PCP Calculations - Early settlement

DrEskimo

I highly doubt it is a 2-month early settlement fee (that is unusual on a PCP or HP car finance deal), and you do not have to worry that the deposit contribution will be clawed back.

Having done this before, I suspect the most likely explanation is that the settlement figure hasn't taken into account your £332.49 payment yet.

I suspect if you did settle, you would get a notification soon after that you are due a refund of your £332.49. This happened to me as well on a previous deal when I did an early settlement.

Grumpy_chap

zagfles said:

As above, see https://www.legislation.gov.uk/uksi/2004/1483/made

It looks like they're entitled to delay the settlement date 58 days.

I actually think the delayed settlement of 2 months is a practical thing as much as anything.

Let's assume I have finance and want to settle early, so I phone up and ask for today's settlement value at lunchtime on Friday.  I get emailed the settlement value and see that when I get home from work.  Decide to do that so process the payment over the weekend, it clears by Wednesday.

BUT, by Wednesday, the amount I paid was not enough as there have been additional days of interest accrued.

The 2 months is a reasonably practical time that allows for the finance to be settled without complexities of the balance changing but not allowing an excessive amount to be added making it like front-loading.

I guess, for a settlement value requested today mid-November, the optimum thing is to set up the payment to clear second week of January.

sheramber

check out the FAQ

https://www.santanderconsumer.co.uk/frequently-asked-questions/

How is my settlement figure cakcukated

If you have a regulated agreement your settlement figure will be calculated in accordance with the Consumer Credit Act (Early Settlement) Regulations 2004. We have produced a 1 page document to help you understand how we calculate settlement figures, you can download a copy here.

from that link

Calculation The early settlement calculation contained in the Consumer Credit (Early Settlement) Regulations 2004 means that we defer the proposed settlement date by 28 days from the date of your request on an agreement that had an original term of 12 months or less, and by 58 days on an agreement with an original term of greater than 12 months. Your settlement figure is therefore valid for 28 days for a 12 month agreement and 58 days for an agreement with a term greater than 12 months, this is known as the validity period. If you wish to repay after the validity period, you will need to request a new settlement figure from us.

gizz_10

sheramber said:

check out the FAQ

https://www.santanderconsumer.co.uk/frequently-asked-questions/

How is my settlement figure cakcukated

If you have a regulated agreement your settlement figure will be calculated in accordance with the Consumer Credit Act (Early Settlement) Regulations 2004. We have produced a 1 page document to help you understand how we calculate settlement figures, you can download a copy here.

from that link

Calculation The early settlement calculation contained in the Consumer Credit (Early Settlement) Regulations 2004 means that we defer the proposed settlement date by 28 days from the date of your request on an agreement that had an original term of 12 months or less, and by 58 days on an agreement with an original term of greater than 12 months. Your settlement figure is therefore valid for 28 days for a 12 month agreement and 58 days for an agreement with a term greater than 12 months, this is known as the validity period. If you wish to repay after the validity period, you will need to request a new settlement figure from us.

Yes I found that after the fact once I requested the settlement figure and was trying to understand why it was higher than expected - but it is still not mentioned anywhere on the contract docs or the agreement, and was not mentioned when I queried customer service about penalitues for paying off early one week after purchasing while still in the cooling off period - and their website also states no penalty for paying off early.  So there is some conflicting information there - still awating their written response and then I can make an official complaint - it might not go anywhere - but they should make this clear in the documentation. 

gizz_10

DrEskimo said:

I highly doubt it is a 2-month early settlement fee (that is unusual on a PCP or HP car finance deal), and you do not have to worry that the deposit contribution will be clawed back.

Having done this before, I suspect the most likely explanation is that the settlement figure hasn't taken into account your £332.49 payment yet.

I suspect if you did settle, you would get a notification soon after that you are due a refund of your £332.49. This happened to me as well on a previous deal when I did an early settlement.

If only this was the case - but they have assured me the first payment has been accounted for and now I have seen the docs saying they will give a settlement date 58 days in the future and charge interest till that date - but I am welcome to pay it off earlier but there will be no refund....
I am going to complain about the lack of this information beforehand though, and that it was not mentioned in the docs, or by the salesperson, or when I asked customer services - and it may not go anywhere - but it's worth a try even if it means they improve their docs/comms for the next person..

daveyjp

zagfles said:

daveyjp said:

If you are going to pay it off early do it within the 14 day cooling off period, not after the loan payments have started.

