End of PCP Deal

flossymcfly

Hi all, 

I got a car on a PCP deal from Arnold Clark in September 2020. The finance is provided from Alphera.

This is due to come to an end next month and we have decided to keep the car and pay the balloon payment - an equivalent car now would be an additional £150-200 per month so just not worth it at the moment.

The agreement does say that the balloon payment will be collected on 19th September if I choose to keep the car, however, I have gone over the mileage limit. Will this be an issue? Do I have to take the car in for an inspection beforehand? I've never done PCP before, always HP (if that's the correct terminology) and, although it kept costs down at the time, it's not something I would do again I don't think.

Thanks

Ayr_Rage

If you pay the balloon the car is yours, it's as simple as that, the mileage, condition and servicing history are of no concern to the finance company.

Goudy

If you pay the balloon payment, it doesn't matter what the mileage is, you just pay it and that's it.

A PCP is just HP really except some of the repayment is differed. The balloon/GFV part.
So your contract would have been 48x whatever the monthlies are plus the GFV.

You have options on the GFV.
Pay it and keep it.
Hand it back to the finance company.
Trade it in.

If you hand it back, they will want it back in the condition laid out in the contract.
So mileage and wear and tear are taken into account. Anything outside of contract will be chargeable.

Trade it in and again mileage and wear and tear are taken into account, only this time it'll come off the trade in value. You won't owe the finance company for the mileage/wear, but if there is a short fall in what you still owe (the GFV) and it's trade in value, you will need to pay that to the finance company.

The GFV isn't negotiable, so if you plan to keep it, that's what you pay.
This means there's no need to revalue the car. You just pay it and the finance company will release any interest they have in the car (they'll write and tell you)

You can pay it off at any time, but do nothing and they will take (try to take) the GFV on the specific date in your contract, just like all the other payments.

They might contact you before hand to see what you want to do, but they will take the GFV on the specific date if you do/tell them nothing.

flossymcfly

Thanks, that's really helpful

DullGreyGuy

The balloon is whatever it says it is, mileage, condition etc is totally irrelevant if you decide to keep it. 

When deciding if to keep it or not you'd need to consider the actual value of the vehicle, the balloon payment, any likely penalties or the trade in value. When our PCP ended the balloon was massively more than the value of the vehicle even factoring in we were about 50 miles over the limit the slight excess mileage charge and the one bit of damage outside of tolerance it made no sense to pay it so it somewhat reluctantly went back. 

motorguy

DullGreyGuy said:

The balloon is whatever it says it is, mileage, condition etc is totally irrelevant if you decide to keep it. 

When deciding if to keep it or not you'd need to consider the actual value of the vehicle, the balloon payment, any likely penalties or the trade in value. When our PCP ended the balloon was massively more than the value of the vehicle even factoring in we were about 50 miles over the limit the slight excess mileage charge and the one bit of damage outside of tolerance it made no sense to pay it so it somewhat reluctantly went back. 

Most recent PCP deals (ie, in the last 3-4 years) have ended up in notable positive equity at the end of the term, as car values have went up so much.

Worth checking of course, but i suspect it'll be worth more than the residual.

Like yourself we'd a car some years back whereby the residual was £18K and the car was worth £15K.  It was a real shame as we loved the car, but it would have made no sense to pay the balloon.

Goudy

motorguy said:

DullGreyGuy said:

The balloon is whatever it says it is, mileage, condition etc is totally irrelevant if you decide to keep it. 

When deciding if to keep it or not you'd need to consider the actual value of the vehicle, the balloon payment, any likely penalties or the trade in value. When our PCP ended the balloon was massively more than the value of the vehicle even factoring in we were about 50 miles over the limit the slight excess mileage charge and the one bit of damage outside of tolerance it made no sense to pay it so it somewhat reluctantly went back. 

Most recent PCP deals (ie, in the last 3-4 years) have ended up in notable positive equity at the end of the term, as car values have went up so much.

Worth checking of course, but i suspect it'll be worth more than the residual.

Like yourself we'd a car some years back whereby the residual was £18K and the car was worth £15K.  It was a real shame as we loved the car, but it would have made no sense to pay the balloon.

