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.

456 Comments

  1. Hi, very interesting site.
    I have a question and will try to explain it as best I can. At the end of the pcp agreement, let’s say 2 yr term, the final value was fixed at £7000 by the finance company. At this point you take the vehicle back to the dealership and the market forecourt value is let’s say £8500 for an identical car. Does the finance cmpy allow this difference as your deposit on another agreement £1500? Or only allow what the dealership would buy it for ? bearing in mind that the dealers would want to make a profit on it? I suppose another way of putting it is——–is the final value a trade price (what the trade would pay for it) or a retail price .
    Thanks

    Reply
    • stuart

      Hi Andrew. The price a dealer will buy your car for is obviously less than they will sell it for, as they will need to add their costs and profit margin to get to their sell price. If they are advertising an identical car for £8500, then chances are they paid £6000-6500 for it.
      The final GMFV value (£7000 in your example) is what you owe the finance company. If you can get anyone to pay you more than this for the car, then you still have to pay the £7K but you keep the difference. If the car is worth less than the GMFV but you have fulfilled all the requirements of the PCP, then they guarantee to honour the GMFV and give you £7K for it to clear your finance. If you sell it to a dealer or part-exchange it, then yes you will be getting a trade price.

    • Stuart,
      If I had the savings to pay the GMFV at the end of my 2 year PCP, am I best to do this and then sell the car privately to get a better sale price and give me more money to go into my next PCP
      MARK

    • Stuart Masson

      Hi Mark. If you feel that you can get a better price selling the car yourself, then by all means pay the finance company and do so.

    • Sorry to bother you, Stuart. Been reading your excellent articles. It seems the ‘original agreement’ is the amount financed PLUS all interest. I have a PCP (Audi) where the original purchase price was c. £36825. £8,000 deposit. Amount o/s after about 8 mths is £27,800. In the agreement it says termination rights is £20763! The GFV is £19,800. I ignorantly thought that a VT would be at £28825 (amount financed) MINUS £19800 (GFV) /2= 4512 being the amount having to have been repaid as a minimum. Thus £28825 – 4512 would mean reducing the debt to £24,313 to trigger the VT option. But it isn’t, apparently. Am I being misled by the agreement? Thanks. Shane

    • Stuart Masson

      Hi Shane. The VT amount is half of the total amount payable, which includes the GMFV. SO if the VT amount is £20,763, the total amount payable (including all interest and fees) would have to be £41,526. That sounds about right for a car that was originally £36,825.

    • Hi can you help me ASAP please. I’m buying a car on pcp or car hire loan. On 10% rate. Car is 16000 deposit is 6500 and over 3 years. Ive been told I can pay lump sums after 3 months and pay the car off early. Is this true or do you have to pay till the end of the three years. They said if you pay early you save on interest.?

    • Stuart Masson

      Hi Wahida. You can settle the finance at any time by paying whatever is outstanding. If you contact the finance company, they will be able to provide you with the current settlement figure (it changes all the time as interest is calculated and you make your monthly payments).

      If you are settling the agreement after three months, you will pay a charge for settling early but this will be much less than the interest you will save (you will only be paying for three months’ worth of interest instead of three years).

  2. Hi,

    I bought a car in November 2013 £34k with £12k deposit. I hardly use the car as I commute by train for work. I have done only about 4k miles since owning the car. How can end my contract and what sort of return am I looking at from my initial deposit?

    thanks

    Reply
    • stuart

      Hi M3. As outlined above, you can sell the car but will need to settle the outstanding finance. Since you had a large up-front payment, you may be lucky and make enough from the sale to cover the finance. Contact your finance company to get the settlement figure. If you are selling the car to a dealer, the dealer will settle the finance; if you are selling it privately, then the finance company may want your buyer to pay them directly rather than paying you and you settling with them.

  3. Hi
    I have around 6 months left on my PCP and have been told by my dealer that my car has £1800 equity against a new car. I am considering getting my next car through the NHS lease car scheme. If I hand my car back in 6 months and there is still some equity will I get the difference back from the finance company?
    Or am I able to sell my car if there is finance outstanding on it and then pay it off?
    Any advice would be appreciated!

    Reply
    • stuart

      Hi Jools. If you simply give the car back at the end of the PCP, you will not get any equity – you simply give it back and the finance company either wins or loses depending on how much it’s worth against your GMFV/settlement. You can sell the car yourself which may yield you a higher amount, in which case you can keep any equity over and above the GMFV/settlement figure. Check with your finance company first, as they sometimes have strict conditions about selling the car privately (the buyer may have to pay the finance company directly for the settlement figure, rather than paying you and you then paying off the finance company).

