Mercedes A Class on PCP

Bolt1234

Could someone help please.  I think I am getting myself confused here.

My husband has a Merc on PCP at £469 per month.  The 4 year contract ends in Jan 24.  The ballon payment is £17,300 to buy the car.  For all sorts of reasons (health related) he is not getting another PCP and wants to buy the car outright.  We have just had an inheirtance so there is money to fund this.

We have had a quote to settle this month at £19,837.  This looks like the £469 x 5 months PLUS the ballon payment or there or thereabouts!

Is the price to settle today higher because effectively the car is newer NOW than it would be in Jan 24?

Thank you

WellKnownSid

No the price is the amount you still owe on the car with a small amount of interest saved.

Bolt1234

Thanks Sid, so actually there doesnt seem to be any real benefit to paying it off now?  Whether we wait until Jan 24 and buy for £17300 or pay it off now doesnt seem to make a huge difference.

Just wondering what to do?

Goudy

On Jan 24 you would have paid 5 months more payments.
The settlement figure will reduce the more monthly payments you make until you just have the balloon to pay.

As for what the car is worth now and in Jan 24, that's debatable.

You might actually get more than the £19,837 now if you trade it in for a new car.
The dealer would just pay off the finance and use the difference as a deposit for the new car.

Then again is might be worth less, then if you trade it in or settle first and then trade it in, you will lose out some.

It might be much better to wait until nearer the end of the PCP contract, if it's worth less trade in than the GFV, then you can just hand it back to the finance company and walk away.
If it's worth more then the £17,300 you take the difference to the next car.
Either way, you can't lose out like this.

You have a settlement figure, now it's just a matter of if you can get more for it as trade in or not, so a visit to the dealer might be worth your time.

Bolt1234

So on Car Wow the car is valued at £27k but we are not looking to sell the car.   He loves the car and for health reasons it wont be sensible to take on another PCP or look around for another car.    

WellKnownSid

Then consider what interest you would earn in five months as this may be high enough to justify waiting and just paying off when the balloon payment is due

Bolt1234

so five months interest at say 4.5% interest rate on £19k?

The ballon payment at £17300.  Would that ever change between now and Jan 24? If it wont we might well wait until Jan 24.

WellKnownSid

The balloon payment is the last payment that is it. It won’t change.

happyc84

Bolt1234 said:

So on Car Wow the car is valued at £27k but we are not looking to sell the car.   He loves the car and for health reasons it wont be sensible to take on another PCP or look around for another car.    

That's  a great price for an almost 4 year A-Class, can I ask what model it is. That's a decent rate of depreciation.

Bolt1234

This is model - AMG A35 A35 4Matic Premium Plus 5dr

Goudy

You won't save much in interest settling now.

You only have a few payments left but the finance company will charge you around 2 months of those to settle now.

Anytime you settle a loan like this the maximum they can charge you is around 2 months interest.
So settle early on in the contract and you pay the 2 months but save on the following months/years worth of interest.

Settle late like this and you save very little as you've paid most of the interest already and would pay a further 2 months interest out of the 5 months remaining anyway.

So just a couple of hundred pounds max saved by settling now.

Now, can you put that cash you would have used to settle into a savings account and make more than a couple of hundred in the next 5 months?

You can get around 5% in an easy access account at the moment and 5.5% in a notice account.
In 5 months you could make £400+ in interest which would be probably more than the 3 months interest saved by settling early.