PCP for GFV, minimise interest

billy2shots

I would appreciate help with the following 

- Buying a new car

- Have the cash to fully pay 

- taking PCP for the security of the Guaranteed Future Value (59% after 3 years)

- obviously want to minimise interest on the loan.

Taking a PCP to get the best negotiated deal.

My original plan was to call up within 14 days and cancel the PCP. Thus gaining the good deal but paying no interest on the loan itself.

I understand about leveraging etc but at a rate of 6.9% I'm not confident my investments will beat this rate in the short term (3 years) so need to be creative.

The thing is, the GFV is a solid 59% and I do change cars frequently. Add in uncertainty in the car industry and I would like to keep this guarantee.

The small print indicates that I can overpay as much as I want without penalty but it is not clear on whether the term will reduce or the interest will reduce over the previously agreed term. 

I won't officially take the product untill next year so doing my homework now. 

I vaguely gather that interest might be saved on the scheduled repayment by lump summing, but after that point you start paying off the future 'final payment ' but I'm presuming this will also reduce the GFV which I don't want to do.

How do I minimise interest but retain the full GFV?

Goudy

You can pay off all the monthlies in a lump some and just leave the GFV but you will still pay some interest on the GFV, you've borrowed it, they'll want interest on it.
The finance company will just spread that out over the remaining months.

Same goes for paying off a portion of the monthlies. They will just work out what is left, add the interest to that and you'll pay that over the remaining months.

So you'll save the most interest by paying it all the finance off in one go.
You will have paid only the interest on what payments you have already paid plus around 56 days to settle.
You lose some guarantee of the GFV and the ability to hand it back, but if it's in the same sort of condition as per contract it will be worth around what the GFV said it would, perhaps more on a private sale or trade in. 
The GFV is worked out on industry data at around the trade value (at auction), they aren't too well known for getting these things so wrong it costs them, so there's usually enough margin to take a risk, pay it all off and be as certain as you can be about it's value when the GFV would have been due. (but that's just my opinion).

Next would be to pay a lump sum that just leaves the GFV.
You'll have paid interest on any payments already made plus the interest on the GFV spread over the remaining months.
This will save some interest and still leave you with the ability to hand it back at the end.

After that a lump some anywhere up to the GFV.
Paying off a chuck will just save you the interest on that chunk, you'll still pay interest on the GFV and anything else you owe.
You'll pay less interest depending on how big the lump sum is and still have the ability to hand it back at the end.

Lastly, just carrying on with the monthlies with all the interest.
(shouldn't need explaining)


They don't generally let you pay more, ie all the monthlies plus a portion of the GFV unless you clear the whole finance.

Mildly_Miffed

You're borrowing the 59% balloon until the day you either pay it or hand the car back, so you're paying 6.9% interest on that for the entire term.

Whether you pay the other 41% (minus whatever up-front payment) off on day two or not affects how much interest you pay on that, but not the rest of the debt.

billy2shots

Thanks, @Goudy @Mildly_Miffed

It's as I thought. 

Paying interest on the balloon in exchange for the GFV vs canceling all and paying it all off in one go. 

As said, 6.9% is exactly attractive and although I'm sure we have all beaten that return in past year, the future is not certain.

Will clear it all within the 14 day cooling off period to save the interest and run the risk of the GFV prediction being wrong.

Goudy

billy2shots said:

Thanks, @Goudy @Mildly_Miffed

It's as I thought. 

Paying interest on the balloon in exchange for the GFV vs canceling all and paying it all off in one go. 

As said, 6.9% is exactly attractive and although I'm sure we have all beaten that return in past year, the future is not certain.

Will clear it all within the 14 day cooling off period to save the interest and run the risk of the GFV prediction being wrong.

That's what a lot do, me included.

I tend to look at a couple of things before deciding.

Finance, particularly PCP on new cars will often come with deposit contributions, the bigger the better.
Also certain clubs, organisations and professions might get access to larger than normal deposit contributions. 
You also might find servicing incentives and other benefits might get offered.

