VWFS PCP contract confusing

DullGreyGuy

niamos_salad said:

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.

PCP is a marketing term, the contract is a HP with a balloon but the purchase at the end is optional. 

Herzlos

Goudy said:

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.

I always assumed they wanted you to return the car and get into another PCP loop, and that they usually contacted the buyer a few months ahead to try and sell them something new. 

If it became option to not purchase (in the text, if not in practice) then I assume a lot more people would keep the car. 

Frozen_up_north

PCP is basically a loan to fund half the value of a car. It is a scheme dreamed up by the motor industry to make buying a car appear cheaper, however it can be awkward if you exceed the agreed mileage, have some minor damage (scuffed alloys, stone chips, etc), as this can result in quite a large bill at the end of the agreement when handling the car back.

In addition, even with a good condition car there may be no residual value owing to you at the end, so taking on another PCP can need another large deposit.

I guess many seem happy with a PCP, I had one several years ago, but never again.

niamos_salad

Goudy said:

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?
 

Ah! I'm sorry to have caused confusion by not giving the exact figures from the contract. The £z *is* the Balloon/GFV.

Here's the unredacted text:

You must pay the Advance Payment to us when you sign this Agreement. You must then make: one repayment of £447.01 on a date set by us (which will be at least one month after the date of this Agreement); followed by 22 monthly repayments of £447.01, on the same date of each successive month; followed by a final payment of £35,150.00 payable 23 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.

There's a sample copy of an VWFS contract available if you google "nottingham audi pcp finance contract pdf" on dieselemissionsclaim. My account is too new to post a direct link.

Goudy

Frozen_up_north said:

PCP is basically a loan to fund half the value of a car. 

No, you borrow all the value of the car minus the deposit.
PCP just defers a portion of the repayments, which you then have options on.
This deferred payment is basically what the finance company think it will be worth to them around the time the GFV is due.

The concept of this type of deferred purchase agreement was originally used by businesses (and still is to some extent), where they could buy whatever stock without having to stump up the total value until after they sold it.

Ford in this country started to make it more consumer accessible in the 90's with their "Options" plans.

Herzlos said:

Goudy said:

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.

I always assumed they wanted you to return the car and get into another PCP loop, and that they usually contacted the buyer a few months ahead to try and sell them something new. 

If it became option to not purchase (in the text, if not in practice) then I assume a lot more people would keep the car. 

Yes, it generally works that way but the contract has to comply with the law.
The contract you sign is to repay the full amount with interest with an option to bail out when the GFV is due.

You don't sign contract to only repay up to the GFV, then decide or not to pay the GFV.
Though that's how it's generally looked upon.

If you do nothing when the GFV is due, the finance company will (try) and take it in the month it is due as that's what the contract you signed states.

Hoenir

Frozen_up_north said:

PCP is basically a loan to fund half the value of a car. It is a scheme dreamed up by the motor industry to make buying a car appear cheaper, 

Makes expensive cars affordable to buy. Look after the car  properly. Subsequently finance the balloon payment and you've many years of happy motoring. 

jimjames

niamos_salad said:

Goudy said:

niamos_salad said:

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

 

You must pay the Advance Payment to us when you sign this Agreement. You must then make: one repayment of £447.01 on a date set by us (which will be at least one month after the date of this Agreement); followed by 22 monthly repayments of £447.01, on the same date of each successive month; followed by a final payment of £35,150.00 payable 23 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.

There's a sample copy of an VWFS contract available if you google "nottingham audi pcp finance contract pdf" on dieselemissionsclaim. My account is too new to post a direct link.

You're also missing the other key parts of the contract. I've got a recent VWFS PCP as well, look at clause 2.4.

You may exercise this by paying the Option to Purchase fee. Until you exercise this option the vehicle remains our property. Your entitlement to exercise the option will cease on termination of the agreement.

So if you don't want to buy the car at the end you need to terminate the agreement. It's a PCP however you're reading the text.

Having said all that and after reading the agreement in detail there is a slightly odd section 6.2 relating to withdrawal from the agreement where it states that interest is due for every day until the balance is paid to them. In reality it seems they interpret it slightly differently in that the balance is fixed at the point where you request to withdraw from the agreement and have 30 days to pay. I can't see any reason to pay it off early when that money could be in your account earning interest over that time.

Grey_Critic

Originally you bought a car on HP - You could not as an individual *Lease* a vehicle, that option was only open to companies. You could as an alternative rent a car long term - companies could but not individuals.

That changed and PCP was introduced which enabled the individual to basically lease a vehicle

ontheroad1970

Grey_Critic said:

Originally you bought a car on HP - You could not as an individual *Lease* a vehicle, that option was only open to companies. You could as an alternative rent a car long term - companies could but not individuals.

That changed and PCP was introduced which enabled the individual to basically lease a vehicle

No it's still technically different from a lease.  It is still a form of HP.

Goudy

Hoenir said:

Frozen_up_north said:

PCP is basically a loan to fund half the value of a car. It is a scheme dreamed up by the motor industry to make buying a car appear cheaper, 

Makes expensive cars affordable to buy. Look after the car  properly. Subsequently finance the balloon payment and you've many years of happy motoring. 

Yes and it's getting nearly as cheap as normal straight HP these days if you know where to look.

Take a base Ford Puma.
£26,580 for cash
£27,189 on HP with a £5k deposit over three year
£27,514 on PCP with a £5k deposit over three years on 9000 miles per year.

The monthly payments of the PCP deal are nearly half that of the straight HP but the PCP comes with a £10,000 GFV.

As cars have become ever more expensive, PCP has become the defacto finance option these days.

I'm not saying rush out and buy a car on PCP, but it's always wise to crunch the numbers and see what actually suits you.

Not everyone wants to pay £650 a month for a new car that they'll likely swap in a few years and hope to get an uncertain portion of that back.
And I'm positive most early EV adopters on PCP deals laughed themselves silly when they realised their cars depreciated far faster than their GFV's and they could just hand them back.