PCP question.

jediknight49

Looking at getting a used car. We have cash to cover a £16k car. None of the various dealerships we have spoken to are interested in doing deals for used cars paying cash.
The price you see is what they want for it.

It has been suggested to us that we look at PCP finance with deposit and pay the full outstanding amount off a few days after getting the car.

If we did this, are we likely to get stung for any early payment charges / interest? If doing PCP this way the best option of getting a 'discount' off the £16k car?

Cheers in advance for any advice  

Grumpy_chap

It is quite common (more-so with new cars than used) that Dealers can provide an incentive / discount linked to taking finance and that finance can then be cleared very early with no penalty - you will have to pay interest for as long as you held the finance and there may be a notional admin fee for closing the finance.

Check the value of the incentive and the fees with the finance, but it is something that is referenced frequently in these threads.

You have not said what age of car you are considering at £16k, or whether you need the car with urgency.  If the £16k is a nearly new car and you can wait for a delivery time, it is worth checking the broker costs for brand new.

jimbo6977

jediknight49 said:

Looking at getting a used car. We have cash to cover a £16k car. None of the various dealerships we have spoken to are interested in doing deals for used cars paying cash.
The price you see is what they want for it.

It has been suggested to us that we look at PCP finance with deposit and pay the full outstanding amount off a few days after getting the car.

If we did this, are we likely to get stung for any early payment charges / interest? If doing PCP this way the best option of getting a 'discount' off the £16k car?

Cheers in advance for any advice  

Car dealers are no longer in the business of "shifting tin" ie selling as many cars as possible. Instead they earn massive commissions by persuading customers to take finance, and they use a proportion of these commissions to offer discounts off headline/screen prices. They would gladly refuse a cash offer today in order to collect the comm from tomorrow's customer who wants/needs/accepts finance. 

As described above, you can take finance and pay it off within the statutory cooling off period, no harm done. 

[Deleted User]

Grumpy_chap said:

It is quite common (more-so with new cars than used) that Dealers can provide an incentive / discount linked to taking finance and that finance can then be cleared very early with penalty - you will have to pay interest for as long as you held the finance and there may be a notional admin fee for closing the finance.

Check the value of the incentive and the fees with the finance, but it is something that is referenced frequently in these threads.

You have not said what age of car you are considering at £16k, or whether you need the car with urgency.  If the £16k is a nearly new car and you can wait for a delivery time, it is worth checking the broker costs for brand new.

I think you mean "with no penalty".

Anyway, the only downside to doing this is that the finance company often loses interest very rapidly in providing you with documentation and updating your credit history to show the debt as cleared. It can be a minor hassle, or a bit of an issue if you intend to take another big loan in the next few months (e.g. mortgage).

Goudy

You can pay off a PCP at anytime, it's a loan and covered by regulations.

Firstly you have 14 days cooling off without penalty (to the loan, not always the perks).
You may or may not lose any discount or perks from the PCP deal doing it this way. You need check and be sure.

Secondly, you can make an early settlement anytime in the agreement and the interest will be adjusted accordingly.
If you do this within the first month you will only pay around a months interest, though I think they can charge up to 58 days max interest. (hopefully someone will confirm this 58 days, I might be out of date a bit)

I have never done it on a used car, but I have taken advantaged of various discount schemes that tend to offer 4 or 5 grand deposit contributions if the vehicle is bought on a special NHS staff PCP deal.
These usually have slightly higher interest rates, but that doesn't bother me as I settle in the first month and smile as that usually covers about 50% of the cars depreciation over the next 3 or so years.

I've not yet been brave enough to pull out within the 14 days cooling off period as what I "might" lose far outweighs the month or so interest I pay.

If you are going to go down this route, you will probably find the best deals in regards to deposit contributions, discounts and perks like free servicing will attract fairly high interest rates, though it's not really a big worry if you are going to settle straight away.

daveyjp

Used cars are in short supply and in high demand.

If dealers are giving deposit contributions against used cars in such an environment and the price after the contribution makes it much cheaper than just paying cash take advantage of it and pay the loan off a few days later.

Grumpy_chap

[Deleted User] said:

I think you mean "with no penalty".

Aaah - yes, oops!  A serious typo - I have corrected my post.  Thanks for highlighting.

Herzlos

If you settle the finance within the 14 day cooling off period, you only pay interest for the days you had the money (which should be a pretty small figure). If you settle after the 14 days, they will charge you "up to" 58 days worth of interest. Still not a lot, but a lot more than within the first 14 days.

It should have no effect on the deal for the car which is separate to the deal with the finance. The sales guys may not be happy about losing any commission but that's how the system is set up and not your problem.

jediknight49

Thanks everyone for your comments. Food for thought.
The car is used but only reg in 2020 so not that old.
I'll go for the test drive and see what VW dealership have to offer.

motorguy

jediknight49 said:

Looking at getting a used car. We have cash to cover a £16k car. None of the various dealerships we have spoken to are interested in doing deals for used cars paying cash.
The price you see is what they want for it.

It has been suggested to us that we look at PCP finance with deposit and pay the full outstanding amount off a few days after getting the car.

If we did this, are we likely to get stung for any early payment charges / interest? If doing PCP this way the best option of getting a 'discount' off the £16k car?

Cheers in advance for any advice  

What you're looking for is manufacturers finance deal on something like an Approved Used car that would get you, as you say a financial incentive to take out the deal.

These deals are rare currently, as neither manufacturers nor dealers are having to incentivise purchases to sell cars.

Personally.... I'd be scouring the country to find the right car at the right price rather than find a car and hope you can get a finance deal to make it worthwhile.

£50 off a car at £16,000 is better than a £1,000 finance incentive on the same car at £17,000 in another dealers.

motorguy

jimbo6977 said:

jediknight49 said:

Looking at getting a used car. We have cash to cover a £16k car. None of the various dealerships we have spoken to are interested in doing deals for used cars paying cash.
The price you see is what they want for it.

It has been suggested to us that we look at PCP finance with deposit and pay the full outstanding amount off a few days after getting the car.

If we did this, are we likely to get stung for any early payment charges / interest? If doing PCP this way the best option of getting a 'discount' off the £16k car?

Cheers in advance for any advice  

(a) Car dealers are no longer in the business of "shifting tin" ie selling as many cars as possible. (b) Instead they earn massive commissions by persuading customers to take finance, and (c) they use a proportion of these commissions to offer discounts off headline/screen prices. They would gladly refuse a cash offer today in order to collect the comm from tomorrow's customer who wants/needs/accepts finance. 

As described above, you can take finance and pay it off within the statutory cooling off period, no harm done. 

Sorry, but the above points are incorrect.

(a) No.  Car dealers need to sell cars.  They need to sell as many as possible, for various reasons - because the manufacturer wants market share, and because the more they sell the more profit they make.  Car sales is still pretty much a volume game (though thats up in the air right now because of the impact of covid).

(b) No. Because everybody looks now for the cheapest car, the margins on new and used cars has been reduced to being waifer thin.  Dealers make up the difference by offering insurance products, servicing bundles, commission on finance, etc.  They will get "an amount" of commission off the finance but it wont be a "massive commission" and frankly they'd rather sell the car for a decent profit in the first place, rather than scratch around in the dirt for pockets of profit.

(c) No. It will almost always be the manufacturer who offers a finance incentive on a new car deal, and sometimes on an approved used car.  It will never be the dealer putting their money in to the finance deal.