VWFS PCP contract confusing

niamos_salad

Resurrecting a bit of a dead thread but this was asked back in 2019 and never had a firm answer.

PCP deals from VWFS contain confusing language that doesn't seem to make it clear (to me) that the contract is a PCP deal (option to hand back) and not HP with Balloon.

The specific language is:

You must pay the Advance Payment to us when you sign this Agreement. You must then make: one repayment of £x on a date set by us (which will be at least one month after the date of this Agreement); followed by y monthly repayments of £x, on the same date of each successive month; followed by a final payment of £z payable y months after the date set for the first repayment. To exercise the option to purchase the Vehicle, you must add the Option to Purchase Fee of £10.00 to the amount of the final monthly payment stated above

Obviously I can see the phrase "Option to Purchase", but apparently this can apply to HP as well?

Later there is a section:

2.4 When you have made all the payments due to us under this Agreement, you will have the option of purchasing the Vehicle. You may exercise this by paying to us the Option to Purchase Fee. If no amount is specified on page 1 for this Fee, you may do so by giving us notice in writing. Until you have exercised this option, the Vehicle will remain our property. Your entitlement to exercise the option will cease on termination of the Agreement .

But the "payments due" appears to include the "final payment".

I've been back and forth with the Dealer and VWFS and they've both said this is the correct contract for PCP.

Is this really a PCP contract? Are there thousands of people out there with what they think is a PCP contract from VWFS that is really HP with Balloon and they don't technically have the option to hand the car back and walk away at the end of the term (not voluntarily terminate).

Hoenir

PCP is a form of hire purchase for individuals. PCP standing for Personal contract purchase. 

niamos_salad

Hoenir said:

PCP is a form of hire purchase for individuals. PCP standing for Personal contract purchase. 

Sure, I understand that and that's probably why the contract says "Hire purchase" on it. What I'm not understanding is whether this contract is "Hire Purchase with Balloon" and the Balloon *must* be paid with no option to just hand back the vehicle, or if it "PCP" and therefore allows for handing back the vehicle without paying the balloon.

Mildly_Miffed

Seems clearly worded that there is no compulsion to exercise the OPTION to purchase, if that's what you're asking.

daveyjp

A contract is the whole document.   Quoting two sections is like trying to guess a famous picture after providing 1% of the whole.

Car_54

Seems pretty clear.

You have the option to purchase. If you don't exercise the option, the vehicle remains their property, so you hand it back.

Goudy

I always thought the terminology around PCP deals was a bit odd.

It isn't really an option to purchase.
You have just signed up to a HP agreement with uneven repayments.

What you actually have is an option not to purchase before the final payment it due.

If you do nothing when the final payment is due, the finance company will just take the payment.

The option is to tell them you want to hand the car back and not pay the final payment.

If it was an option to purchase, you'd think they's automatically take the car back unless you arranged to pay the final payment.

facade

"Option to purchase" is A legal Thing that financiers introduced (in the 70s or 80s I think) to make it watertight that the vehicle belongs to the financier (and you are paying to borrow/hire their car) right up until the "option to purchase" is paid, and you can't pay that until after the final payment is made. This makes repossession when the payments are in default trivial, whereas without it they had to jump through a lot of hoops to take possession. 

There is no legal difference between HP & PCP. PCP skews the payments to only cover the depreciation, and leaves a massive final payment, HP covers the whole loan in the equal sized payments (and should be cheaper as less interest is paid, but PCP often gives a large discount on the purchase price and can work out cheaper)

You can VT a HP car when you are halfway through the payments, but as the balloon is near enough 50% of the purchase price, you can't VT PCP until very near the end (without paying any more I mean) PCP has a mileage cap as this affects the final value, HP doesn't as you were supposed to own it, and it is likely in positive equity when you have paid 50% off.

niamos_salad

I guess what I'm trying to say, is that the contract wording reads like:

"You must pay a final payment of £z payable y months after the date set for the first repayment".

Where £z is the balloon payment.

So it sounds like I am forced to pay the balloon even if I want to hand the car back.

However everyone else seems to think this is normal PCP wording and at this point I feel like I'm taking crazy pills so maybe I'm just reading it wrong.

Goudy

niamos_salad said:

I guess what I'm trying to say, is that the contract wording reads like:

"You must pay a final payment of £z payable y months after the date set for the first repayment".

Where £z is the balloon payment.

So it sounds like I am forced to pay the balloon even if I want to hand the car back.

However everyone else seems to think this is normal PCP wording and at this point I feel like I'm taking crazy pills so maybe I'm just reading it wrong.

From what I understand, the contract is:
Initial deposit 
+
So many months at £z with the last monthly payment of £z including £10 option to purchase fee if you want to purchase.
+
Balloon/GFV, if you keep the car.


So for an example over a three year deal. (I'm just making most of the £ figures up)
Initial deposit of £5000
+
35 x £300 plus 1 x £300 (or 1 x £310 if you take the option to keep the car)
+
If you do keep the car you'll then pay the Balloon/GFV at £5000.

Does that make sense?
 

WellKnownSid

I guess what I'm trying to say, is that the contract wording reads like:

"You must pay a final payment of £z payable y months after the date set for the first repayment".

Where £z is the balloon payment.

Yes.  That is correct.  You are agreeing that you will pay for the entire car, not part of it.

Whilst you DO have the option to hand the car back, what you do NOT have is the option to not pay if you don't hand it back.

So it sounds like I am forced to pay the balloon even if I want to hand the car back.

It does not say that.  It simply says that you are liable to make all of the payments required under the terms of the contract.

You haven't copied the entire agreement but presumably when you hand the car back, and subject to the payment of any necessary fees and charges, the contract then terminates so it become irrelevant what other payments need to be made by when.