  4. Hi
    I have around 6 months left on my PCP and have been told by my dealer that my car has £1800 equity against a new car. I am considering getting my next car through the NHS lease car scheme. If I hand my car back in 6 months and there is still some equity will I get the difference back from the finance company?
    Or am I able to sell my car if there is finance outstanding on it and then pay it off?
    Any advice would be appreciated!

    Reply
  5. I am currently looking to buy a new vw cc and at present vw are offering £4000 off the price of a the car if you take it through their finance. In order for us to get this deal we have been informed that the only way we would get this is if we take out the finance and then after one month we could clear off the finance and it would only have cost us the first payment of around £300+. The salesman said that is correct but it would still save us around £3,600. I am really unsure of this, can you please advise me if this is correct. I have the money to pay it outright and can’t believe I can’t get the same deal with cash in hand. I am treating myself as I have just retired and don’t want to get stung, can you please advise me. Thanks Dave

    Reply
    • stuart

      Hi David. Rather than wait a month and pay fees + interest, you can cancel the agreement within 14 days of the finance being activated and pay no interest or fees whatsoever. You will immediately be invoiced by the finance company for the amount financed, which you simply pay them. You will still have benefitted from the deposit contribution as they can’t really reclaim that from you (sometimes they try it on, but usually they don’t bother because they know they can’t).
      The salesman probably wants you to wait until the first payment has come out so they get their commission on the finance sale. Never forget that everyone you talk to at a dealership has a financial interest in everything they sell you…

    • 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

    • stuart

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

  6. Hi Stuart,

    Your site is very helpful – thank you. I just have a quick question, I wonder if you can lend any advice please? I entered into a PCH deal for a Fiat 500 in Jan 2013 at £152 per month for 3 years. I put down a £1,000 deposit and have an annual mileage agreement of 15K. The APR is 4%. I’m happy with the car and was planning to keep it to the end of the contract, and then potentially trade in the equity as a deposit for a finance contract on a new car.

    The dealership has however just contacted me (18 months into the contract) to offer the chance to swap the car early, and has offered me the exact same model 64 plate for £160 per month, same terms and conditions as listed above. The APR is 9%. I feel that this is a good deal, particularly given that there is some damage to the car (chip in windscreen and scuffed alloys).

    Would you agree that this is a good deal and worth going for? Do you see any disadvantage to me agreeing to this offer? Should I be concerned at the difference in APR?

    Really grateful of your advice, thanks.

    Reply
    • stuart

      Hi Hannah. Have a very careful check of the specification to make sure that it is indeed exactly the same model with the same equipment. Assuming that’s all good, have a look at how Fiat has got to that price. If you are only paying £8/month more (so £288 over 3 years), but the interest rate is higher, then they may well be pricing the car a bit lower. Manufacturers will play with discount and interest rate to get to a price point, but at the end of the day it doesn’t really make a difference to you.
      By your explanation that the new T&Cs are the same as the previous agreement, I assume that you are putting in another £1000? Bear in mind that this means your previous £1000 deposit has only been spread over 18 months rather than the intended 36 months, so you are having to find another £1000 cash about 18 months sooner than expected, which is an extra cost you weren’t expecting.

  7. Hi
    I have a pcp that I pay 156 a month over 3 years with very low interest. I agreed a very low mileage for the final value. My circumstances have changed dramatically and I have now doubled the mileage agreed. What is the best thing to do?

    Reply
    • stuart

      Hi James. Normally you can contact the finance company and ask them to recalculate your GMFV and payments to account for your additional mileage. You start paying more per month to cover the lower GMFV at the end of the agreement.

  8. Stuart,
    Back in March 2014 I took out PCP on an AClass MB Agility, estimated I would do 90k miles over 4 years. Deposit, £1000, monthly £380. Total Value around £28k.

    Within 6 weeks Id changed jobs and don’t need to use the car at all! Miles are about 6,000 at present.

    Any way the finance company will reduce the payment based on lower annual miles (they do it for more miles? – flawed logic I think). In terms of sale ia think I will lose too much?

    Reply
    • stuart

      Hi Paul. No, MBFS (and any other finance company) will, at their discretion, allow you to bump the mileage up if you pay extra. But they won’t allow you to reduce the mileage and enjoy a lower payment. All you can really hope for is that because your car has a much lower-than-expected mileage at the end of the agreement, it will be worth more than its GMFV.

