26 August 2018 at 3:44 pm #138228
I am coming to the end of a 3 year MB Finance Agility Agreement. (30th Sept 2018). I cannot understand why Agility/ PCP contracts are considered as having any financial gains. Please note the rough figures of my Agreement below.
Vehicle Price: £23,000
Total Price (inc finance 6.11% pa, APR 6.3%): £27,000
During the 3-year period, I received NO Annual Statement showing the breakdown regarding Capital and Interest
Payments- I requested information from MBFS and the docs were forwarded to me (May2018). This document showed capital repayments 0f £13600 plus Interest charges of £3200 (the interest charges for the total finance sum of£20k) when the Agreement ends.
If I wish to keep the vehicle I would need to finance a new agreement @6% for the balloon price of £13,600). This means that I have paid interest on this 13600 plus the interest on the £20k= INTEREST PAYMENTS 0n £33600 @ 6%. This type of Agreement suggests to me that Finance companies are licking their lips with this product.
I have only borrowed £7k Capital over the 3 year period – I have paid the Interest on the total Capital Outstanding sum of £20K. I believed that Interest would be paid on Capital borrowed in this case £7K. I should be refunded the remaining cash (Interest on the £13k which I have not borrowed) which could then be used towards the Interest charges on the outstanding balance if I wish to buy the car.
I could have had a straight lease on a similar vehicle for £320 pm for 36 months (11.5K)with a Leasing Company and then returned the car. Opting for Agility/PCP has already cost me £3k deposit and £7 05k capital and £3100 interest charges =£13.5k -A loss of at least £2 k plus any tax advantages.
Please convince me that Agility/PCP is a quality product in the car finance market. Please let us remember in this instance that if I retain this vehicle and refinance with MBFS then I have been charged finance on a £34K capital sum (original £20k paid in first 3 years)- good business for the finance companies!!
30 August 2018 at 10:06 pm #138621
Hi Richard. Firstly, you are misunderstanding the product. You borrowed £20,000 over three years, but you only repaid £7,000 (based on the numbers you have provided). That’s why you have paid interest on £20,000. The remaining amount (balloon payment) is what you need to pay to settle the finance agreement. You borrowed this money, so you have been paying interest on it but you haven’t been repaying any of the balloon amount.
Alternatively, you can give the car back to the finance company, which would also settle the agreement.
If you want to keep the car but don’t have £13K available, you need to borrow that money from either the same finance company or another lender. So yes, you will be paying interest on the new loan as well as the money you have already borrowed.
There’s nothing wrong with a PCP agreement per se, but you need to understand the product you are signing up for. You seem to have misunderstood entirely what your financial obligations and commitments are.
For more information on how a PCP works, have a read of our explanation of PCP car finance.