Car finance: How do I settle a PCP early?

Car finance advice
How to settle your car finance (PCP) early

Most car dealerships are rubbish at explaining how various car finance products works. This is clear from the number of search enquiries we receive every day.

Today we are answering one of the most common PCP finance agreement questions: What if I want to terminate the agreement and settle my PCP early?

There is a lot of confusion about ending a PCP agreement early, but in reality it’s quite simple. You can settle the agreement early, but it will probably cost you to do so.

What is a PCP?

Graph of PCP - depreciation vs finance outstanding

Figure 1: depreciation vs finance outstanding (click to enlarge)

To understand how to settle a PCP early, let’s firstly look at what happens if you finish the agreement as per the original contract.

Let’s take a theoretical three-year PCP and run it for the full three years.

Take a look at this graph (Note: example only; actual results may be affected by many factors).

For the purposes of this example, we’ve ignored both interest and any deposit, so we have a £30,000 car and £30,000 financed. The blue curved line represents your car’s depreciation over time, while the red straight line represents your finance settlement over time.

The finance company calculates the depreciation of your new car over three years, and comes up with a value of what the car should be worth at the end of that period.

This figure is called the Guaranteed Minimum Future Value (GMFV). This is the value for your car that the finance company is prepared to guarantee in three years’ time, as long as:

  • You keep under the mileage in your contract
  • You have your car serviced on time, every time by an official dealership
  • You keep your car in good condition

What you repay over the three years is the depreciation of the car from its new price down to the GMFV.

So in our example, the car cost £30,000 new and the finance company sets a GMFV of £15,000 after three years. Your monthly payments over three years are repaying £15,000 of depreciation. If you want to keep the car then you still owe another £15,000 to pay off the rest.

Your monthly payment is the same each month. That means the finance remaining (red line in the graph) follows a nice straight line. It decreases by £5,000 each year to reach £15,000 after three years.

However, your car’s value (blue line in the graph) does not follow a nice straight line. It does not depreciate at exactly £5,000 per year.

Depreciation is a curve. You lose a lot of value early on, and then the curve flattens out over time. As a result, the car’s value drops well below the settlement in the first year, then starts to gradually catch up again until they meet after three years.

So, at the end of the agreement, everything comes together nicely. The settlement figure is £15,000 and so is the car’s value.

But wants happens if you are not able to wait until the end of the agreement and need (or want) to change your car early?

The segment of the graph marked out in grey, between the two lines, is called negative equity. This is the difference between what your car is worth and what you still owe to the finance company.

You can see that at any point before the end of the agreement, the car’s value is less than the amount owing. This means if you want to sell the car, you will not have enough to cover what you owe. Therefore you will have to pay the difference owed to the finance company to settle the finance.

What if I have a large deposit?

If you want to settle a PCP early, you will have to pay any negative equity

Figure 2: depreciation vs finance outstanding with a large deposit (click to enlarge)

As mentioned, the above example assumed no deposit, which almost never happens.

The more deposit you put in up front, the smaller the negative equity issue is going to be during the term of the agreement.

Have a look at the second graph (right). Having a large deposit to start with means that the settlement graph starts off well below the car’s value.

The car’s rapid initial depreciation means that its value still drops under the settlement figure during the agreement, but only slightly.

So if you wanted to settle a PCP early and have put in a large deposit, you will probably only have a minimal negative equity position.

Will my car ever be worth more than the settlement?

The whole point of a PCP is to guarantee the value at the end of the agreement (Guaranteed Minimum Future Value – GMFV).  This means that if the car’s market value is less than the GMFV, the finance company will lose money. As a result, they will want to make sure they are not setting the GMFV too high.  So it is possible that the car could be worth more than the GMFV at the end of the agreement.

This means that if your car’s market value is less than the GMFV, the finance company will lose money. As a result, the finance company will want to make sure it is not setting the GMFV too high. So it’s possible that your car could be worth more than the GMFV at the end of the agreement.

It certainly used to be the case that finance companies were quite conservative in their GMFV predictions, and customers would end up with a car that was worth a handy sum more than the settlement figure. This money would almost certainly be used as a deposit for another PCP agreement.

However, as the market has become more competitive, the situation has changed. More finance companies appear to have increased their GMFV predictions, which makes your monthly payments lower but makes it much less likely that you will have any equity in the car at the end of the agreement.

It is now very unlikely you can ever settle a PCP early and be in a position where your car is worth more than you owe.

Other factors to consider when settling a PCP early

These simplified examples show the relationship between a car’s value and its outstanding finance. However, the exact position will be different for each case.

Factors affecting a car’s depreciation curve include:

  • Mileage
  • Condition
  • Specification
  • Model cycle (for example, when a manufacturer launches a new model, the old model will drop in value)

The factors affecting a PCP early settlement figure are generally interest and fees. The more interest you are paying on the finance, the greater the negative equity amount is likely to be.

Your termination rights

Every PCP agreement has a clause built in outlining your termination rights. This provides you with the right to give the car back once you have paid off a certain amount. Voluntary termination is looked at in detail here.

Should I settle a PCP early or keep it until the end?

A PCP agreement is set out to be financially optimal to run it all the way to the end of the agreement.

The reality is that most times, you’ll have to pay out a substantial sum of negative equity to settle a PCP early.

Whether or not it is worth paying to settle the finance depends on how important the need is to change your car or get rid of it.

Circumstances change, and the cost of paying to get rid of the car now may be better than paying more to keep it for the rest of the agreement.

Alternatively, your car may no longer be suitable for your needs, and the cost to change may be worth it to you.

Is it simply impatience that makes you want to change your car early? In that case, understand that you’ll be paying a high price to settle your PCP early instead of finishing it as scheduled.

The dealer who sold you your car will often contact you several months (or even a year) before your PCP is due to finish. They will try to entice you to buy a new car ahead of schedule with an early upgrade offer.

Sometimes these offers are advantageous. But usually they’re a bit of smoke and mirrors, and not really worth it.

You should plan your purchase carefully to make sure you are not destined for an expensive problem in a few years’ time.

If you choose to settle a PCP early, you are responsible for paying off any negative equity

Stuart Masson
Stuart is the Editor of The Car Expert, which he founded in 2011, and our new sister site The Van Expert. Originally from Australia, Stuart has had a passion for cars and the car industry for over thirty years. He spent a decade in automotive retail, and now works tirelessly to help car buyers by providing independent and impartial advice.


  1. stuart

    Hi Harriet. Most finance companies will not allow you to add your negative equity of £660 onto a new PCP. Usually you will have to pay this off before you can start a new agreement. It is generally bad financial practice to add existing debt onto a new debt as you are paying interest on that money twice and creating a larger negative equity position during your next agreement. Basically if you are in the same situation part-way through your next PCP, you would be in a worse position than you are this time, because you would have negative equity on that agreement plus the negative equity you carried over from this agreement.