Will the warranty cover my expected ownership length.
If I plan on keeping it five years I don't want a 3 year warranty.

The GFV is a good guide on what the future value will be, therefore a good guide to depreciation. The higher percentage of GFV to invoice the better.

Put the largest deposit down I can. (*I'll come back to why)
There is usually a limit that you can put down, I max it.

Select no options other than perhaps paint. Trade prices which your cars value will be based on as soon as your drive it off the forecourt don't really adjust much for options.
You never really see the cost of the options back later, though they might help you sell it privately later.
A higher trim model that comes with the kit you want already will usually retain the same percentage of value overall, so it tends to offer a little better value if there are some "must have's".


*You might not get to keep the finance benefits if you cancel the finance in the 14 days cooling off period.
Some have, some haven't as the finance companies has wised up to it.

When I have enquired and told no, I just take the finance package and then settle in the first month.
To settle means you take the finance and pay it off and the finance company can only charge you a max of 56 days interest by law, so a larger deposit means you've borrowed less, so the 56 days interest if you need to cough it up is less.


Once the car is mine, after a couple of years I keep an eye out on it's current value and any other offers floating about.
I'm not in a rush, but if something crops up that'll get me into a new car for little money I might be tempted to jump and on the other hand, if things are looking grim in the offers department and the value of my current car is still strong, I might keep hold of it a year or so longer.

In the mean time, what I would have paid in all those monthly payments goes into savings and I'll shuffle that around soaking up the best rate on the market.
That means when it's time to do it again, the money used to settle has had a chance to build up a head of interest.

billy2shots

Goudy said:

billy2shots said:

Thanks, @Goudy @Mildly_Miffed

It's as I thought. 

Paying interest on the balloon in exchange for the GFV vs canceling all and paying it all off in one go. 

As said, 6.9% is exactly attractive and although I'm sure we have all beaten that return in past year, the future is not certain.

Will clear it all within the 14 day cooling off period to save the interest and run the risk of the GFV prediction being wrong.

That's what a lot do, me included.

I tend to look at a couple of things before deciding.

Finance, particularly PCP on new cars will often come with deposit contributions, the bigger the better.
Also certain clubs, organisations and professions might get access to larger than normal deposit contributions. 
You also might find servicing incentives and other benefits might get offered.

Will the warranty cover my expected ownership length.
If I plan on keeping it five years I don't want a 3 year warranty.

The GFV is a good guide on what the future value will be, therefore a good guide to depreciation. The higher percentage of GFV to invoice the better.

Put the largest deposit down I can. (*I'll come back to why)
There is usually a limit that you can put down, I max it.

Select no options other than perhaps paint. Trade prices which your cars value will be based on as soon as your drive it off the forecourt don't really adjust much for options.
You never really see the cost of the options back later, though they might help you sell it privately later.
A higher trim model that comes with the kit you want already will usually retain the same percentage of value overall, so it tends to offer a little better value if there are some "must have's".


*You might not get to keep the finance benefits if you cancel the finance in the 14 days cooling off period.
Some have, some haven't as the finance companies has wised up to it.

When I have enquired and told no, I just take the finance package and then settle in the first month.
To settle means you take the finance and pay it off and the finance company can only charge you a max of 56 days interest by law, so a larger deposit means you've borrowed less, so the 56 days interest if you need to cough it up is less.


Once the car is mine, after a couple of years I keep an eye out on it's current value and any other offers floating about.
I'm not in a rush, but if something crops up that'll get me into a new car for little money I might be tempted to jump and on the other hand, if things are looking grim in the offers department and the value of my current car is still strong, I might keep hold of it a year or so longer.

In the mean time, what I would have paid in all those monthly payments goes into savings and I'll shuffle that around soaking up the best rate on the market.
That means when it's time to do it again, the money used to settle has had a chance to build up a head of interest.

