PCP repayment - advice request!

Rolf15

Hi, hoping everyone is having a good day!
Does anybody have experience, is it best to decrease the term of a PCP or reduce the monthly repayment amount by making regular, monthly lumpsum payments?
Thanks.

Grumpy_chap

Rolf15 said:

Hi, hoping everyone is having a good day!
Does anybody have experience, is it best to decrease the term of a PCP or reduce the monthly repayment amount by making regular, monthly lumpsum payments?
Thanks.

It really depends what your objective is.  It may be possible to hazard a guess at an answer, but further information will help.

1. When did you take out the PCP?
2. How long is left to run?
3. What are the current payments?
4. What is the settlement figure?
5. How much do you have available to over-pay?
6. Are there any specific clauses in the T's&C's that might impact your next steps?  (Entitlement to incentives linked to the PCP?)

Rolf15

Thanks Grumpy chap, here are the answers:

1. When did you take out the PCP? June 2020
2. How long is left to run? 3 years
3. What are the current payments? £400
4. What is the settlement figure? £25000
5. How much do you have available to over-pay? 800 a month
6. Are there any specific clauses in the T's&C's that might impact your next steps?  (Entitlement to incentives linked to the PCP?) I don't know but will find out in parallel

Rolf15

My objective is to keep the car, and repay asap.

AdrianC

Rolf15 said:

Hi, hoping everyone is having a good day!
Does anybody have experience, is it best to decrease the term of a PCP or reduce the monthly repayment amount by making regular, monthly lumpsum payments?

If you want to own the car now, you can decrease the term to nil, by asking for a settlement value.

If you want to get rid of the car sooner, you can investigate the options - perhaps VT is near?

The balloon is the predicted value at the end of the term. Your monthly repayments are simply the difference between that and the initial value, less the up-front.

If you're sending them money each month, does it make a different if you call it a "repayment" or a "lumpsum"?

Grumpy_chap

Rolf15 said:

1. What are the current payments? £400
2. What is the settlement figure? £25000
3. How much do you have available to over-pay? 800 a month

If you don't have £25k available to clear the loan in total, then simply make the overpayment each month at the extra £800 you can afford (£1.2k per month if the current payment £400 is added to the £800, assuming I read that correctly).

The balance will clear quickly, and the settlement figure will rapidly reduce also (as the forecast interest will reduce).

No need to formally change the term as you can keep the flexibility for the future in case you need to revert back to the normal payment £400 monthly.

k3lvc

A lot depends on APR of the PCP - I've just taken a shorter loan @ 2.8% vs PCP @ 4.9% and repaid my PCP rather than messing around with increased payments etc

Rolf15

Thank you Grumpy chap and all, I have the solution that works for me.

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If you are planning on keeping it, then you eventually have to either pay the balloon (GFV) as cash (or from another loan) or the settlement as cash.

You could put the £800 a month into a piggy bank and keep checking on the settlement figure until you have enough to settle. (if the interest is low)

Or as Grumpy_chap says, overpay £800 a month, which will reduce the settlement figure by at least this amount, as the interest is payable on less loan, but then you still have to magic up the settlement lump sum from somewhere.

I don't know, but it might be that when you have paid off the repayment part of the loan, that the PCP terminates, and you have to either pay the GFV or return it.