    Some finance companies will allow it on other finance products (like an HP), but as a rule you should be trying to avoid refinancing your negative equity anyway so it’s best to try and clear it before taking out another loan.

  2. Hi, I wonder if you could help.

    I currently have a 13 plate 3 door BMW 1 series and
    Am 23 months into a 36 month PCP. I’ve just had a baby and would like more doors. When I was heavily pregnant I had a non fault accident, and it was repaired on insurance. When I went back to BMW this week to see the possibility of changing the car they have said the work is unacceptable they would be unable to resell the car and it has diminished the value of the car. Consequently if I want to walk away from the car now I would owe them £2500. The bubble payment for next March is £9000. So he basically said I should persue my insurance for a respray of the car to try and increase the value of the car again. If I wait until the 3 years is up will I still owe an extra £2500? I am due to incur about £500 of additional mileage costs as I estimate an extra 6000 miles will be on the clock but I was told on the providing I buy another BMW it doesn’t matter. Now I am obviously worried about how to move forward and I don’t trust my insurance to respray the car if they have already done so much damage! Do you have any advice?!

  3. stuart

    Hi Bianca. We’ll break it down to address a couple of your points:
    1) Was the repair work done by a BMW-approved repairer? You have the right to tell your insurer where you want the car repaired, and a BMW dealer will value a car higher if the repair work has been done by a BMW-approved bodyshop.
    2) The valuation you have had done this week is what the dealer is prepared to pay you for your car. If you give it back to BMW Finance (not the dealer) at the end of the agreement, it may be a different story. BMW Finance may well be fine with the standard of work, but if they decide that the repairs are sub-standard, they may not honour the GMFV (bubble value). If the work has been done by a BMW-approved bodyshop, you can probably give it back without loss, but if it hasn’t been then they may not accept it and penalise you. You may have to take it up with your insurer to get the work done properly. However, this may be difficult well after the work has been done and you have been driving the car again.
    3) You will be charged by BMW Finance for any excess mileage if you give the car back, but if you part-exchange the car on another BMW then the dealer is buying your car and paying the settlement to BMW Finance (they are two separate companies), so the dealer is saying that they will pay your GMFV even though your mileage is higher than expected. It’s a small but important difference – and another dealer may be prepared to do exactly the same or offer you even more for the car.

    It’s definitely worth getting another valuation on the car from another dealer or two. It may be that the repair work is OK but the dealer was looking for an excuse to drive your part-exchange price down.

    Going back to your insurance company and asking them to get the repair work re-done will be a bit of a battle (they’re likely to refuse point blank, especially since you accepted the car back from the repairer and have been driving it since then). You may be able to voluntarily terminate the agreement and walk away once you have paid 50% of the total payable, which should be soon if you haven’t already reached that point, but it is still dependent on BMW Finance accepting the repair.

  4. Hi Stuart,

    Yes the car was 23,000 and I had 4000 deposit and 1000 dealer deposit contribution. I currently pay 220 a month. The repairs were undertaken by a firm that claims to be an approved body shop by BMW. I’m going to try and persue claiming the loss of value through expenses with my solicitor, as ideally I do want another BMW. He did say he would provide me with paperwork to support my claim, but I am still get to receive it! If they do not honour the bubble value would that make it cheaper for me to buy the car outright? I shall pop along to a few dealers next week!

  5. stuart

    If it is an approved BMW bodyshop, then BMW Finance should have no problem taking the car back – and if they do, you should be able to argue the point that the repairs were conducted by their recommended repairer. It won’t help with the dealer offering you more money at the moment, however, since they are independently-owned franchises.

    Sadly the settlement figure at the end of the agreement won’t be any cheaper if the car has more mileage or has not been repaired properly. The GMFV/bubble is simply what you owe BMW Finance to settle the agreement. The GMFV allows you to give the car back (assuming it meets their standards) instead of paying the rest off.

  6. Hi Stuart

    I have a car that I wish to give back on voluntary termination of PCP or HP contract, but wondered if you could clarify something for me? On my contract there is a text box that reads: ”Termination: Your Rights – You have a right to end this agreement. To do so you should write to the person you make your payments to. They will then be entitled to the return of the goods and to half the total amount payable under this agreement, that is £8632. If you have already paid at least this amount, plus any overdue installments, and have taken reasonable care of the goods, you will not have to pay any more’. Come September this year I will have paid just over this amount. I know this might seem an obvious question with an obvious answer, but when I have made my payment in September, and I have looked after the car and not gone over the mileage, can I simply give the car back?

    Many thanks in advance….

  7. stuart

    Hi Debi. Yes, as soon as you pay back £8632 you can give the car back. You can do this at any time as long as you pay them a total of £8632, so you can pay the balance now and give it back if you like. They can’t charge you for mileage, regardless of what your PCP agreement says. The only caveat is taking “reasonable care of the goods”, which basically means it has to be neat and tidy (not necessarily perfect). Have a read of our article on voluntary termination for more info.

  8. Hi Stuart, many thanks for you quick reply., will spread the word :) Thanks again. Debi

  9. Hi Stuart,
    Hope you can help as I have a few questions. I have a pcp running with Skoda (who use VW finance) until June 2016, with my GMFV around 10,700 for my Octavia. My agreement started in June 2013.

    If I wanted to switch cars early (possibly to Audi who also use VW finace I believe) how do I go about it? I don’t want to do a private sale and would prefer all dealings to be with the dealers.

    The other quesiton I have may be daft but say I left the agreement to run full term and hand the car back to Skoda but in the meantime have an order with Audi – how do I synchronise the delivery etc to avoid being without a car – is this something the dealer will deal with, will Audi give me money for my Skoda to pay off the finance – is it the same a trade in when buying a new car? How does this work?

    Sorry for the daftness of the question but I hope you can understand what I mean…I’m confused.


  10. stuart

    Thanks Debi, hope it all goes smoothly for you.

