Taking advantage of dealer contribution on PCP, then backing out

patchyX2

I'm potentially looking at buying a new Kia. I was planning to pay in cash, but I noticed on their PCP offer, there's a £2000 dealer contribution on a ~22k car. Is there any way I can take advantage of that contribution and then just pay the car off in full immediately and therefore cancel the finance?

I remember reading about PCP deals a long time ago, and the termination options were not available until you'd paid off 50% iirc.

I'm likely to get a mortgage in the next year or two, so don't want any kind of black mark against my name, nor do I want to get trapped on the PCP deal if I can't 'escape' it early. 

It's also not worthwhile if it's possible for the dealer/manufacturer to claim the 2k contribution back.

SaverRate

Have a look at Carwow to check your getting the best deal.

You can pay the PCP off and still get the contribution. 

marlot

Yes, I withdrew from the finance on my Kia Sorento and didn't have to pay back the finance contribution.

I had to pay a few days of interest.

The salesman was fully aware of what I was going to do, but asked me not to tell him.  I guess so he had plausible deniability with his bosses.

DrEskimo

PledgeX2 said:

I'm potentially looking at buying a new Kia. I was planning to pay in cash, but I noticed on their PCP offer, there's a £2000 dealer contribution on a ~22k car. Is there any way I can take advantage of that contribution and then just pay the car off in full immediately and therefore cancel the finance?

I remember reading about PCP deals a long time ago, and the termination options were not available until you'd paid off 50% iirc.

I'm likely to get a mortgage in the next year or two, so don't want any kind of black mark against my name, nor do I want to get trapped on the PCP deal if I can't 'escape' it early. 

It's also not worthwhile if it's possible for the dealer/manufacturer to claim the 2k contribution back.

Yes, many of us have done this, including myself.

Your reference to the 50% mark is unrelated to your ability to settle the finance in full. You can partially or fully settle the finance whenever you like. 

I suspect you are referring to a separate clause related voluntary termination, where you can hand the car back to the finance company with nothing more to pay once you have paid 50% of the total amount payable. A mechanism used by people who want to change early, or are no longer able to service the debt and the car is worth less than the outstanding settlement. 

patchyX2

Ah ok thanks all. Sounds like quite a neat trick if the only risk is a few days/weeks interest. 

facade

There is a thread on here from someone who did this, but settled outside the "cooling off" period, and the terms of the finance agreement applied, which meant he was charged an extra 50 odd days interest- less than the "incentive" but not cheap

marlot

PledgeX2 said:

Ah ok thanks all. Sounds like quite a neat trick if the only risk is a few days/weeks interest. 

To keep it minimal, you need to exercise your right to withdraw from the finance within the first 14 days.

Ectophile

marlot said:

PledgeX2 said:

Ah ok thanks all. Sounds like quite a neat trick if the only risk is a few days/weeks interest. 

To keep it minimal, you need to exercise your right to withdraw from the finance within the first 14 days.

But if you cancel the finance, you lose any perks that were associated with the finance.  Let the 14 days run out, and pay off the finance early, and you get to keep any benefits.

Goudy

Yes you can do this.
Buy it on a PCP deal, get the deposit contribution and then settle the finance.

When you settle is questionable.
It is your write to be able to cancel the finance within 14 days but you could end up being invoiced the full retail price of the car without the deposit contribution as this contribution is part of the finance deal.

After the 14 days you can settle any loan at any time.
You request a settlement fogure from the fianace company and they will work it out for you.

By doing this the finance company can only charge you the interest you have already paid on any monthly payments paid so far and X amount of days interest on the outstanding total.

Usually a PCP deal is over three or four years, so the maximun interest is around about two months interest payments over these longer period finance. It's less for finance over a shorter period though.

There are obviously many upsides to doing this, even paying the two months interest payments.
Finance companies aren't silly, so it's usual to find deals with larger deposit contributions attract higher rates of interest, but you don't really have to worry looking at the APR on any deal as the larger deposit contribution will massively outweigh the two months interest.

marlot

Ectophile said:

marlot said:

PledgeX2 said:

Ah ok thanks all. Sounds like quite a neat trick if the only risk is a few days/weeks interest. 

To keep it minimal, you need to exercise your right to withdraw from the finance within the first 14 days.

But if you cancel the finance, you lose any perks that were associated with the finance.  Let the 14 days run out, and pay off the finance early, and you get to keep any benefits.

The question was about keeping the dealer & finance company contributions.  You keep both if you cancel within the 14 days.  I've done it several times.

Kia don't normally have any other additional perks with PCP.  But sure, if the deal includes free services or similar, those will likely be lost by withdrawing from the finance.

patchyX2

So by the sounds of it, the safest bet would be to put down a large deposit, so the loan is as small as possible (ensuring the loan amount still meets the minimum size to qualify for the dealer contribution), then pay it off ASAP after the 14 day cooling off period.

That would incur a month or two of interest charges, but that would still be much less than the 2k dealer contribution.