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PCP - How to overpay and reduce interest, is it worth doing?
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I have bought a car on PCP over 48 months with a 10k final payment at a rate of 8.9% with Zopa to commence shortly.
What are the recommendations for overpayment, I ideally want to have minimal monthly payments circa £25-£50 a month maybe instead of the £390 quoted. Once the account is live, is it wise to overpay the maximum I can, as I believe Zopa let you and auto recalculate the payments until I get to £25 over the next few months.
Is this a wise thing to do? I ultimately want the flexibility of having a car for 4 years with minimum payments and the option to return the car or keep it at the end with minimal interest.
I just do not know whether to overpay monthly and let the £391 dwindle down over a year as the overpayments happen, lump sum overpay (potentially 10k plus) or leave as is.....and just overpay my savings/mortgage
Any advice or suggestions?
What are the recommendations for overpayment, I ideally want to have minimal monthly payments circa £25-£50 a month maybe instead of the £390 quoted. Once the account is live, is it wise to overpay the maximum I can, as I believe Zopa let you and auto recalculate the payments until I get to £25 over the next few months.
Is this a wise thing to do? I ultimately want the flexibility of having a car for 4 years with minimum payments and the option to return the car or keep it at the end with minimal interest.
I just do not know whether to overpay monthly and let the £391 dwindle down over a year as the overpayments happen, lump sum overpay (potentially 10k plus) or leave as is.....and just overpay my savings/mortgage
Any advice or suggestions?
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Comments
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I have bought a car on PCP over 48 months with a 10k final payment at a rate of 8.9% with Zopa to commence shortly.
What are the recommendations for overpayment, I ideally want to have minimal monthly payments circa £25-£50 a month maybe instead of the £390 quoted. Once the account is live, is it wise to overpay the maximum I can, as I believe Zopa let you and auto recalculate the payments until I get to £25 over the next few months.
Is this a wise thing to do? I ultimately want the flexibility of having a car for 4 years with minimum payments and the option to return the car or keep it at the end with minimal interest.
I just do not know whether to overpay monthly and let the £391 dwindle down over a year as the overpayments happen, lump sum overpay (potentially 10k plus) or leave as is.....and just overpay my savings/mortgage
Any advice or suggestions?0 -
Bet your savings aren't getting anywhere near 8.9% interest, even ignoring the tax difference.Why leave a small monthly? Why not just repay all bar the balloon, and have £0 monthlies - and only the interest on the balloon?1
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Mildly_Miffed said:Bet your savings aren't getting anywhere near 8.9% interest, even ignoring the tax difference.Why leave a small monthly? Why not just repay all bar the balloon, and have £0 monthlies - and only the interest on the balloon?0
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IAMIAM said:Mildly_Miffed said:Bet your savings aren't getting anywhere near 8.9% interest, even ignoring the tax difference.Why leave a small monthly? Why not just repay all bar the balloon, and have £0 monthlies - and only the interest on the balloon?1
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Overpay as much as possible as quickly as possible.
But you already have the option to hand the car back, without the need for finance. You can trade it in to any garage or dealer any day you like from the day you buy it. You just don't have the option to hand it back to the finance company at the pre agreed price of £10k at the end of the loan.
So how likely is it that the car will be worth less than £10k in 48months time with your anticipated mileage?
What's the cheapest 4-year version on AutoTrader of the car today?1 -
TBH I am actually 50/50 wanting to keep the car anyway, the finance was a buffer in case I get bored, but as I tend to look after cars, it will be traded in in 7-8 years instead0
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Well then I would certainly pay off as much as possible.Keeping the £10k GFV is going to cost you around £3,500 in interest. So the only scenario where keeping the PCP finance and handing the car back to the finance company will be a benefit for you is if the car is worth <£6,500. If it’s worth £10k or more after 48 months and you just trade it in, you’ve spent £3,500 for no benefit.You’ve already said you’re likely to keep it longer so it really isn’t worth paying that much interest if you don’t have to.2
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DrEskimo said:Well then I would certainly pay off as much as possible.Keeping the £10k GFV is going to cost you around £3,500 in interest. So the only scenario where keeping the PCP finance and handing the car back to the finance company will be a benefit for you is if the car is worth <£6,500. If it’s worth £10k or more after 48 months and you just trade it in, you’ve spent £3,500 for no benefit.You’ve already said you’re likely to keep it longer so it really isn’t worth paying that much interest if you don’t have to.0
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IAMIAM said:DrEskimo said:Well then I would certainly pay off as much as possible.Keeping the £10k GFV is going to cost you around £3,500 in interest. So the only scenario where keeping the PCP finance and handing the car back to the finance company will be a benefit for you is if the car is worth <£6,500. If it’s worth £10k or more after 48 months and you just trade it in, you’ve spent £3,500 for no benefit.You’ve already said you’re likely to keep it longer so it really isn’t worth paying that much interest if you don’t have to.Because you are borrowing the entire cost of the car, including the £10,000 final payment. So the £10,000 is accruing interest over the 48months (whilst not reducing) at 8.9% APR.0
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