  11. Hi. My husband entered into a bmw 2 year car lease agreement for a new 64 plate x1. Paperwork was signed by him late December 2014. Car delivered to our house on 8th January 2015 (whilst my husband was in hospital). 20th January my husband died. approx 75 miles have been put on the clock by me visiting him in hospital. I notified BMW 2 days after his death as for emotional and financial reasons I didn’t want to carry on with the agreement. I have been told that I have to sell the car and whatever price I get, I have to find the difference to finish the agreement. The car is worth £26916.88 and the garage I bought it from has offered £19,000 therefore leaving me to find £7356.00! Ive approached other garages who have offered less. BMW finance asked me whether my husband left a will and am I his next of kin. He did leave a will saying all possessions, monies etc come to me. My question is … it correct that I have to pay this on his behalf or are the finance company treating me incorrectly given the terrible and distressing circumstances I find myself after losing my husband. Thanks

  12. stuart

    Hi Michelle. Sorry to hear of your loss. I am not sure of the legal implications in your situation, so can only suggest a couple of options. Firstly, contact BMW Finance and try to get yourself put through to someone senior who will deal with you beyond the standard call centre script. Unfortunately, leases tend not to have much flexibility to cover any variations from the contract, so any offer to cancel the lease or reduce your obligations in any way will probably rest solely at BMW Finance’s discretion. Secondly, if you are engaging a solicitor to handle any issues with the estate then they may be able to advise and assist, or even handle the matter for you entirely. Thirdly, try – it is an excellent source of general advice, and there may well be some advice there which is helpful. If not, you could post a question there and someone suitably experienced or qualified may be able to advise. Best of luck.

  13. Hi Stuart – Great site, very helpful!

    I have not used a PCP before, but am just about to order a new Audi S5 Sportback Black Edition and will probably finance it with a PCP.

    I plan to keep the car for 3 years, but the dealer is advising me to take a 4 year PCP and finish it at year 3 (as did a BMW dealer I visited last week).

    The car with extras is about £46k, but I will be getting a large (I think) discount from the dealer of about £7,500, so £38.5k after discount and before my deposit. I want to have a monthly payment no more than £450 and I expect GFV at year 3 on a 3 year PCP to be about £22k, and about £18k at year 4 on a 4 year PCP.

    With that in mind the dealer is advising I need a deposit for a 3 year PCP of about £8,000 whilst the deposit required for a 4 year PCP is about £5k to maintain a £450 monthly payment. So at year 3 I will have paid £3k less on a 4 year PCP!

    Given the large discount and a £5k deposit, I don't think I will be in -ve equity, but there must be a catch? The only thing I can think of is a big penalty payment from exiting a PCP early, perhaps?

    I hope you can help me find what the catch is, or advise me the questions I need to ask the dealer.

    Thanks a lot.

  14. stuart

    Hi Gavin. There is a very simple catch – if you try to change the car after three years, you will probably have a negative equity position that needs to be cleared. In a nutshell, you can pay more money now (higher deposit on a 3-year PCP) or pay it later (negative equity). Chances are, you will not ultimately save anything overall, you are simply deferring payment. As you point out in your calculations above, the difference in deposit is £3K, which means you are borrowing over £3K more (you have to pay interest on the additional borrowing).

    Dealers will often suggest the exact scenario that you have described, but remember that it’s because it suits them, not you! They sell a more expensive car by arranging a longer term (which yields them more money), and you are taking a larger chunk of the car’s total price on finance (which also yields them more money).

    With a PCP, always assume that you will not end up with any equity at the end. If you do, then consider it a bonus. Dealers love to tell customers that they will probably/almost certainly/definitely will have equity, but it rarely happens. And most of the time, it’s not the same salesperson that has to deal with that next time around…

  15. Hi Stuart, I’ve recently taken a car out in June 2014 on PCP over 60 months. My circumstances have changed and I need to downgrade to a vehicle of literally half the value of this car. I think I had about 2k negative equity roughly when I signed the agreement. Would I be able to change cars without to much hassle?


  16. stuart

    Hi Rich. If you’re saying that the finance company allowed you to carry £2K of negative equity over into a new 60-month agreement, then I’m afraid your current negative equity position is likely to be much worse now. Less than 12 months into a 60-month agreement, you will barely have scratched the surface of your debt.

  17. Okay Thanks Stuart. Is there anything I can do to get rid of the car or even reduce the payments? I appreciate you don’t have much info to go off here!

  18. I went to the dealer, and found that had downgraded the GFV at year 3 by £3k! They say by mistake. To me that is another way of getting more money from me as I would pay that over the agreement as increased depreciation, and then be reliant on them to give it me back as equity to make it look like they were “doing me a favour” at y3 by offering me more than the GFV.

    You have to be very careful with these things is the conclusion.

  19. stuart

    Hi Gavin. They can’t adjust the GMFV once the contract has been signed off, so not sure what you’re talking about. They may have set it incorrectly in the first place, but they certainly can’t change it mid-term.

  20. Hi Stuart

    The finance they were offering me – which I have not signed – had the GFV set artificially low. My understanding of a PCP is I would have paid too much depreciation had I signed this agreement. Effectively I would be building equity into the car, but with no guarantee of getting it back.

    That I think explains the difference in the finance figures in my original post.

    So I guess I have answered my own question!

  21. Hi Staurt
    I am on a 4 year pcp deal for our Nissan Juke, took it out in July 2012. I would like to upgrade to a bigger car perhaps a qashqai. can I trade it in now? I looked at my settlement figure and it was about £8200. Or should I wait until next year when the pcp finishes?


  22. stuart

    Hi Martin. Yes, you can trade it in now, but you will probably have negative equity that will need to be settled before you can start again on your next PCP. Whether or not it's worth it will depend on your needs and what level of negative equity you will have to pay off.

  23. Hi Stuart,
    I took out a BMW 1 series on a 48 month agreement, I am 13 months into that agreement now would like to upgrade to a BMW 3 series. I put down a £3,000 deposit and pay £265 per month. My agreement allows me to do 20,000 miles a year, however I have only done 12,000. The value of the car is £20,000, rising to £22,476 after the 4.9% interest, and a £7,000 balloon payment at the end of the agreement.
    Seeing as I have already paid a full year, a large deposit and done less miles than expected… Do you believe the amount i’ve paid now surpasses the valuation they have made on my vehicle, and I should be able to upgrade for no cost (with larger monthly payments)?

  24. stuart

    Hi Tom. I’d say almost certainly not, because 13 at months in you have only paid off £3,445 of your £22,476 payable. Have a read of our articles on part-exchange prices and depreciation, then find out your current settlement figure from the finance company and get a real-world valuation on your car (ie – ignore theoretical numbers from the likes of Parkers and ask dealers or car buying services like I’d say you probably still have significant negative equity to clear before you can start again on a larger car.

  25. Hi Stuart, I’m 2 years and 4 months into my PCP contract for a toyota yaris. Due to change in circumstances I’m looking to change my car to an automatic transmission. Toyota Finance company have told me the current outstanding balance for the finance is £7056. The car was recently valued at a MINI dealership for about £6200 which is almost £1k less than what Whatcar valued it at . I’m looking at purchasing a car (new or used) priced in the £10-12k category with little to no deposit required. I can’t figure out whether iI’ll be going into new finance deal with negative equity and if so is it worth looking at cheap cars that will easily pay off the outstanding £7056 and leave me with some equity to put towards a deposit? Also if the my yaris was valued higher would that count towards the paying down of the existing PCP? Its all confusing.

