back, then get another 2/3 of the cost of a car for the next one etc and you end up paying say £30k after 2 cars and have nothing at the end. 

zippy1973

Well, what a morning and I no longer have a car. On calling the finance company to return, they reckoned I did have equity in the car and said i could sell myself and pay off the finance (I didn't realise I could do that, I thought i had to return). Anyway, went on WBAC, booked an appointment and just had to get a taxi home, £2600 in my bank tomorrow and they have paid of the finance, unbelievable and quite annoyed with the dealership who told me it was only wiping its face.

Just to answer the above, the deal on my new car is costing £11,890 over 3 years for a car with OTR at around £35K (new style Peugeot 3008 GT automatic), so I think that's a great deal, but maybe I am wrong!

Anyway, thanks again for all the replies, appreciated.

Rosco32

It's absolutely nothing to be concerned about at all, although it does initially sound somewhat alarming. I have done this personally and it has not affected my ability to obtain credit. It's actually a right under the Consumer Credit Act 1974 that permits you to hand the car back early and walk away when you have paid off half of the total price. Here is the snippet (from Experian) on my previous BMW PCP that I did a Voluntary Termination on...