  9. Hi Stuart, my daughter has a vw polo 1.2 on a 3 year pcp. She pays 163 per month. At very short notice, she’s going to work in Italy and wants to get rid of car. Car is registered from 1st November 2013 so she’s not been a year yet into the agreement. How can she end the finance early? We can’t afford to make the payments for her. Any advice please ? Thanks. Kay

    Reply
    • stuart

      Hi Kay. Unfortunately the only option is to sell the car and pay the outstanding balance back to the finance company (presumably VW Financial Services) as outlined in the article above. The settlement on the finance is likely to be greater than the value of the car, so she/you will have to come up with the extra cash to pay it off.

  10. Hello, I have a 23k golf on PCP and I now need to get a mortgage and downgrade my car as it’s taking a big chunk of what I can borrow based on my income. I am 10 months into a 48 month contract payments at £350 a month. Is there a better time to swap my car, should I wait a little while or down grade as soon as possible? vw have said I won’t pay a penalty and it will be a renewal / repeat purchase but would I be better keeping the car for another year based on the most depreciation happening in the first year?

    Reply
    • stuart

      Hi Beth. It will be a question of how rapidly your car is depreciating compared to your repayments. If you settle up now, you will probably have to pay out a lot of extra cash, however you end up paying less overall (because you are saving interest on all of the last 38 payments you won’t make). If, for example, you keep the car for one more year, you will end up with less cash to pay out but will have paid more in total because of the additional year’s interest you will have paid.

      There’s no real right or wrong, it’s more a matter of working out what’s best for your cashflow and overall budget.

    • Thanks! I’ve now resolved the issue :) thanks for your help and advice!

    • stuart

      Hi Beth. Glad it’s all sorted, hope you’re happy with the outcome.

  11. Hi Stuart, I have a PCP with BMW finance and am now 12 months in to a 48 month contract. Unfortunately, my personal circumstances have changed and I now find due to massive drop in income I cannot afford the circa £490 pm payments (part current PCP and part negative equity loan). I contacted the BMW dealer who cannot help and also BMW FS with whom I entered into a short term agreement to pay 3 months of PCP at 50% and 3 months neg equity loan at 50% and 3 months at 150% for 3 months to bring agreement back in line by January 2015. I will not be able to pay the 150% payments as this will be circa £780 pm so again contacted BMW FS with a proposed return of vehicle via their dealer plus an affordable monthly payment to settle outstanding finance. The dealer offered £14,500 to buy car but BMW say this is unacceptable and that I should seek to increase the sale [price through other dealers or a private sale. I offered to return the car via the dealer and to pay off the negative balance at £200 pm which is just about affordable but I will be car less and likely to be unable to get credit for a new car. My understanding is that I can VT the agreement anytime under CCA but will I be liable for the whole outstanding sum and have the issue as a credit recorded default against me as BMW suggest?

    Reply
    • stuart

      Hi Paul. Sorry to hear it’s not worked out as planned. So far you’ve done everything right, but ultimately you still have a large borrowing that needs to be serviced. I doubt you will qualify to voluntarily terminate the vehicle just yet (have a read of this article about voluntary termination rights) as you need to have paid back 50% of your total amount owed and you are probably still well short of this.

      If you sell the car, you may get to your 50% to voluntarily terminate. Be very clear with BMW that this is what you want to do – if you talk about “settling the finance” they will calculate a much higher number for you to pay. Your contract should tell you the total amount payable and should have a clause on voluntary termination. Read it carefully. IF you carry it our correctly, there will not be a default recorded against you as it is your legal right to VT the car without penalty. However BMW probably won’t finance you again since you didn’t complete the loan in full.

    • If you have insurance get someone to write it off for you ;)

  12. Hi Stuart,
    I really couldn’t afford to pay for the explanation you’ve just given in this article. I bought my Nissan Juke last year but soon realized that neither was the car large enough for my needs, nor did I understand any DETAILS of the PCP agreement he sold us.
    Finally I know what it is all about. Thanks to you brother.

    I was just thinking of upgrading, but now I realize I’ll be better off just being patient and wait at least until the initial 3.5 years pcp have elapsed.

    Thanks again.

    Reply
    • stuart

      Happy to help, Juked. Feel free to share a link to the site with all your friends and family via every social media network you have ;)

  13. Hi Stuart,

    Very helpful site.