At the other end of the spectrum, some owners on PCP deals have been glad to hand their car back as used values got hammered between signing up and the end of the contract.

This has left the finance companies taking big hits but they were quick to adjust future deals.

When Vauxhall launched the Corsa electric they worked out the values being close to 50% after 36 months.
Turned out they were making less then 40% at auction and no one wanted to hang on to them. Some early punters got a relatively cheap deal.

As not to offend the EV fans, Citroen and Peugeot got caught out a few years ago.
The sold lots of C1's and 107's on PCP and they suddenly crashed in price at the auctions after a couple of years. Owners could hand them back fast enough.

born_again

PCP on stellantis EV's are destined to be way over what they are worth given that dealers are offering stupid cash purchase prices to shift them.

Grab a Astra EV for £24,795, full price £38,395 (Autotrader) Evens Halshaw

4 year pcp has a balloon of £13,387.50. odds on of having that value after 4 years 🤣

Goudy

born_again said:

PCP on stellantis EV's are destined to be way over what they are worth given that dealers are offering stupid cash purchase prices to shift them.

Grab a Astra EV for £24,795, full price £38,395 (Autotrader) Evens Halshaw

4 year pcp has a balloon of £13,387.50. odds on of having that value after 4 years 🤣

Yes, that is today. Go back 3 years or so and it wasn't the case then.

Mistakes were made on PCP GFV calculations on some models.
Back then there wasn't much history to use for calculations of some new models or they sold so many they ended up flooding the market in a short space of time.

Your figures pretty much back it up.
38k list price car with a GFV of £13k.
Back then you couldn't buy one for £24k.

The banger they originally dropped was they initially thought models like this would be making £17k not £13k.

The beauty is, owners could just hand them back.

motorguy

Goudy said:

motorguy said:

DullGreyGuy said:

The balloon is whatever it says it is, mileage, condition etc is totally irrelevant if you decide to keep it. 

When deciding if to keep it or not you'd need to consider the actual value of the vehicle, the balloon payment, any likely penalties or the trade in value. When our PCP ended the balloon was massively more than the value of the vehicle even factoring in we were about 50 miles over the limit the slight excess mileage charge and the one bit of damage outside of tolerance it made no sense to pay it so it somewhat reluctantly went back. 

Most recent PCP deals (ie, in the last 3-4 years) have ended up in notable positive equity at the end of the term, as car values have went up so much.

Worth checking of course, but i suspect it'll be worth more than the residual.

Like yourself we'd a car some years back whereby the residual was £18K and the car was worth £15K.  It was a real shame as we loved the car, but it would have made no sense to pay the balloon.

At the other end of the spectrum, some owners on PCP deals have been glad to hand their car back as used values got hammered between signing up and the end of the contract.

This has left the finance companies taking big hits but they were quick to adjust future deals.

When Vauxhall launched the Corsa electric they worked out the values being close to 50% after 36 months.
Turned out they were making less then 40% at auction and no one wanted to hang on to them. Some early punters got a relatively cheap deal.

As not to offend the EV fans, Citroen and Peugeot got caught out a few years ago.
The sold lots of C1's and 107's on PCP and they suddenly crashed in price at the auctions after a couple of years. Owners could hand them back fast enough.

Yeah EVs have taken a battering - and still are.

Shockingly (ha!) bad depreciation on them.

Goudy

Yes, bad for some, good for others if they are in the market for used.

I've said it before, if you're taking a PCP out look for the difference between invoice price and GFV. That it's expected depreciation.
Cars that depreciate less work out cheaper.

Also, try not to be tempted to go mad with the options list, quite often you'll be better going up the trim levels.

Choose a nice colour but reign in the temptation to go bonkers with options. That'll only increase the invoice and monthlies but you probably won't see the cost of those options reflected in the GFV. 

You can fiddle about on car sites finance calculators to see what I mean.
You can add thousands in options but the GFV will stay pretty much rigid.

No one will care if it has optional 17" wheels and a 2" larger screen in three or four years time.