buying a car - HP vs PCP
Comments
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a VT is forcing the contract termination under your rights in the Consumer Credit Act. Its to protect people who can no longer afford to pay due to a dramatic change in circumstance against being pursued for a disproportionate amount by the finance company.
It is NOT designed as a handy get out of jail free card and as such i wouldnt recommend abusing that right just to save a few £.
BUT, you are correct, if you did do a VT and had already paid 50% of the total contract cost but did say 8,000 miles instead of 5,000 miles a year then they cant particularly object - UNLESS you sign a "waiver" as part of a VT pack that they might kindly send you when you try to VT. They tend not to take that lying down any more so i personally wouldnt go in to a PCP agreement, relying on a VT as my exit strategy.
Probably being stupid here, but what is a "VT"??0 -
a VT is forcing the contract termination under your rights in the Consumer Credit Act. Its to protect people who can no longer afford to pay due to a dramatic change in circumstance against being pursued for a disproportionate amount by the finance company.
It is NOT designed as a handy get out of jail free card and as such i wouldnt recommend abusing that right just to save a few £. .....
It is simply a statutory right - where does it say that it is only designed for people who's circumstances have changed dramatically?
Surely if it saves ANY money then it makes sense?0 -
Probably being stupid here, but what is a "VT"??
Voluntary Termination is a method of debt relief provided under the Consumer Credit Act. It is intended to offer protection to consumers who can no longer afford their monthly payments, but what it means in reality is that anybody can hand a car back to the finance company once they have paid 50% of the total repayable on a HP or PCP agreement.0 -
Voluntary Termination is a method of debt relief provided under the Consumer Credit Act. It is intended to offer protection to consumers who can no longer afford their monthly payments, but what it means in reality is that anybody can hand a car back to the finance company once they have paid 50% of the total repayable on a HP or PCP agreement.
Yes, that summarises it as most people would use it.
Its a bit more than that though as you can VT at ANY time, and the finance company can only seek to recover 50% of the total contract value (subject to fair wear and tear). This, again, because of what its original intention was for was to stop finance companies trying to recover disproportionate amounts from people who could no longer afford to pay.0 -
It is simply a statutory right - where does it say that it is only designed for people who's circumstances have changed dramatically?
Surely if it saves ANY money then it makes sense?
Where did i say ONLY?
People can use it as a loophole, but it is not in the spirit of the CCA nor is it using it what it was designed for.
And of course, you can VT a car and exercise that right at ANY time, however as i said, i wouldnt be going in to a PCP agreement relying on a VT as my only exit strategy, and if you do use it, dont expect the finance company to necessarily take it lying down.0 -
To the OP, HP is aimed at people who want to ultimately own the car whereas PCP is typically more like a form of leasing but with an option to buy (at a predetermined price) once the 'lease' is up. It could be used to buy a car but I would guess that far more people use it as a way of leasing and never pay the 50% bubble at the end.
With HP you pay a monthly fee and once you have paid a pre-determined amount of money, the car is yours to keep.
With PCP, you'll typically pay a monthly fee for three years at which time you can either pay off the balance (typically 50% or just under of the entire agreed sale cost) or give the car back.
Assuming you definitely want to keep the car, just crunch the numbers and see which works out cheapest for you to own the car.
A lot of people are tempted by PCP because monthly payments seem so low, but they fail to factor in that after three years or so are up, they'll be looking to cough up the equivalent of all that they have just paid, over again and in a lump sum, in order to own the car.
If you give the car back, you have well, no car. Sometimes there might be 'equity' in the car depending on the buyback prices agreed at the start of the deal so you might get a small sum back (remember, you have to pay an extra large sum at the start too - typically anything from 3-9 months normal payments in one go in the first month that you are not guaranteed to get back). What usually happens is that if you agree to take out another PCP on a new car, the dealer finds enough 'equity' in the last deal to be able to finance the initial large downpayment on your new deal and the cycle of being stuck on paying every month but never owning the car continues ......0 -
I had a Renault out on PCP last time round. I did a VT last year (3 yrs into a 4 year deal) to take up a new PCP deal with Renault. No chance of a straight trade in as there was no equity.
They do take into account fair wear and tear with the VT, but there was still an £80 charge for a lovely big scrape I put on the front bumper the first week I had it
. The dealer covered this charge as part of the agreement to take the new deal.
For the mileage, I was being charged 6p per mile excess. They work the mileage allowance out on a pro rata basis, so even though I had the car into it's third year, I did not not get the full 3 yr mileage allowance. The final charge for excess mileage was well over £300, but again the dealer took care of that.
As for OP's question at the start, HP will give you the option to buy the vehicle outright, whereas PCP should be viewed more as a lease deal where you don't intend to buy it. When the term is up, you hand it back and start from scratch again.
For the record, I did not have to make any inflated payments at the start, other than a £99 credit arrangement fee.0 -
bingo_bango wrote: »I had a Renault out on PCP last time round. I did a VT last year (3 yrs into a 4 year deal) to take up a new PCP deal with Renault. No chance of a straight trade in as there was no equity.
They do take into account fair wear and tear with the VT, but there was still an £80 charge for a lovely big scrape I put on the front bumper the first week I had it. The dealer covered this charge as part of the agreement to take the new deal.
For the mileage, I was being charged 6p per mile excess. They work the mileage allowance out on a pro rata basis, so even though I had the car into it's third year, I did not not get the full 3 yr mileage allowance. The final charge for excess mileage was well over £300, but again the dealer took care of that.
As for OP's question at the start, HP will give you the option to buy the vehicle outright, whereas PCP should be viewed more as a lease deal where you don't intend to buy it. When the term is up, you hand it back and start from scratch again.
For the record, I did not have to make any inflated payments at the start, other than a £99 credit arrangement fee.
Did you give the car to the dealer or did the finance company take it away? Where is the car now?0 -
It goes straight to the finance company. They send Wilson Auctions to collect it. I had the dealer deal with that end of it, as I needed to get to work. They handled the handover inspection and paperwork for me. Wilsons are happy to collect from somewhere other than your home, as long as it is within reason.
The VT papers will ask you where you want to do the handover.
Edit: Just to add, expect the handover to happen very quickly when you return the papers (I scanned and emailed them to Renault finance which they offer as an option). IIRC it was less than a week from signing the papers to the expected return date. I managed to get this arranged for the same day I was picking up the new car so I wasn't left without transport.0
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