Taking advantage of dealer contribution on PCP, then backing out

daveyjp

Dealers will usually restrict the amount of deapoit which can be paid on a PCP as they make the mkney from the amount of the loan.

You don't lose manufacturers deposit contribution if you pay off the finance within 14 days.

Very few do it and to manufacturers its part of their marketing budget.

DrEskimo

daveyjp said:

Dealers will usually restrict the amount of deapoit which can be paid on a PCP as they make the mkney from the amount of the loan.

You don't lose manufacturers deposit contribution if you pay off the finance within 14 days.

Very few do it and to manufacturers its part of their marketing budget.

I think the restriction is due to the GFV, which is a set amount, rather than some nefarious means of making more money.

I also was not charged any early repayment fee. My hypothesis of why that occurred for the other poster on here was because their finance agreement was direct with a finance company (Santander), rather that through the manufacturer as an intermediary. Could be wrong though, so always worth checking your T&Cs!

Goudy

Yes, putting down the largest deposit possible and taking the shortest period possible on a PCP deal would in effect reduce the overall interest.
The less you borrow over a shorter time should mean less interest.

Which also means less payable interest should you settle early, that is if you can't cancel and keep the incentives if you cancel within 14 days.

You can play with a PCP deal on most site, but a quick look here.
https://www.kia.com/uk/new-cars/offers/retail/pcp/sportage/
And it shows you the chargeable interest by moving the sliders about.

What you're after in reducing the interest charges as low a possible.

Interestingly, if you also move the annual mileage up to max, that also reduces the chargeable interest.

Take it over 37 months (36 monthly payments and 1 GFV payment) on a 10,000 mile a year contract with a 10K deposit and you'd pay £5400 interest on the loan. (150 a month interest or around £300 to setttle early)

Take is over 25 months (24 and 1) with 30,000 miles a year with a 17k deposit and you'd pay £2900 in interest. (120 a month interest or around £240 to settle early).

Obviously moving the sliders around like this alters the monthly payments and GFV, but as you plan to clear the finance off, it doesn't matter what they are.

I must admit I have only asked once asked about cancelling within the 14 days rather than settling later and was told I couldn't.
I presume that was because the deals I take tend to be manufacturer discounts for NHS staff.
They tend to a bit more generous with deposit contributions, so two months interest is a spit in the ocean.

lordmountararat

I did this with my Kia, but the lovely sales woman asked me to let it run for a couple of months before I paid it off, presumably because she didn't want to lose her commission. I was happy to do this.