PCP and early settlement

mustardtree6

I am about to buy a brand new car and the manufacturer is offering £3500 deposit contribution if I take out the PCP. I was planning to settle the PCP after 2-4 weeks. However, the dealer said I had to let the PCP run for a minimum of 6 months. Is he pulling a fast one? There is nothing in the finance T & C about it having to run for 6 months, only that the settlement figure would include a 58 days interest charge.

daveyjp

He's a salesman, so it will be for his reasons not yours. He may not get his bonus if it is paid off, but that isn't your issue.

Best advice is not to mention early repayment as it doesn't affect your rights to clear a debt at any time.

jimjames

If you withdraw from agreement within the cooling off period it will be as if it never happened so they won't get any commission. I suspect that's all the salesman is worried about. But it's important to distinguish between withdrawing from the agreement and paying it off which will show on your credit report.

redped

I know you want to pay off the PCP ASAP, but what is the interest rate? Can you get a better rate saving your money elsewhere? E.g. if you're buying a MINI with a 0.9% APR rate, then you'd be better off putting your money into a savings a/c paying several times that, and just drawing down from the a/c to pay the PCP each month.

Goudy

There are two avenues here that are different and the dealer doesn't want you to take one of them. Their reasons will often benefit both of you.

You can withdraw from the finance within the cooling off period of 14 days. This is basically cancelling taking out any finance package and paying the invoice in full another way. You may or may not get to keep the finance benefits as they may invoice you the full retail price. It's not unheard of that this has happened. The finance company and dealers quickly cottoned on to what some were doing regards withdrawing and deposit contributions and why wouldn't they, they both lose out.

As for the dealer will likely lose any commission on the finance. How much that is depends, but they have to tell you when asked.

Settling the finance is different. You are actually letting the finance start, paying perhaps the first monthly payment before requesting a settlement figure. This settlement figure can only include 56 days interest on the outstanding capital left as per the consumer credit act. The saved interest is often quoted as a interest rebate, but if you pay the settlement early, you will save years and years of interest which is often thousands.

The 56 days interest is usually a small fraction of the deposit contribution they are giving you, so you are still thousands in pocket by doing it this way.

You will keep all the benefits from the finance package as you did actually take it out, there's nothing anyone can do about that. The dealer, who likely made you aware of this arrangement also get's his commission and all it's cost you is 56 days of the saving on all that interest.

If you have the money already to go, you can manipulate this 56 days interest a little. Leave the biggest deposit the deal will allow. This way you initially borrow less, so the 56 days interest is less when you come to settle in a months time.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6680934/pcp-and-early-settlement

I would imagine its a condition of the deposit contribution and so is more likely to be in the terms of the sales agreement than the finance agreement.

mustardtree6

https://forums.moneysavingexpert.com/discussion/comment/82114832#Comment_82114832

The interest is 6.9%, so not really 0% or close to.

mills705

Read the T+C of the credit agreement.

I have done what you have suggested with my last car and was going to do it with the car I am waiting on being delivered to the dealer.

You will need a settlement figure from the finance company anyway.I let it run a few weeks and then about week 3 rang them up got a settlement and sent it via BACS. They wouldn't take card payments.

Goudy

https://forums.moneysavingexpert.com/discussion/comment/82122273#Comment_82122273

I have never heard of this and if it were true, it would be in contradiction with the Consumer Credit Act 1974.

Early settlement at anytime is a statutory right that's covered by section 94 of the act. Right to complete payments ahead of time

"The debtor under a regulated consumer credit agreement is entitled at any time, by notice to the creditor and the payment to the creditor of all amounts payable by the debtor to him under the agreement to discharge the debtor’s indebtedness under the agreement".

I suspect you might be confusing settling the finance with something else, perhaps Voluntary Termination. To VT you must have paid 50% of the total payable. That 50% is calculated by including all the capital including balloon payment and the interest.

That 50% point would usually be much later in the payment plan than 2 years (out of 4) thought as on a PCP you have to factor in the balloon payment.

born_again

https://forums.moneysavingexpert.com/discussion/comment/82122273#Comment_82122273

Are you are thinking of Voluntary Termination? Which is handing the car back.