PCP Interest rate

Noeby

For complete transparency, I know nothing about what I am posting! I just need help to understand.
I took out a PCP on a new car one year ago and just got the first statement. Its the first one I have ever done. The loan was for £18,395.70 and the interest rate is 4.09% for 49 months. I have paid off £1,580.30 during 12 months and I now owe £22,204.92. I have the money invested at 4.5% to pay it off now which I can access without loss of interest. Should I pay the PCP off now?

TadleyBaggie

No doubt the £22K figure is what you would pay back if the PCP agreement was to run its full term, however if you ask for a settlement figure, the number should be much lower.

retiredbanker1

In my experience you would to pay off the whole loan not just the PCP part.

Again in my experience PCP are set up so that you cannot pay more than 50% off (and voluntarily terminate the contract) before the agreement is up.

Check the terms of your agreement - my last one was with Ford.

Ayr_Rage

retiredbanker1 said:

In my experience you would to pay off the whole loan not just the PCP part.

Again in my experience PCP are set up so that you cannot pay more than 50% off (and voluntarily terminate the contract) before the agreement is up.

Check the terms of your agreement - my last one was with Ford.

There are no "parts", you can ask for the settlement figure and pay it of at any time during the term of the PCP agreement.

There may be a small interest penalty for doing so.

Please don't start confusing the issue with voluntary termination which means relinquishing the vehicle.

retiredbanker1

Ayr_Rage said:

retiredbanker1 said:

In my experience you would to pay off the whole loan not just the PCP part.

Again in my experience PCP are set up so that you cannot pay more than 50% off (and voluntarily terminate the contract) before the agreement is up.

Check the terms of your agreement - my last one was with Ford.

There are no "parts", you can ask for the settlement figure and pay it of at any time during the term of the PCP agreement.

There may be a small interest penalty for doing so.

Please don't start confusing the issue with voluntary termination which means relinquishing the vehicle.

PCP to me means a loan and a balloon payment at the end,
Again I have only ever taken out Ford ones they would not let me pay off the balloon payment before the loan part for the reasons I explained.

Ayr_Rage

retiredbanker1 said:

Ayr_Rage said:

retiredbanker1 said:

In my experience you would to pay off the whole loan not just the PCP part.

Again in my experience PCP are set up so that you cannot pay more than 50% off (and voluntarily terminate the contract) before the agreement is up.

Check the terms of your agreement - my last one was with Ford.

There are no "parts", you can ask for the settlement figure and pay it of at any time during the term of the PCP agreement.

There may be a small interest penalty for doing so.

Please don't start confusing the issue with voluntary termination which means relinquishing the vehicle.

PCP to me means a loan and a balloon payment at the end,
Again I have only ever taken out Ford ones they would not let me pay off the balloon payment before the loan part for the reasons I explained.

@retiredbanker1 you seem to be somewhat confused as to how PCP finance works.

You CAN pay off all of the finance including the balloon payment of any PCP contract at any time.

Just ask for the current settlement figure, pay that, the finance is cleared completely and the vehicle is yours.

Noeby

Thanks for all you comments. What I couldn't understand is how I could pay off over £20,000 in 4 years by paying only £1500 per annum? I now think I understand it is the 'baloon' payment at the end?

Nasqueron

Noeby said:

Thanks for all you comments. What I couldn't understand is how I could pay off over £20,000 in 4 years by paying only £1500 per annum? I now think I understand it is the 'baloon' payment at the end?

The balloon is on your paperwork (should be the same as the vehicle GMV). The PCP being 49 months means you are accumulating a lot of interest and your payments are mostly going to the interest, not towards the capital as is always the case with loans. An example might be that your car is £25k, the GMV/balloon after 49 months could be 5k and you pay off the 20k+interest over the 49 months - then you pay the 5k or return the car.

Given the length of the loan and the amount of interest you will pay, it would make financial sense to pay it off but you can confirm this easily. Ask for a settlement figure and see what it is. Plug the numbers into a PCP calculator and see what the total you will pay is. That will give you an idea of how much you could save paying off early.