Can you over a PCP and effectively have no payments until the GMFV is due?

IAMIAM

Example.
Car is 20k
Deposit 5k
10k over 48 months
GMFV 5k

Effectively over pay by 9k, have 1k on monthly payments over 48 months and know full well I have the option of returning the car or keeping it. Will this reduce interest to hardly anything and payments which are minimal monthly amounts over 48 months?

DrEskimo

I’m not sure how it works universally but when I had an agreement with Renault for a Used PCP (used it just to get finance contribution and free services) I could play around with partial payments and it was more complicated. Depending on the amount, it Sometimes reduced the GFV. 

But in any case, not sure what benefit this is giving you? Whilst you will no longer be able to return back to the finance company at the end of the term (subject to any wear and tear and excess mileage charges), you are still free to sell it to any broker or garage or dealer anytime you like. 

As long as that trade sale price is higher than the GFV (including any interest costs) then you have done better than not having the PCP finance. So depends on the APR and GFV. In your example having a back stop of less than 1/4 (when you account for the interest charges) of the cars value after 4yrs doesn’t seem much of a protection…?

I guess you get the benefit of the VT, but the overpayment will probably mean that selling is still the better option. 

Mildly_Miffed

With a PCP, you borrow the entire value of the car. You pay interest on that entire debt.

The repayments are structured so that the balloon is what they think the car will be worth at the end of the term.

So...
Car purchase = £20k
4yr value = £5k
4yr interest on that value = £500

If you pay £15,500 at the start, then your repayments will be £0, because the only money you owe is the balloon.

cw8825

i know ford used to do a pcp, where you can pay the initial payment + all monthly payments as a deposit 
0 monthly payments and have the balloon at the end

IAMIAM

That’s ideally what I want to do 

IAMIAM

Mildly_Miffed said:

With a PCP, you borrow the entire value of the car. You pay interest on that entire debt.

The repayments are structured so that the balloon is what they think the car will be worth at the end of the term.

So...
Car purchase = £20k
4yr value = £5k
4yr interest on that value = £500

If you pay £15,500 at the start, then your repayments will be £0, because the only money you owe is the balloon.

I was under the impression overpayment reduced interest. So effectively what you are saying is having a PCP and overpaying to get the monthly payments to zero makes no difference to the overall cost. I would still pay everything including all interest calculated at the start over the term agreed? Its BMW Approved Used.

Mildly_Miffed

IAMIAM said:

Mildly_Miffed said:

With a PCP, you borrow the entire value of the car. You pay interest on that entire debt.

The repayments are structured so that the balloon is what they think the car will be worth at the end of the term.

So...
Car purchase = £20k
4yr value = £5k
4yr interest on that value = £500

If you pay £15,500 at the start, then your repayments will be £0, because the only money you owe is the balloon.

I was under the impression overpayment reduced interest. So effectively what you are saying is having a PCP and overpaying to get the monthly payments to zero makes no difference to the overall cost. I would still pay everything including all interest calculated at the start over the term agreed? Its BMW Approved Used.

You're still paying 4yr interest on the balloon - because that's still money you've borrowed and owe.
You aren't paying interest on the monthlies.

So, yes, you pay less interest - but, no, not zero.