Early settlement on PCP. Do I need to pay 50% of Interest costs?

axil23

I bought a car on PCP 4 months back but want to sell it now. I was advised by my finance broker that I would pay the interest portion on the cash borrowed for the 4 months + a little extra but my finance company are asking me to pay 50% of the finance amount over the term of the loan. So over 4 years my finance amount was 16k and their settlement figure is the balance owing on loan plus 8k finance charges for the 2 years. 

Its a PCP and I bought the car through my business if that makes any difference? My finance documents says CONDITIONAL SALE AGREEMENT on top of it. 

Grumpy_chap

axil23 said:

I bought a car on PCP 4 months back but want to sell it now. I was advised by my finance broker that I would pay the interest portion on the cash borrowed for the 4 months + a little extra but my finance company are asking me to pay 50% of the finance amount over the term of the loan. So over 4 years my finance amount was 16k and their settlement figure is the balance owing on loan plus 8k finance charges for the 2 years. 

Its a PCP and I bought the car through my business if that makes any difference? My finance documents says CONDITIONAL SALE AGREEMENT on top of it. 

It sounds like whoever you spoke to at the finance company have given you the details for a VT (Voluntary Termination).

What you need to ask for is a "Settlement Figure" for the finance.  Keep the request simple and don't mention wanting to sell the car.  The Settlement Figure should be broadly as your Finance Broker advised.

Given that you have a Broker, why are they not sorting this for you?

axil23

That's a relief. 

I called the finance company at 525pm and didn't have time to call the broker before he closed. 

I assumed I might have been sold a Business PCP which doesn't get covered under the normal consumer rules. 

Grumpy_chap

axil23 said:

I assumed I might have been sold a Business PCP which doesn't get covered under the normal consumer rules. 

I assumed you have a standard PCP with my comments above.

You would need to check the agreement that it is a standard PCP.  

axil23

It doesn't state anywhere in the agreement that its a PCP. All references state CONDITIONAL SALE AGREEMENT. 

But I was sold it as a PCP and everything about it is a PCP like balloon payment etc. 

Goudy

If it's a standard PCP or even Hire Purchase or Bank Loan, you can settle the finance (pay up and clear it in a lump sum) any time and the amount of interest they can charge you on the outstanding amount is around 56 days only.

So if you did it now you would have paid interest with the first four months payments plus the 56 days, so around 180 days interest.

You just ring the finance company and ask for a settlement figure, though most these days have online portals where you can do the same thing.
They should workout the total owed and apply the appropriate interest rebate on it.

Pay it and the car is yours to do with as you please, but there is no guarantee that you will recover all you have spent on it when it comes to selling or trade it in.
Depreciation isn't linear, your car would have lost a large chunk of value early on, then less and less as time goes on. (which is why the 50% mark is so far into the monthly payments, see below).

Selling it to whoever and you are going to suffer a large portion of depreciation plus those 180 days interest payments as the car is only 4 months old and has dropped a large slice of value already.   


To voluntary terminate rather than settle the finance you need to have paid 50% of the total. 
Then if all is good with the car ie no damage, you could hand it back to the finance company and walk away.
That 50% includes all the interest and the GFV by the way.  

If you continued to carry on paying the monthly payments, you would have normally paid that 50% roughly around the time the GFV is due. If you have a 36 month contract (plus 1 more for the GFV), the 50% mark will be around that 36 month payment, maybe a month or two before if you are lucky.

So to do that you would have to pay up a lump sum payment in the thousands to reach that 50% to hand the car back now, which isn't really viable.

facade

The only realistic option if you must get rid is to settle the finance and own the car to dispose of how you wish. The car is very likely to be worth more than 50% of the finance at 4 months old so you will lose the least money.

VT'ing now is just throwing more money away, you might as well keep the PCP on until the VT point is reached naturally and at least have the use of the car for 30 some odd months.

As Goudy says, the 50% VT point is in the thitysomethingth month, the GFV is about 40% of the purchase price, they don't allow a large deposit, and with 50% of the interest as well it takes a long time to pay 50% of the total finance package from the monthlies.

Goudy

facade said:

The only realistic option if you must get rid is to settle the finance and own the car to dispose of how you wish. The car is very likely to be worth more than 50% of the finance at 4 months old so you will lose the least money.

Yes, but you must realise you are still going to lose out some money somewhere.
You aren't going to recover all you've paid as the car, even though only 4 months old it's now used and will have lost a fair chunk of value.

Best case would be you settle and then recoup what it costs to settle by selling it on.
You'll lose whatever deposit you put down originally and the 4 months payments, which is fair enough as you've used the car for 4 months.

What is more likely, especially if you only put down minimum deposit is you won't get back what you paid to settle the finance when you sell it on. 
So you could lose more if the cars used value falls short of the settlement figure.
Again you still lose the deposit and 4 months payment as above but now also the difference between settlement figure and cars value..

With a finance settlement figure and a few quotes from the usual car buying sites, that should give you an idea if there's going to be a big difference between the two.

I expect it to be a decent difference as you won't really get retail value for the car when selling it on, only trade value.

axil23

I spoke with the finance company and since its a Business PCP its unregulated and they have front loaded the interest costs on it for the 4 years. They are giving me a 50% rebate on them for settling early.

Basically I went as a private individual for finance with the broker and that was declined so I put it through the company. I have checked all the paperwork and it doesn't say anywhere that they will front load the interest costs. I have an email conversation with broker that there wont be any early termination charges or fees but having questioned that now I am being told  that was from when it was a personal PCP. I wasn't informed this on the business PCP and can't see it in any paperwork that I signed. 

axil23

Ok so the more I look into this the more I am convinced I was mis-sold. Would anyone be able to guide me on what I should do? 

sheramber

If you bought through your company why would it not bee a business PCP.?

Is the agreement in the company name?