Exiting PCP early

passingchord

I am 20 months into a three-year PCP deal and looking for the best way out, basically because I’ve decided I no longer need to run a car.  We're currently a two-car family, and following various changes in my work patterns, we reckon we can manage with one, which will of course save a lot of money in the long run. 

So I am thinking through how I can get shot of the car, in the most financially sensible way. It’s a Renault Zoe (EV). It’s fairly low-mileage and I believe its current value is higher than the outstanding financing (£15,700) - although so far that is just based on a couple of estimates from websites. 

Should I just pull out, give the car back and walk away? Or is there some way that a dealer could make me a better offer, sort out the finance and pay me the difference? Or any other things I should be thinking about? I’d really appreciate any help in thinking this through. I have always been terrible at any kind of deal-making, especially if it involves cars. Maybe someone on here can help me not to do anything stupid?

jlfrs01

Like any loan, you can't simply walk away from a PCP. If you want to end the contract early you will need to contact the lender and ask for a settlement figure. You will be given 2 figures, 1 to repossess the car and another to include the balloon payment if you would like to buy it. You will not be able to make any argument for amending these figures even with a lower mileage and if you decide to return the car, they will still assess it for any non-wear and tear damage and bill you accordingly. This can include windscreen chips, upholstery marks (even to door handles which can get dirty), and bodywork dents and scratches. The dealer is not likely to be able to help you I'm afraid, your contract is with the Finance Company, even if it is the manufacturer's own finance company.
As you are about two thirds of your way through the PCP, the dealer may be able to broker a deal but it will mean buying another vehicle which you have said you do not need.

Goudy

You can voluntary terminate your PCP contract if you have paid or are willing to pay at least 50% of your contact.
That contract includes everything, interest and GFV.

You will effectively just hand the car back to the finance company, but they may come after you for excess mileage and damage beyond the normal wear and tear.

It shouldn't harm your credit rating, but you'll probably never get credit with this company again.

Though after only 20 months, I doubt you are anywhere near 50% yet.


If on the other hand you think there is some equity in the car, you can sell it.
You can't really sell it privately without clearing the finance first but dealers may offer you more than you owe, then they clear the finance and pay you the difference.

There are the obvious choices, like We buy Any Car and Motorway that will do this, but your local dealer might be interested in it for stock, so it's worth asking them first as the usual car buyer sites tend to offer you a price and chip away at it at handover once they see it and make up faults.

passingchord

Thanks for comments so far, and I had not taken on board the important fact that the 50% (for voluntary termination) included the value of the balloon payment. That does change the landscape! and probably means I will need to put my money-saving plan on the back burner for a while. It does sound as if would be a good plan to run the car by my local dealer some time soon and ask if they'll make me an offer - if only so that I have a clearer idea where I stand in terms of equity. 

Ectophile

If you think the value of the car is more than the finance, then go to any dealer and offer to sell it to them.  Maybe even the dealer that sold you the car.  They will pay off the finance and give you any money left over.

But make sure you have an up-to-date value, because the value of used EVs has suffered a significant downward correction in the last few months.

Goudy

passingchord said:

Thanks for comments so far, and I had not taken on board the important fact that the 50% (for voluntary termination) included the value of the balloon payment. That does change the landscape! and probably means I will need to put my money-saving plan on the back burner for a while. It does sound as if would be a good plan to run the car by my local dealer some time soon and ask if they'll make me an offer - if only so that I have a clearer idea where I stand in terms of equity. 

Your car payments are linear and includes interest but depreciation isn't.
This means you pay off even slices of repayments but depreciation dips rapidly as first, then evens out later in the cars life.
It takes time for your even repayment slices to catch up with depreciation and the interest.

PCP deals mean that the 50% VT point is usually at or very near the end of the set monthly payments, often around the time the GFV is due and you've basically made all the interest payments, as they are loaded into the monthly payments.

Used car prices are high at the moment, so it's value now compared to what you owe (minus the interest rebate) might be in your favour.

Ask the finance company for a settlement figure first then try selling it on to a dealer or car buying site.
If it's in your favour you can sell it to them and pocket any equity.

I know this part doesn't concern you, but quite often at or near the end of a PCP agreement, owners might be tempted to trade it in for a new car/deal.
Dealers have been known to under value the trade in price meaning there is negative equity in the car which they roll into the next deal with even more interest on that.

If that is the case, either shop around and tell dealers you need trade in to give you some deposit or you'll walk away and hand the car back to the finance company and nobody wins.