  26. Hi Stuart,

    Thanks for your reply.

    I attended a VIP day at my local dealer yesterday just to see what my options might be and how much the Juke was worth etc etc.

    Apparently currently its worth exactly the same as the amount of finance owing, so that’s good. The dealer however just seemed intent on trying to sell me one model of the car id ideally like (new qashqai as it was the equivalent model)
    He went away and did some figures and came back and both were way over my budget, at £100+ more than I pay now. Of course I am aware the qashqai is going to be more expensive but I want to get one ideally that is as close to what I pay now as possible.

    I believe I have a few options to get the car I want :

    Try another dealer and outline what I want and what I currently have etc and see what they offer.

    Sell my car, pay off the debt and start again with the new car, although there would be no equity to take into the next deal.

    Lease the car I want, I know id have to put an amount up front as the initial payment

    Sell my car, pay off the finance and then go for a used model (maybe 6 months/year old) with some sort of finance

    Can you let me know please what you think of my options.


  27. stuart

    Hi Bella. Forget WhatCar? and so on, and get real-world valuations from the likes of and similar – these are real offers for your car. There is a fair chance that the MINI dealer is offering you too little, but it’s not surprising that you ave negative equity in your car. Read this article about why your part-exchange value is not as much as you hoped for. And don’t just take one dealer’s word for it; take your car to another dealer or two for a price.

    If one dealer has offered your £6200 for your car, it is unlikely that another dealer is going to offer you nearly £1000 more to cover your settlement. But you may well get closer.

  28. stuart

    Hi Martin. Checking the numbers by going to another dealer is always a smart move, especially if you are not convinced that you are being offered a fair deal. Your main problem can be summed up in your own sentence: “Of course I am aware the qashqai is going to be more expensive but I want to get one ideally that is as close to what I pay now as possible.” If the Qashqai is more expensive, then your payments will have to go up (or take it over a longer term). You may be able to get a better price for your Juke by selling it privately than you can get for a part-exchange (read this article on part-exchange prices, which may give you some extra deposit for your next car.

    A used car may be cheaper in its cash price, but that doesn’t necessarily mean that it will be cheaper on a PCP – the interest rates tend to be much lower on new cars, and there are often deposit contributions available as well.

  29. Hi Stuart,

    Sorry one last question.

    As I mentioned the dealer said that the car would currently cover the cost of the finance owing.

    If I leave it a while and do nothing, I assume I have the risk that the car will depreciate more and not be worth enough to cover the cost of paying off the finance?
    Or will the fact that I am still making payments on the PCP even itself out?


  30. stuart

    In theory, the rate you are paying off the PCP should be greater than the rate at which the car is depreciating, so your position should improve over time and leave you with equity. However, there is no guarantee of this and it can change for any number of reasons (eg – if Nissan launch a new model Juke, values of the current model will drop).

  31. Hi Stuart, Very helpful website.
    I currently have a bmw 320 coupe which i own outright and is worth £10000. We are currently planning an extension so i am going to sell my car to put the funds towards the house.
    My plan is to take a pcp deal out on a Audi A5 £21000. I want to pay as little deposit as possible to keep funds free, and have budgeted paying around 330 a month. I have had finance quotes for 48 months with an initial £1000 deposit at £330.39 or over 36months with a £2000 deposit at £327.83.
    I have changed my cars quite often so with me entering any of these terms will i have to stick it out to the very end without changing? The finance company is auto union finance.

    Any help would be greatly appreciated.


  32. Hi Stuart I currently have a pcp on a Ford Fiesta zetec 1.25 £260.81 per month it’s just had its 1st service and I’m a year into my agreement. My question is I want to change my car for a number of reasons but not for financial reasons. The car is currently worth £8000 (we buy any car) it’s done 6800 miles. I would just like your opinion as to whether it’s worth changing and I don’t mind taking out a new pcp as they work for me. Rachele.

  33. stuart

    Hi Mark. If it is cash upfront that you need, then by all means. Bear in mind, however, that uyou are earning £10,000 now by selling your car but will be paying nearly £17,000 on a 48-month PCP – and at the end of that you won't own the car. So in total economic terms, it doesn't add up.

  34. stuart

    Hi Rachele. Yes, you can change if it suits your needs. Be aware that you will probably have some negative equity that needs to be cleared, so it may be a bit of an expensive exercise. Add upp your costs and decide if it's worth the cost for you to change it now.

  35. Hi there
    Have an audi A1 finance . On research my car worth about 12,000 max . Interested in getting vw polo. They say they will pay off settlement which is just over 10,000. I have no deposit.
    Do I ask 4 more for my car?

  36. stuart

    Hi Sharon. You can ask for whatever you want. You are not compelled to accept an offer or buy a car; it comes down to whether you can get a deal you’re happy with. Be aware that you car may well be worth less than you think – it usually is. Have a read of this article about part-exchange prices.

  37. Thanks Stuart. Really good site this. Well I was silly told them what my settlement is and they just matched that.
    Signed an order form didn't have a deposit. Everywhere I look it seems u can get two thousand more for my car in this condition and mileage. Wanting to reduce Payments so going from 242 to 212 into a polo SE.
    Do you think I'm losing out with them just giving me the settlement figure only as I have no deposit? Maybe if I pushed for more that would of been a deposit?

  38. stuart

    Well if they haven't taken your money then you don't really have anything to lose by walking away and finding a better deal. Inform them in writing that you are cancelling; it may lead to them making you a better offer, but you may have to shop around to get what you want.

  39. My 3 year PCP ends late April/early May and I will be handing the car back. Mileage is within the agreement levels but I serviced the vehicle myself for the first two years but put it in for a full service last week to at least get one authorised dealer service, am I going to get caned for servicing myself (I cannot evidence servicing it with receipts other than a bill for brake pads/disks/tyres last year). Also, I’ve not used the vehicle since January so is there any benefit to handing it back early ? Repayments are £283 per month.

  40. stuart

    Hi Bilbo. Yes, it is likely that you will be penalised for not having the car serviced by the manufacturer’s official service provider.

    You may have the option of voluntarily terminating the PCP. You give it back, and as long as it is in good condition, there are no penalties to pay. They may try and stop you from doing so because the car has not been serviced in line with the agreement, but they can’t really stop you.

