PCP early repayment

incopad

I am looking pay cash for a 3 year old car for around 16k which comes with a year warranty. At the dealership I was told that if I took out pcp I could get 2 years free servicing, mot and breakdown. I could then simply pay if the loan a month later and keep all the above.

if I took out pcp, things like alloy , tyre and scuff protection would  be added to the price coming in at around 18k total. These are things I wouldn’t bother with if paying cash. I queried that if I were to pay the contract early would I be paying off 18k or just the 16k  and was told it would be based on the value of the car, so 16k. Ever the sceptic I asked if they were sure as this seemed a win for me and not much in it for them apart from their fee for sorting out finance. Anyone come across this before? Is it correct?

Silvertabby

We did something very similar just a couple of weeks ago.  In our case, we bought a new car, which gave us £1,600 PCP cash discount.  Then we paid off the balance the next day, by saying that we wanted to exercise our 14 day right to cancel.  Just cost us £3 and some shrapnel for one day's interest.

We asked the sales chap how this could possibly be right, and how VW finance could afford to do this.  He said that the losses from the tiny number of customers like us were more than covered by the interest rates paid by the customers who keep their contracts.

Veteransaver

incopad said:

I am looking pay cash for a 3 year old car for around 16k which comes with a year warranty. At the dealership I was told that if I took out pcp I could get 2 years free servicing, mot and breakdown. I could then simply pay if the loan a month later and keep all the above.

if I took out pcp, things like alloy , tyre and scuff protection would  be added to the price coming in at around 18k total. These are things I wouldn’t bother with if paying cash. I queried that if I were to pay the contract early would I be paying off 18k or just the 16k  and was told it would be based on the value of the car, so 16k. Ever the sceptic I asked if they were sure as this seemed a win for me and not much in it for them apart from their fee for sorting out finance. Anyone come across this before? Is it correct?

If they are adding the dubious add-ons of alloy wheel cover etc to the price then that will be added to the invoice cost of the car and will be the amount you have to pay back eg £18k less whatever deposit so I think the salesman is fibbing.
The amount you need to pay back is whatever the loan amount (or "amount financed" on the agreement says. You won't pay the interest payable figure, although you will pay have a few days worth of interest.

incopad

Thanks for the reply. That’s what I thought. I don’t think she was fibbing just doesn’t understand it. When I drilled her down to what it all meant she admitted ‘she didn’t really get it herself!!

Keep_pedalling

I have asked for this to be moved to the motoring forum.

On-the-coast

“… if I took out pcp, things like alloy , tyre and scuff protection would  be added to the price…”
not if you ask or insist it not to be. 

Goudy

"I am looking pay cash for a 3 year old car for around 16k which comes with a year warranty. At the dealership I was told that if I took out pcp I could get 2 years free servicing, mot and breakdown. I could then simply pay if the loan a month later and keep all the above."

Yes, this is common.
They offer you incentives like this to take the finance but this finance is consumer credit (you aren't a business buying a car?) and is covered by the consumer credit act.
The consumer credit act states you can cancel the credit agreement within 14 days without penalty (charges or interest)
Or
If you settle the finance, they can only charge you X amount of days interest.
For larger amounts, it's 56 days interest maximum on the total capital left to pay.

If you cancel, they are not obliged to give you the incentives as you have not taken the finance package.
(some get to keep them, but there are more and more reports of dealers removing or charging for them)

If you settle, you have actually taken the finance package and there's nothing they can do about the incentives, you keep them.
If the incentives work out more than the 56 days interest, you're quids in!

These are obviously two different things, Cancel and Settle, so don't confuse them.



"if I took out pcp, things like alloy , tyre and scuff protection would  be added to the price coming in at around 18k total. These are things I wouldn’t bother with if paying cash. I queried that if I were to pay the contract early would I be paying off 18k or just the 16k  and was told it would be based on the value of the car, so 16k. Ever the sceptic I asked if they were sure as this seemed a win for me and not much in it for them apart from their fee for sorting out finance. Anyone come across this before? Is it correct?"

There are optional add ons.
Dealers like to add these things on automatically and roll the costs, which tend to be much higher than you can buy them elsewhere, into the finance package, so you borrow more.

So yes you will have to settle these as part of settling the finance package.
If you want these, just buy them elsewhere and not from the dealers.

Again, two different things. Incentives and optional cost add ons.

Goudy

I forget to add.
If you are planning to take the finance (and incentives) then settle in the first month, you can manipulate the 56 days interest a little.
Just put down the maximum permissible deposit for the deal.

This way the amount financed is less, so the 56 days interest works out less. 

marlot

incopad said:

...I could get 2 years free servicing, mot and breakdown. ...

Are they really free, or just added to the purchase price?

facade

The £2k of "extras" will have to be paid up front when you settle the finance, they aren't free and are added onto the invoice.

So you will lose out, unless the servicing & breakdown is worth a lot more than £2K + 90 days interest.

jimjames

Interestingly I've found with this kind of deal once you've phoned the finance company to cancel then the payment amount is then fixed for 30 days and interest stops. In this instance I can't see any point paying it off much before the 30 days is up as it won't cost you more and you'll be earning interest on that money not them. Things like the free servicing and extended warranty don't appear to be cancelled by paying off the finance. You do need to notify finance company within 14 days though, the sooner you do that the sooner the interest stops being accrued.

I definitely wouldn't have all the other bits added to the invoice though as you'll still need to pay them off.