PCP Coming to an End

MikeL93

I currently have a BMW on PCP which I absolutely love and is coming to the end of its contract in the next 12 months. I absolutely love the car and I really want to keep it. This is the second car I’ve had on PCP, the first was a VW which I used as a deposit towards my current car.

BMW have contacted me to discuss my options and they seem to be pushing for me to either get the new 1 Series which is coming out later this year and I really don’t like the look of, or get a newer version of the current 1 Series from cars that they have in stock. Neither of these are something that I want to do as my current 1 Series is spec’d out exactly as I want it and it’s the best car I’ve ever had so I really want to keep it a bit longer.

If I so wished and didn’t want to pay the balloon payment next year could I just tell BMW I want to keep my current car and renew or renegotiate the current PCP I have on my current car? 

UniversalSecret

Usually you have to pay the balloon payment at the end of a PCP to keep the car or hand it back. If you want to keep the car have you thought about taking out a personal loan to pay off the balloon payment?

Goudy

You have three options at the end of a PCP contract.

One is hand it back to the finance company (not the dealer).
A few weeks before the final, GFV payment is due you need to contact the finance company and tell them.
They will arrange collection by an agent.
You will have nothing to pay except any excess mileage charges and damage that falls outside of their fair wear and tear policy (which roughly lines up with the BVRLA's fair wear and tear policy)

Trade it in for another car.
This doesn't have to be with the same dealer/manufacturer or even another PCP deal.
If there is any equity in the vehicle (it's worth more than the GFV) that will go towards your next car.
If on the other hand it's worth less than the GFV, you would refinance that shortfall in the next deal. But why would you do that if you can just hand it back as per option one.

Pay the GFV.
The finance company will actually (try) take this GFV payment from your bank account on the month it's due from if you don't do anything else.
Your contract will be for something like 35 or 47 monthly payments plus the GFV on month 36 or 48.

How you pay is up to you. If you have cash that is usually the cheapest option.
You could take a bank loan or talk to the current finance provider, they do often refinance GFV's but usually as a loan not another PCP.
On the subject of PCP deals on used cars, these tend to be a very expensive way of buying one.
Interest rates tend to be much higher, cars tend to be over priced and there is usually no deposit contribution.

Remember you have already paid interest on the GFV as part of the PCP deal, you've only deferred this part of the capital borrowed.
Borrowing again to pay the GFV adds to the cars overall cost as you end up paying interest on the part of the capital again.

You can of course pay the outstanding finance at anytime.
You just request a settlement figure from the finance company and they will adjust the interest on what you owe as they can only charge 56 days interest on the outstanding total interest still owed.
The earlier in the deal the more interest you will save, but with 12 months left you could save a few hundred, that is if the capital to pay it off doesn't have a high overall cost.

You wouldn't really borrow at 10% to pay off a 5% loan though it might be worth borrowing at 5% to pay of a 10% loan.

WellKnownSid

Many manufacturers will offer some kind of re-financing option for the balloon payment, however depending on the maths this could be anything from poor to daylight robbery.  At the end of the day they would rather see you in a brand new car than finance your old one.

I understand that you love your car, but it is also an older car now.  Consider extending the warranty so there are no nasty surprises, if it is coming out of warranty make sure you have the end-of-warranty check done.

Depending on your mileage, the 4th and 5th year of motoring can be expensive even compared to the cost of owning of a brand new car, especially if you're still maintaining the car within the franchise network or there is a new model coming out and you're now carrying the can for a bigger drop in residual over the next 12 months.

Goudy

WellKnownSid said:

Depending on your mileage, the 4th and 5th year of motoring can be expensive even compared to the cost of owning of a brand new car, especially if you're still maintaining the car within the franchise network or there is a new model coming out and you're now carrying the can for a bigger drop in residual over the next 12 months.

That is a good point.

There are a couple of schools on thought on this.

Some like to buy into a car at this 3rd, 4th or 5th year point, when it's lost a large slice of value already via depreciation but then have warranty, repairs, breakdown cover and often some heavy service items along with all the normal servicing to content with.

Others might consider the price of not having most of these things to contented with is the cost of depreciation.
Particularly if you do you homework, pick something that has a lower depreciation rate and perhaps work in a discount on the purchase price.

The OP is getting nearer to the point where they have suffered the depreciation the first school has tried to avoid but left facing some of the costs those are happy to make because they weren't the one's suffering that deprieciation.

I've been doing the second thing for around 20 years now but it only really works for me due to being able to get a good discount on the purchase price due to working for the NHS.
There are a few hoops to jump through but I can usually find a car with a big enough discount that it accounts for around 30 to 40% of what it would depreciate in 3 to 4 years, often it's more but I don't like to sign up for much less.

I'm not overly worried about what it is and don't really go mad on model/trim unless it comes with free/cheap options, I prefer an auto hatchback these days so I just take my time and wait until I can find another good deal that will account for that slice of depreciation.
Then I'm in a new car with generally nothing to worry about for the next few years apart for the basic servicing.

Mildly_Miffed

The BMW dealer simply want to have your car in stock as a second-hand car to retail and sell you a new one. No more, no less.

Your current finance is coming to an end.
It gives you two options:
1. Hand the car back.
2. Pay the balloon and own it (and perhaps resell it).

You can, of course, finance that balloon in whatever way you want if you wish to keep the car.

DullGreyGuy

Whilst its stated there are three options... 1) hand it back, 2) buy it or 3) trade it in in reality 2 & 3 are the same thing from a finance perspective, you are still paying the balloon. 

How much is the balloon? How much is the car going to be worth in 1 years time? If there is a new model coming out you could find yourself in negative equity. 

Ultimately there will be a range of options to finance the balloon if you cannot afford to pay in full and it makes sense to retain the vehicle. Your current finance provider is likely to offer you options but you've options with personal loans etc too

We really liked our PCP but at the end the balloon was vastly more than the vehicles value so made no sense to do anything other than hand the car back. 

jlfrs01

When the 3 year PCP I had with BMW Finance was coming to an end I was given the option to extend which I did for a further 2 years.
This wasn't something they advertised but what I was offered over the phone. They may have pulled this now (it was 3 years ago), but might be worth a call in to ask if it's an option, if the OP wants to hang onto this particular car.