  41. I have been on a Passport Deal contract with Peugeot for the past 15 years. During this time I never missed a single payment or been late with one. I have now decided to move away from Peugeot and go with a PCP contract with Mazda and advised Peugeot of same. However having taken a call for their finance department they want to charge me £230 for having finance with them in the first place (even though I paid interest to them for the past 15 years) and an extra full Passport Deal payment of £180 because I want to hand the car back a month before the 3rd year is up. This is to allow me to meet the terms of taking up my PCP contract with Mazda. Am I obliged to pay these amounts despite being a loyal customer for such a long time. Is their such a payment as a finance payment? Can they really penalise me by charging me for a month that I will not even have the car? I am so angry about this and think that Peugeot are acting in bad faith.

  42. stuart

    Hi Laura. It will depend on you finance agreement. If you have a lease, then you don't have the right to settle early and give the car back – the penalties for breaking a lease are quite severe, even if it's only by a month. It sounds like you have a lease rather than a PCP. From Peugeot's point of view, you're trying to get out of paying your last month's fee by skipping out early to buy a Mazda, so they're not going to be especially inclined to help you.

    As for the £230 fee, it should be noted in your finance paperwork somewhere. They can't charge you a fee for no reason, so it should be documented and they should be able to explain exactly what it's for.

  43. Mercedes are offering £750 cash contribution if HP finance is taken out on a car over 2 or 3 years. However, if the buyer was originally a cash buyer and opted for the finance, but settled after 3 months, the buyer is supposedly £500 or so better off. This sounds excellent in theory. In practice, is it as good as it sounds? Do they deduct the 3 months payments that would of been made to finance company. I imagine opting for the 2 years would yield even more benefits. Does this sound right to you?

  44. stuart

    Hi Lawrence. No need to wait three months – your finance agreement has a 14-day cooling-off period. Cancel within this time and you won't have to pay any interest or fees. Have a read of this article about deposit contributions for more information.

  45. Hi Stuart
    I’m 2 years into a PCP agreement with Mini and want to change my car. Do you know if the finance company will accept an offer on their settlement figure, or is this unethical? I’ve had the car valued by Mercedes, and they are willing to PX my mini for just under the settlement figure (£400) but was hoping that i wouldn’t have to pay any negative equity at all…..The other option is that I advertise it privately but not too keen on that!

  46. stuart

    Hi Sarah. I would say that they are incredibly unlikely to accept an offer on their settlement figure, just as a bank would be unlikely to on a personal loan (unless you were a declared bankrupt). Your settlement is simply what you still owe according to your agreement. When you settle early, you do save on the interest you would have paid on the remainder of your contract, so your Total Amount Payable reduces on what it would be of you finished your agreement.

    The fact that Mercedes-Benz is offering you less than the settlement figure will be of no concern whatsoever to BMW Finance, and they will expect full payment of their settlement.

  47. I’ve just purchased a Ford Kuga on a PCP I’ve put down a £6500 deposit and Ford have also contributed £1500 for using PCP with Ford credit. So if I cancel within 14 days I still keep the Ford contribution when I pay the full amount for the car in cash? Also if I leave it a couple of months how much of the £1200 interest approx would I have to pay on the settlement figure on a 24 month contract? Thanks

  48. stuart

    Hi Chesguy. Yes, you can cancel the finance agreement within 14 days – have a read of our article about deposit contributions here.

  49. Hi. I entered a PCP agreement 3 days ago with BMW finance, I pick up the car yesterday.
    Unfortunately, I’m going to be unable to keep the car due to a badly timed medical problem meaning i’m unable to drive.
    Is there any way of me giving the car back, and settling early? What options do I have?

    Many thanks,

  50. stuart

    Hi Joe. Although there is the option to cancel your PCP with a 14-day cooling-off period, there is no facility to give the car back. Once you take delivery, it’s a used car, so unless there is a fundamental problem with it that would define it as unfit for purpose, you can’t give it back. Have a read of this article about changing your mind after buying a car (even though you haven’t actually changed your mind in this instance), which explains that there is no cooling-off period for a car unless you are buying it sight unseen.

  51. Thanks for your fast response.
    Okay, so giving the car back is not an option, I unless i can claim it is unfit for purpose, which it kind of true as I'm finding driving it difficult due to my health problems, heavy steering and controls you see. Also Is there any method by which I can sell the car back to the dealer and settle the finance? Or sell it privately? My worry is that If I can't get rid of the car ill be paying for something which is essentially going to be sat on my drive for next 3 years! Really awful situation I've found myself in. Thanks again, really appreciate the help.

  52. stuart

    You won’t be able to complain that the car is not fit for purpose unless it is not doing the job it is supposed to be doing (ie – it’s faulty beyond repair). By the sounds of it, the car is performing correctly, so that’s not an option for you.

    Yes, you can sell the car, either back to the dealer or to a private seller, and settle the finance. However, you are going to take a massive hit on the car’s value (see this article on depreciation, so you will owe a lot more than you get for the car.

    Unfortunately, there is no ‘walk away’ option, regardless of your situation. Whatever you do, it will cost you a lot of money. You will need to work out whether you want to take a big hit now by selling the car, or take a lot of smaller hits every month which will potentially add up to more in the long run.

  53. Hi Stuart, I am currently paying £210 a month for my Vauxhall corsa. I am 2.5 years into a 5 year contract. They have now offered me the new corsa, I would be paying £170 per month for 3 years, then a final balloon payment of £5000 at the end. They want me to give my current car back to them for £800 equity. I have already paid over £6000 for my corsa currently, im just questioning just giving it over to them, please can you help? Many thanks

  54. stuart

  55. Hi Stuart,

    I have read most of these questions and your answers are extremely helpful. I was hoping you can clarify some things for me though?

    In October 2014 I got into a 3 year Agility Agreement with Mercedes Benz Finance, I pay £386 per month and the car was worth £23,000 when I bought it. My final payment will be £8000. When I bought the car I had a mortgage and unfortunately my circumstances have changed and I'm living back at home with my parents. I am 24 and have no other outgoings apart from this car therefore I can afford the repayments. However, I know I will be looking to get onto the property ladder myself so I don't want to be stuck with car finance this high for the next 4 years.

    From reading the questions and answers I know my car will be worth less than the outstanding finance so I'll have a big payment to make. I was thinking of buying a smaller, cheaper car to get me from A-B and asking if the negative equity can be added to that finance, but as you said not many companies offer this. Even if I buy a fiat 500 for example for about £150 a month and pay the negative equity from my savings, I'd still be saving a large amount each month.