Santander can charge 30 days additional interest for early settlement.

Are you sure you'd keep the deposit contribution if you paid it off in the cooling off period? I would have thought not as you're effectively cancelling the finance deal?

The deposit contribution is a discount negotiated on the price of the car, it is not an incentive to get you to borrow money.

Once the price is agreed you can pay it off as soon as you like.

zagfles

Grumpy_chap said:

zagfles said:

As above, see https://www.legislation.gov.uk/uksi/2004/1483/made

It looks like they're entitled to delay the settlement date 58 days.

I actually think the delayed settlement of 2 months is a practical thing as much as anything.

Let's assume I have finance and want to settle early, so I phone up and ask for today's settlement value at lunchtime on Friday.  I get emailed the settlement value and see that when I get home from work.  Decide to do that so process the payment over the weekend, it clears by Wednesday.

BUT, by Wednesday, the amount I paid was not enough as there have been additional days of interest accrued.

The 2 months is a reasonably practical time that allows for the finance to be settled without complexities of the balance changing but not allowing an excessive amount to be added making it like front-loading.

I guess, for a settlement value requested today mid-November, the optimum thing is to set up the payment to clear second week of January.

Looking at the examples in the legislation, the settlement figures include the upcoming payments due between requesting the figure and the settlement date, so what happens with these, do you tell them you're going to settle on the settlement date and not pay them, or pay them and deduct from the settlement figure?

zagfles

daveyjp said:

zagfles said:

daveyjp said:

If you are going to pay it off early do it within the 14 day cooling off period, not after the loan payments have started.

Santander can charge 30 days additional interest for early settlement.

Are you sure you'd keep the deposit contribution if you paid it off in the cooling off period? I would have thought not as you're effectively cancelling the finance deal?

The deposit contribution is a discount negotiated on the price of the car, it is not an incentive to get you to borrow money.

Once the price is agreed you can pay it off as soon as you like.

No it isn't, it's a deposit contribution for the finance, if you don't take out finance you don't get it. This is common practice, when I bought a car 15 years ago it was the same, and looking at buying one now and it's the same.

That's why the OP took out finance in the first place when he didn't need it. I'd be very wary of cancelling in the 14 day period unless you're sure you wouldn't lose the deposit contribution.

gizz_10

zagfles said:

Grumpy_chap said:

zagfles said:

As above, see https://www.legislation.gov.uk/uksi/2004/1483/made

It looks like they're entitled to delay the settlement date 58 days.

I actually think the delayed settlement of 2 months is a practical thing as much as anything.

Let's assume I have finance and want to settle early, so I phone up and ask for today's settlement value at lunchtime on Friday.  I get emailed the settlement value and see that when I get home from work.  Decide to do that so process the payment over the weekend, it clears by Wednesday.

BUT, by Wednesday, the amount I paid was not enough as there have been additional days of interest accrued.

The 2 months is a reasonably practical time that allows for the finance to be settled without complexities of the balance changing but not allowing an excessive amount to be added making it like front-loading.

I guess, for a settlement value requested today mid-November, the optimum thing is to set up the payment to clear second week of January.

Looking at the examples in the legislation, the settlement figures include the upcoming payments due between requesting the figure and the settlement date, so what happens with these, do you tell them you're going to settle on the settlement date and not pay them, or pay them and deduct from the settlement figure?

Their settlement letter says you should still pay them and if you end up overpaying they will be refunded later.

Goudy

Reading this a bit more carefully. Under the head "Allocation of Interest Payments", Santander state the interest ratio of the repayments aren't even.
https://www.santanderconsumer.co.uk/wp-content/uploads/SCUK-Settlement-Figures.pdf

So early on in the contract you pay a higher ratio of interest to capital in your monthly payment, then towards the end of the contract you pay a smaller ratio of interest on those monthly payments.

Your next payment is made up of more interest than the next one and so on.

Now if they charge two months (or 58 days) interest when you settle, they could work that out on the interest payable on those next payments due as that is what would be due in those 58 days.

So depending on when you settle in your contract, what they charge you for those two months interest will change.