Rebate for settling PCP

ArcamStorm

I took out a PCP for a new car and signed all the paperwork remotely approx one week before collection. I thought better of the interest rate I was being charged and requested a settlement quote about a week after delivery. I got the settlement and paid off the finance about one week before the first payment was due.

The finance company (VWFS) charged me 58 days interest, does that sound right as it was a decent amount of money and I settled it before the 1st payment was due.

Ayr_Rage

Yes that sounds normal, have you bothered to check if that matches the details in the paperwork you signed and read from top to bottom?

CliveOfIndia

Yep, perfectly standard.  Whenever you settle a loan early, the lender is allowed to charge an early settlement penalty of up to 2 month's worth of interest (1 month of interest if there's less than a year left to run on the loan).

MyRealNameToo

ArcamStorm said:

I took out a PCP for a new car and signed all the paperwork remotely approx one week before collection. I thought better of the interest rate I was being charged and requested a settlement quote about a week after delivery. I got the settlement and paid off the finance about one week before the first payment was due.

The finance company (VWFS) charged me 58 days interest, does that sound right as it was a decent amount of money and I settled it before the 1st payment was due.

Yes, the CCA caps penalties for early settlement as 2 months interest if you have more than 1 year of loan outstanding and 1 month if you have less than 1 year left on the loan.


If you were within the 14 day cooling off period you could have cancelled without the penalty but it sounds like you went over that. 

Nearlyold

Yes that figure is probably correct for an Early Settlement.  If instead  you had "withdrawn" from the finance agreement within 14 days of the loan commencing you would only have been charged interest for the period from the start of the loan to the date you informed the lender you wished to withdraw and would have 30 days to pay.

ArcamStorm

Thanks for the answers, I did read up on the Gov website on how the rebate is calculated and it looks rather daunting. For some reason I thought that if you sign a finance agreement "remotely" that it afforded you more time to pull out of the finance without a penalty. As the first payment was still over a week away I thought I would just get charged the interest on the number of days until my settlement payment arrived with them.

born_again

In person or online you get 14 days to withdraw from the finance. FCA reg. 

Grumpy_chap

ArcamStorm said:

Thanks for the answers, I did read up on the Gov website on how the rebate is calculated and it looks rather daunting. For some reason I thought that if you sign a finance agreement "remotely" that it afforded you more time to pull out of the finance without a penalty. As the first payment was still over a week away I thought I would just get charged the interest on the number of days until my settlement payment arrived with them.

There is a difference (in technical terms) between settling the finance early (which it appeared you did and the interest charges appears to be correct for that) or cancelling / withdrawing the finance within the cooling off period (which makes it like you never had the finance in the first place).

Out of interest, did the finance come with any "incentive"?
There has been some previous discussion in these threads about whether cancelling / withdrawing the finance means that the "incentive" is no longer earned.  Early settlement does not seem to have that same query attached.

ArcamStorm

Grumpy_chap said:

ArcamStorm said:

Thanks for the answers, I did read up on the Gov website on how the rebate is calculated and it looks rather daunting. For some reason I thought that if you sign a finance agreement "remotely" that it afforded you more time to pull out of the finance without a penalty. As the first payment was still over a week away I thought I would just get charged the interest on the number of days until my settlement payment arrived with them.

There is a difference (in technical terms) between settling the finance early (which it appeared you did and the interest charges appears to be correct for that) or cancelling / withdrawing the finance within the cooling off period (which makes it like you never had the finance in the first place).

Out of interest, did the finance come with any "incentive"?
There has been some previous discussion in these threads about whether cancelling / withdrawing the finance means that the "incentive" is no longer earned.  Early settlement does not seem to have that same query attached.

No incentives for me, the dealer got a decent kick back from the finance company which I presume will be clawed back now that I have settled the agreement.

ArcamStorm

Ayr_Rage said:

Yes that sounds normal, have you bothered to check if that matches the details in the paperwork you signed and read from top to bottom?

No I have not, I took VWFS at their word and naively thought that one month's interest or the number of days I had the use of their money would just be charged for, 58 days seems excessive. I wanted to try and use the Gov calculation formula to make sure their settlement figure is correct but it involved hieroglyphs <g>. Based on the 58 days the interest they charged is correct (I ran the numbers in an amortisation spreadsheet).  

Grumpy_chap

ArcamStorm said:

Grumpy_chap said:

ArcamStorm said:

Thanks for the answers, I did read up on the Gov website on how the rebate is calculated and it looks rather daunting. For some reason I thought that if you sign a finance agreement "remotely" that it afforded you more time to pull out of the finance without a penalty. As the first payment was still over a week away I thought I would just get charged the interest on the number of days until my settlement payment arrived with them.

There is a difference (in technical terms) between settling the finance early (which it appeared you did and the interest charges appears to be correct for that) or cancelling / withdrawing the finance within the cooling off period (which makes it like you never had the finance in the first place).

Out of interest, did the finance come with any "incentive"?
There has been some previous discussion in these threads about whether cancelling / withdrawing the finance means that the "incentive" is no longer earned.  Early settlement does not seem to have that same query attached.

No incentives for me, the dealer got a decent kick back from the finance company which I presume will be clawed back now that I have settled the agreement.

Probably not.

That is exactly the difference that has been discussed in the case of "incentives" with PCP deals.  

The finance is sold with t's&c's that permit early settlement.  Following that process means the finance still existed and, the general consensus is that the "incentive" is still retained by the individual.  On a similar basis, I would expect the Dealer still retains their commission.

However, if the individual withdrew from the finance / cancelled the finance, that unwinds the whole process such that the finance is treated as never having come into existence.  The discussion in the boards has been that this requires any "incentive" to be returned by the individual.  On a similar basis, I would expect the Dealer forfeits their commission for selling the finance as a "cancelled order" has not been sold.