    My question though, is I don't understand what voluntary termination is, my contract states I have to pay roughly £13000 before I can do this, but I just want to make sure this is different to visting the garage and trading my car in for a cheaper car, or going to a different garage and buying a cheaper car, because the new dealer would pay off the MB finance therefore it wouldn't be voluntary termination, it would just be early repayment?

    Sorry if this is a stupid question!

    Kind regards,

  56. stuart

    Hi Lucy. If you part-exchange your current car for another one, the dealer will not pay off any negative equity for you. That’s your responsibility. Most finance companies won’t allow you to finance negative equity either, so you will have to pay it to the dealer so that they can settle your finance for you.

    Have a read of our article about voluntary termination, as it explains how that works. Once you have repaid half of the Total Amount Payable, you can return the car regardless of negative equity.

  57. Hi Stuart, I have a question about PCP voluntary termination. My son in law purchased a car on PCP in January 2014. The car cost £12,000. All the costs and finance were £3,500, total cost of the agreement is £15,500. 36 monthly payments of £193 and the final payment is £7,500. He and his partner are having a baby and she will be going on maternity leave, which means that they will struggle to pay the £193. He rang the finance company and asked for a voluntary termination quote and they quoted around £4,000. Having now looked at the paperwork, it says that the early termination value is £7,500. So in effect he has to pay the full 36 months before he can voluntarily terminate, which basically means he has no right to terminate, he must keep paying for the full term agreed. I thought that the early termination would be applied to the amount actually borrowed, which was £8k (including fees and interest), not the full value of the car plus all fees and interest? Is the car company correct in saying he can only terminate after 36 months or if he pays back £4,000? Thank you.

  58. stuart

    Hi Karen. You are incorrect in your assumption about the amount borrowed – it is £15,500 (based on the numbers you provided above). Your son-in-law only repays £193×36 = £6,948, and can then choose to give the car back instead of paying out the remaining £7,500. The finance company is correct, and it should all be set out in the finance contract.

  59. Hi Stuart. I recently ordered a new 2015 plate merc a class on PCP over 48 months which is due to be delivered at the end of May. It was built to my specification with panoramic sun roof etc. Unfortunately my work circumstances have changed in the interim period and I’m not sure I will now be able to afford the monthly payments. I paid a £500 deposit and am due to pay a further £1000 deposit when I pick the car up. Is there any option for me to get out of the deal before I start it? Obviously I’d lose my £500 but that is preferable to entering into the 4 years. Many thanks

  60. stuart

    Hi Ruth. Have a read of this article about cancelling a car order. You are under no obligation to go ahead with the finance, but contractually you have no legal right to walk away from the contract. The dealer may seek more money from you to cancel the order as the car has been built specifically for you. However in reality, there’s not a huge amount they can do since they only have £500 from you. Most dealers these days will want 10% deposit on a factory-order vehicle which is not refundable (or at least you’d have to fight them hard to get it back).

  61. Hi, Stuart. I took out a contract hire agreement last year at £285 per month over 48 months. Unfortunately, my circumstances and those of my wife have changed for the worse since. The contract hire company have asked for £3,340 to terminate the contract. Is the termination charge likely to increase or decrease during the rest of the term? The charge, when I enquired a month ago was actually higher. Unfortunately, my mother then died and I have therefore had to go back for another quote.

  62. stuart

    Hi Mike. Contract hire is a lease and not a purchase product, so you are not protected by a voluntary termination clause. The charges to end the contract early are usually eye-watering and largely unregulated. There should be some note of how it is calculated in your contract T&Cs, but they can basically charge whatever they like.

  63. Due to changing cicumstances I decided to get rid of my car that I was paying PCP on & bought another car with cash. The company I bought the cash car from is a main dealer. I was quoted a settlement fee for my PCP & the dealer I bought my new car from paid the PCP off. I got confirmation from the company I was paying the PCP to that all monies had been tranferred & the final letter confirmed from them stated that the payment was fully procesed and they now longer held any financial interest in the vehicle. I then closed my direct debit with them (they actally refunded me the previous months PCP as they took it after I’d sold the car). However, two weeks later I get a phone call from the PCP company stating they’d made a mistake & we still owed them money for the settlement fee. What is my legal standing regarding this situation.

  64. stuart

    Hi Andy. I would show them the copies of all documentation that they have given you, and get an HPI check to confirm that they no longer have any financial interest in the car, and then politely tell them where to go.

  65. Hi Stuart,

    If I take a VW on pcp and after 3 years can I choose to move to an AUDI instead of a VW? Would the garage need to sell both makes? I think AUDI use VW finance

  66. Stuart Masson

    Hi Marco. Yes, you can absolutely change car brands. The new dealer will arrange to settle your PCP finance for the Volkswagen (which concludes that agreement), and you start again with however you want to finance your next car. It doesn't matter at all whether they use the same finance company.

  67. Cool, so do I need a new deposit of will the car I’m
    Giving back as part of the previous pcp plan?

  68. Stuart Masson

    Yes, you will. It is possible that there will be some equity in your part-exchange as part of the PCP settlement, which can be used towards your deposit. However, if there is not, or if you want a larger deposit, you will need to contribute that yourself.

  69. Hi there

    Husband and I are a few months from the end of our PCP plans on our Kia cars. We have the money to pay them off but husband has decided he'd like to swap his car. He has a 2012 Sportage and £6500 to pay off. On looking it appears that it is worth considerably more than this. could we really expect £4500 to use as a deposit against another car. Are they likely to try and reduce this equity in a deal? Should we sell privately?


  70. Stuart Masson

    Hi Clare. Your car may be worth more than the settlement figure, which means you can use any equity towards your next car. As to whether you are better off selling the car yourself, it depends on the condition of the car and how much time & effort you are prepared to spend going through the process yourself. Have a read of our article about part-exchange values, as it may help.

  71. Hi Stuart,

    I'm currently with Audi on a 4 year PCP. By January it'll be 2 years and I can part-exchange for another car. I was wondering if I didn't want to stick with Audi and move to another brand like BMW or Mercedes will they settle my PCP with Audi? I've been to dealers in the pass and they said that it wasn't possible? But then I hear from other people that it is possible. If you can clarify it that'll be great.

    Many thanks

  72. Hi Stuart, I have a Mercedes Agility PCP agreement which has 4 payments left on the 36 month term, therefore I have been shopping around for the replacement. I have found a car I like, but would need to take delivery in the next 6 weeks and the dealer doesn't want to take the Mercedes as a trade in and advised that I Voluntary Terminate the finance as I am well over the 50% mark.

    I am generally fine with that but worried that handing the car back 4 months early will effectively rule out any further finance agreements with Mercedes…for the sake of 4 months.

    Dealerships will tell you anything to get the sale, as fast as possible! I would like the new car but at some point in the future would like to be able to consider another Mercedes.

