Is PCP being mis-sold

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This topic contains 1 reply, has 2 voices, and was last updated by Stuart Masson Stuart Masson 2 months, 1 week ago.

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  • #149659 Reply
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    Joe

    I am wondering, is the industry is (knowingly) incorrectly presenting PCP deals.

    Following a visit to my local dealer, PCP was, once again, explained as “only financing the difference between the price and the GFV”.

    The moneysavingexpert website also explains it similarly (link:https://www.moneysavingexpert.com/car-finance/personal-contract-purchase/)

    It is explained by both above as:
    Car price = X
    GVT = Y
    Amount to be finance: X – Y = Z

    However, it appears on closer inspection that the interest rate is calculated over the entire outstanding car value. Which actually means that the quoted GVT is more like a settlement amount at the quoted point in time.

    Perhaps I am too obtuse to understand, but if I am financing Z then I should only pay interest on Z, as the dealer retains car ownership until I settle, if I decide so.

    By paying interest on the entire cars value (minus any deposit) it seems like what I am actually doing is financing the whole car with an agreed payment plan based on the quoted amount of payments followed by a single settlement payment, which, is optional.

    Of course, I am slow-witted, so I am happy to be corrected.

    Many thanks

  • #150368 Reply
    Stuart Masson
    Stuart Masson
    Keymaster

    Hi Joe. On a PCP, you are very definitely borrowing the whole value of the car (minus any deposit). The Money Saving Expert article is incorrect.

    For more information, have a read of our article on the top 10 PCP myths, as well as our article on how a PCP works.

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