Believe me, know how to play the game. I use their PCP calculator and add and remove individual options to see how it affects payments and GFVs to see where the value is and how it potentially impacts residuals.
Out of interest, BMW options cost you 75% of their price over 3 years. Land rover cost you 100% of their cost (giving them away to the next owner)


I love a deal. I use carwow and Drive the Deal as starting points then call around dealers (this time from Devon to Inverness) I also use car forums to see what's realistic, then try and better them.

I had a deposit down on the recently Facelifted M3 Touring. I managed 17%. Unheard of discount on a newly released model.
Family prefer the refreshed Defender (very aware of reliability). JLR know they don't have to give up much due to popularity and lead times.
6% was as good as it got.

I've been fortunate enough to own 7 new cars but never financed. 
It's all about the deal so I'm happy to sign up to get the financial benefit, but not happy to pay more than the cars value (interest)

 I wanted a way to 100% pay off the car immediately but keep the GFV. Or leave £35, to pay £1 a month for 35 months thus Keeping the GFV but avoiding interest

I wanted my cake and to eat it but don't think that's possible?

Goudy

billy2shots said:

Goudy said:

billy2shots said:

Thanks, @Goudy @Mildly_Miffed

It's as I thought. 

Paying interest on the balloon in exchange for the GFV vs canceling all and paying it all off in one go. 

As said, 6.9% is exactly attractive and although I'm sure we have all beaten that return in past year, the future is not certain.

Will clear it all within the 14 day cooling off period to save the interest and run the risk of the GFV prediction being wrong.

That's what a lot do, me included.

I tend to look at a couple of things before deciding.

Finance, particularly PCP on new cars will often come with deposit contributions, the bigger the better.
Also certain clubs, organisations and professions might get access to larger than normal deposit contributions. 
You also might find servicing incentives and other benefits might get offered.

Will the warranty cover my expected ownership length.
If I plan on keeping it five years I don't want a 3 year warranty.

The GFV is a good guide on what the future value will be, therefore a good guide to depreciation. The higher percentage of GFV to invoice the better.

Put the largest deposit down I can. (*I'll come back to why)
There is usually a limit that you can put down, I max it.

Select no options other than perhaps paint. Trade prices which your cars value will be based on as soon as your drive it off the forecourt don't really adjust much for options.
You never really see the cost of the options back later, though they might help you sell it privately later.
A higher trim model that comes with the kit you want already will usually retain the same percentage of value overall, so it tends to offer a little better value if there are some "must have's".


*You might not get to keep the finance benefits if you cancel the finance in the 14 days cooling off period.
Some have, some haven't as the finance companies has wised up to it.

When I have enquired and told no, I just take the finance package and then settle in the first month.
To settle means you take the finance and pay it off and the finance company can only charge you a max of 56 days interest by law, so a larger deposit means you've borrowed less, so the 56 days interest if you need to cough it up is less.


Once the car is mine, after a couple of years I keep an eye out on it's current value and any other offers floating about.
I'm not in a rush, but if something crops up that'll get me into a new car for little money I might be tempted to jump and on the other hand, if things are looking grim in the offers department and the value of my current car is still strong, I might keep hold of it a year or so longer.

In the mean time, what I would have paid in all those monthly payments goes into savings and I'll shuffle that around soaking up the best rate on the market.
That means when it's time to do it again, the money used to settle has had a chance to build up a head of interest.

Family prefer the refreshed Defender (very aware of reliability). JLR know they don't have to give up much due to popularity and lead times.
6% was as good as it got.

I am not sure if it's still possible, but you were able to get reasonable discount on some Land Rover products if you were a member of the NFU.

It's possible to join them as an associate or a countryside member for around £40 to £50.

You would need to check the discounts on offer and if those types of memberships qualify, but somewhere in the back of my foggy brain, I thought they did or used too anyway.

These types of things come and go.
Over the years I've known British Cycling members and even Aston Villa season ticket owners get discounts on certain car brands that were major sponsors at the time, so it's worth searching and researching.

I lost track of most of these schemes as I qualify for various NHS schemes and don't have a reason to chase anything else, but they are out there if you look.