    Appreciate your thoughts

  73. Stuart Masson

    Hi Chris. Yes, you can settle your PCP agreement at any time, and a BMW/Mercedes-Benz/anyone else dealership can settle your balance owing with Audi Finance. The only thing to bear in mind is that it is quite likely that you will have some negative equity that will need to be paid off, so you may have to shell out additional cash to clear that before putting down a deposit on your next car.

  74. Stuart Masson

    Hi Pete. I wouldn't imagine that Mercedes-Benz Finance will be too upset over the sake of 4 payments. They would be more upset if you still had many thousands' worth of payment to make and were voluntarily terminating, which would mean a significant loss for them.

    Alternatively, you can sell the car yourself and settle the finance.

  75. Hi Stuart, thank you so much for your brilliantly written articles. I have just put a deposit on a VW and was talked into taking finance on the car by being given £500 deposit contribution and free servicing. Having always paid for my cars outright and with the cash available I now feel very uncomfortable with being 'tied in' to an agreement for a vehicle that I don't actually own. Having read your articles I intend to cancel the finance within the 14 days after I collect the car and pay it off in full.
    I have two questions for you: As part of the finance agreement I agreed to gap insurance for £450, in your experience do you think I can ask the finance company to take this off the agreement before they send me the final bill? I've found better gap insurance for £96 which I may take out instead, or I won't bother with it at all.
    Also, I am getting money back for my part exchange and I need some of this to be able to settle the finance. Do you have any idea how long it usually takes to get the cheque back as I believe I will have 30 days from cancelling the finance to settle the bill?
    Thank you again – SK

  76. Stuart Masson

    Hi SK, thank you for your kind comments.

    You can certainly cancel the GAP insurance before it is set up (or for 14 days afterwards, but better beforehand), although they will certainly try and twist your arm into keeping it. When you can consider that the £354 difference in price is largely their commission, you can see why they will be keen for you not to drop it! Insist on having the documents redone without GAP, as they know that if they leave it in there and make you cancel it afterwards, there's a chance you will forget and they can keep their profit.

    The dealership should be able to give you a cheque for your part-exchange balance on the day of delivery. In fact, you should insist on it and not leave the premises until you have it.

  77. Hi SK
    Where did you get your gap insurance quote. I am waiting for my new car – Audi S5 – and may take gap insurance, but not from the dealer.

  78. Thank you that's great advice, especially about the cheque! It's all so obvious when you put it like that!

  79. Hi Gavin it was from the Honest John website, if you go to there is a 'Quote Me' link.

  80. Hi. Not sure if I'll get a reply now, but just in case…
    Due to recent circumstances I am able to acquire a leased car much cheaper than my current PCP deal. I will have made enough payments in a couple of months to VT the car but have read that you may have trouble getting further finance if you do. So what I have done is ordered my next car now (the same finance group has been used as it's the same make of car) and will do the VT at a future date to avoid the finance being rejected. I recently had a thought though, would there be any remote possibility that the finance company cancel my new order in light of me doing a VT on my current finance? Or is it more likely that they won't be bothered about any other finances I have with them?

  81. Stuart Masson

    Hi Chris. If they approve your lease application, I would imagine that it would be unlikely for them to subsequently cancel it when you VT the current car, so you have probably managed it well. Please let us know the outcome for the benefit of others in a similar position.

  82. Hello,
    I was wondering if you could help with a query I have…
    My girlfriend owns a fiat 500 bought from Arnold Clark over a year ago. The service book tells us the last service was done in March 2014. She has only done 4000miles since then.

    Do we have to take it to Arnold Clark Dealership for its service this year? She has the car on a PCP deal.


  83. Stuart Masson

    Hi Arran. Assuming that the finance has been arranged through FIAT's own finance company, then you will be expected to service the car on time and at an official FIAT service centre/dealership (not necessarily Arnold Clark).

    If the finance was arranged with another finance company, you will need to check your contract to see what it states.

  84. Hello,

    Hoping you can advise…

    I purchased a VW Golf GTD on a 3 year PCP in July 2014.

    The car price was £28k, I managed to haggle £3K off the list price, but with interest, it brought the total owed price back up to £28k.

    I put down a £5k deposit, which left x35 monthly payments of £252 a month, with an optional final payment of £14,600.

    I've currently paid 10 months of payments (with deposit, a total of £7,520).

    I have x25 payments left of £252 – £6,300 total, plus the final payment of £14,600 (£20,900 total)

    I may need to end my finance early… (Within the next few months)

    I've taken the car into the dealer, and they've suggested that in the current state, they would be able to pay the rest of the equity off, and I can hand the car back without having to pay anything extra.

    My question is… Do you think there is any way I can come better off than this?
    e.g.1. Would another dealer buy off the finance plus give me some money back
    e.g.2. Could I take a short term loan to pay off the rest of the finance and sell the car privately or to a dealership for more than my current finance (of £20,900)?

    Thank you very much,


  85. Stuart Masson

    Hi Tom. You are actually in a fairly fortunate position that you are less than 1 year into a 3-year PCP and a dealer is prepared to settle your finance without you having to pay off any negative equity. That doesn't mean you can't do better – as you said, another dealer may be prepared to may more than the settlement figure. You will only find out by shopping around and also checking car buying sites like We Buy Any Car.

    The short-term loan option is probably not going to be any better, as you will probably pay more in interest than you get over and above the dealer price. Plus you have the hassle of selling yourself, which may take longer than anticipated. Every day you are borrowing money it is costing you interest, so you would need to be getting a lot more than a dealer is prepared to pay, plus getting a very low interest rate on your short-term loan, which is unlikely.

  86. Thank you very much for a quick and helpful response! Apologies, I was having difficulties posting my first question so I'm not sure if you ended up getting spammed with questions…

    I'll have a look around at some other companies and see what they're willing to offer. Thanks again :-)

  87. Hi, I am getting a better deal if I take out the pcp on a new car, getting £500 contribution from dealer plus 5 year warranty, no contribution if cash and only 3 years warranty, if I take out the pcp and canel it within 14 days do I still get the benefits ? Will I incur any charges ? Thanks

  88. Stuart Masson

    Hi Lis. Unless they have specified in the contract (which they almost certainly won’t have) that the deposit contribution and warranty are subject to you maintaining the PCP agreement for a minimum amount of time, then you can do exactly as you intended. Have a read of our article on deposit contributions for more information.

  89. Hi. I have today had a bus plough into my 50k 9 month old range rover which was parked outside my house. The car is a write off. I purchased the vehicle on a PCP and also brought GAP insurance, all direct from Land Rover Finance. How does it now work ? I assume the finance company will get full settlement of the outstanding balance but what about my deposit and also how does the replacement work ? Does it have put through like a new purchase ? i.e new credit check and further deposit ?

  90. Stuart Masson

    Hi John. Sorry to hear about your predicament. The most common kind of GAP insurance is called Return to Invoice cover. This pays you the difference between your car insurance payout and the original invoice price. Your GAP cover may also cover you for any finance shortfall if the settlement figure is greater than the invoice price.

    Your car insurance and GAP insurance will be used to settle your current finance agreement. After that, you have to start again with a fresh application. You are not obliged to buy the same make & model of car, but you will have a fresh credit check and you will need to make a decision about another deposit (although you may have some cash left over once the finance is settled).

  91. the sting in the tail with pcp. I have had three cars on pcp all went well until the last one and exiting. my dealer contacted me in Dec with a new deal upgrade car same deal and payments . Went into sign deal collect car, I read paperwork and found salesman had switched deal from 36 months to 48 months without telling me i refused to sign and left dealership.
    Decided to exit pcp nothing to pay car collected initial assesment fine on drive but collector tick car sligtly wet which it was. A car aution assesment 8 dents identified and also interior marked as poorest standard. Finance company now attempting to charge £580 for repairs + £250 for mileage please note mileage is worked out over 37 month average for 36 month agreement i returned car four months early so 8000 miles / year is reduced by average figure and excess mileage charge applied.

  92. Hi Stuart, excellent article. I have a slightly complicated situation but would be grateful for your advice. I'm a British diplomat about to return to the UK after an overseas posting. I am looking to buy a small SUV (Qashqai or CX-5) possibly on PCP. I have never financed through PCP before but I can understand the benefits particularly if you're going to change your car in three years' time.

    However, it's very possible that I will be posted again in 2-4 years' time. At that point, I will almost certainly buy a car duty-free for export.

    The SUVs are worth approx. £20-24k. The PCP interest rate offered by Nissan and Mazda will be around 5.9%. I am looking to put down a £10k deposit.

    Am I better off taking out a PCP for two years (minimum time in the UK); three years (and accept negative equity if I have to settle after two years); or a hire purchase scheme? Or should I simply not buy a new car and purchase a second hand model and keep it for two to four years?

    Sorry again. Any advice would be really appreciated.


  93. Stuart Masson

    Hi Nik. If you have a high expectation of having to settle the finance agreement early, then a PCP will usually mean having negative equity that will need to be settled.

    To compare a PCP with an HP – with a PCP, you will be paying less per month but will have to pay more at the end to settle the agreement. With an HP, you will be paying more each month and therefore will have positive equity if you need to settle up and ship out. The interest rate on PCPs and HPs is usually about the same, so you end up paying a similar amount overall. It's just a question of pay as you go or pay at the end.

    If you have the cash available, buying a cheaper car and not taking finance is ultimately a cheaper option overall as you are not paying interest on the money borrowed. It comes down to how much cash you have available and what sort of car you are looking for.

  94. Hi Stuart,

    I'm currently 8 months into a 4 year PCP agreement, i would like to change my car as i am bored of it already! I have spoken to the dealership i brought the car from who use an external finance company and they have told me i'm currently in around £1,400 negative equity. What options do i have which don't include me forking out a lot of money? Would the dealership cover the cost of the negative equity in order to keep my business by taking out another 4 year PCP agreement on a different car? If yes would i have to put down a deposit on the new car? Or is it worth me waiting more time for my negative equity to reduce?

    Many thanks and look forward to your response.

  95. I would really love to see this question answered, as I am in a similar position…Purchased new q3 in January on PCP. Wife accidentially got pregnant, again, and now the car is not big enough…thinking of moving to a VW Mini Van, and would love to know if VW finance would work a deal to get me out of the q3 and into the VW?

  96. Stuart Masson

    Sorry Jamie, but your impatience will be costly. Frankly I'm surprised that the negative equity isn't a lot more than that so early in the agreement.

    No, a dealer is not likely to cover the £1,400 negative equity. Yes, you will need another deposit for another car.

    Yes, it is most definitely worth waiting for your negative equity to reduce. Probably a couple of years.

  97. Stuart Masson

    Hi Brian. I'm sure they can work out a deal, but it is likely to be an expensive exit from the Audi as you will probably have a significant amount of negative equity to clear before you worry about a new agreement and another deposit.

  98. Hi Stuart
    I am coming to the end of my PCP. I have had a couple of misleading letters from the finance company. One that says I have to pay a settlement fee to keep the car before the end of sept this year and then subsequently sent me a form to fill in. I either keep the car, take out a new deal or return the car whereby I pay £186 for the priviledge of having one of their staff coming out to check it is in acceptable condition and within the mileage etc. However on initially sending the form back to say I was hoping to take out a new deal the finance company sent out another letter stating that I had until the 23rd august to ensure the dealer settles the account. Having met with the dealer I have found that without putting down a £2000 deposit I cannot get anywhere near any vehicle that would now suit my needs with 2 young children so have visited a lease option through my employer where no deposit is needed. Legally should I have any problem informing the finance company that I have changed my mind. My term is not yet officially up so I am hoping that I will not encounter any issues here.

  99. Stuart Masson

    Hi Debbie. If you do nothing, the finance company will try to take the settlement figure from your account, which is usually bad as most people don't have the thousands of pounds required there, and so it bounces and they consider you to have defaulted. So the finance company is right to make you aware of your obligations in advance.

    Regardless of whether you keep the car or sell it, the settlement has to be paid by the end of September as per your contract (unless you plan to give it back and claim the GMFV). Either you pay it because you're keeping the car or selling it privately, or the dealer pays it when you part-exchange the car. The finance company isn't going to care who pays, as long as they get their money.

    If you are claiming the GMFV, check your contract to see if it makes any mention of them being able to charge you a collection fee. If it's not noted in there then you can refuse to pay it.

  100. Hi,

    I am considering buying a car on PCP and have read all of the above thread. I am thinking of paying it off about 6 months into the 3 year term. I am confused in the responses when you say "If you are settling your PCP early, you will be charged for excess mileage on a pro-rate basis".
    I thought the point of the mileage limitation is that it is used in the determination of the GMFV because it influences the depreciation.
    Then based on the difference between the GMFV and the original total (List price + interest), the monthly repayments are calculated – ie higher mileage simply shifts the balance between how much your monthly repayments are (ie the depreciation) and the final value of the car.
    If you are paying the whole lot off to clear the finance then I don't see how the mileage makes any difference as you are effectively paying all the repayments + the GMFV all in one go (with I guess a maybe a reduction of interest).
    Thanks Rob

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