    To cut a long story short. I am not entirely happy with a PCP deal I have. I collected it almost two months ago now, having signed all that was asked of me. Weeks later, the dealer contacted me to say the finance company are not happy with the signatures, as they don’t match my license. As time dragged on and me attempting to resign as requested, it appears that I have indeed signed the ‘vehicle order agreement’, but I have not been asked to sign the ‘written summary’ agreeing to the terms of finance.

    Basically, I can no longer afford the payments(very stupid of me, I know). What is my stance on this matter? Can I request return of the vehicle? Can I expect my deposit back, etc? What are the implications, essentially.

    Any advice would be great.

    Reply
    • stuart

      Hi David. Well, the dealership has erred in handing you over the car without having a signed finance agreement. This almost certainly means that the finance company has not paid the dealer for the vehicle. However, from a practical point of view, you have accepted the vehicle and have been driving it for the last two months, so you have effectively accepted the terms. Realistically, you can’t expect to simply give the car back, take your refund and walk away. Your car is now worth considerably less than it was when you took delivery, simply due to depreciation. They will expect you to pay up, and failing that, they may be interesting in coming to some agreement with you. But it is still likely to cost you quite some money.

  14. Hi Stuart, thank you for an interesting article.
    I am purchasing a Golf for £26000 and financing £18000 on PCP with 7% APR, £48 monthly payments of £260 + final payment. I will be getting a bonus from work next year of £9000 and was considering paying off the PCP with that plus a bank loan (apr 4%) for the remainder . However, having read your article would I be better off with a bank loan for the entire amount and reduce that next year if I am likely to be charged for any negative equity in the car?

    Regards

    Simon

    Reply
    • stuart

      Hi Simon. Ultimately it depends how long you plan to keep the car, and what the net costs to you will be via each method of finance. With a PCP, you only pay the depreciation cost over the total period, so your monthly payments will be less than an HP or a bank loan for the entire amount. The flip side is that you would not really expect have have any significant equity if you sell/PX the vehicle at the end of the agreement. However, if the APR is higher then you will be paying more interest on your borrowing.

      There is no right or wrong way to go about it, it depends on what you are trying to achieve in terms of cash flow vs. overall costs. Also, of course, a PCP or HP is secured against the vehicle whereas a bank loan is not.

  15. Hi,

    I have a mazda mx-5 and I’m 13 months in out of 42 months… I was hoping to get a new audi or something different as my car is a 2 seater and i think i might be better off with a 4 seater now… would i be able to just walk into an audi dealership and swap cars and pay whatever the difference is ?

    thanks, hope that makes sense

    Reply
    • stuart

      Hi fuzzysham. Yes you can go to an Audi dealer to part-exchange your Mazda, but it will involve more than just ‘swapping the cars and paying the difference’. You will need to settle your current finance contract with Mazda, which will almost certainly involve you paying out the difference between what your car is worth and what you still owe. The Audi dealer can take care of this for you, but it will still probably cost you a few bob before you can work out how much to spend on the Audi.

  16. Hi Stuart

    I can get an New Audi A6 for £2500 cheaper if I take finance. I have the capital to purchase out right, but it will be £2500 more. I was thinking of taking the finance and putting down a 50% deposit. Car is £34000 so £17,000 deposit and then funding the balance of £17000. I was then planning on paying off the £17000 in the next 3 months. I have asked the question about what the repayment charges or any penalties will be and im being told that they can not give me a figure if I settled early lets say in 3 months. Would you know what penalties or charges you normally incur (e.g 3 months of interest, etc) if PCP is settled early?

    Thanks

    Bim

    Reply
    • stuart

      Hi Bim. Yes you can take the finance from the dealer and pay it off sooner. If you choose to do so, then it is best to do so immediately (within the first month) to minimise the fees an interest. However, what you can usually do is sign up for the finance to get the £2500 deposit contribution, then after you take delivery of the car you cancel the finance. You have 14 days to do this. Audi Finance will immediately invoice you for the amount borrowed, which you pay off since you already have the money. No fees, no interest; it’s your legal right to cancel the finance within 14 days. It will not affect your credit rating either.

    • Thanks Stuart for the advice. Would you know if I loose my £2500 deposit contribution of I cancelled within 14 days?

      Regards

      Bimal

    • stuart

      Hi Bimal. You shouldn’t lose the deposit contribution unless they have written a clause into the contract. Have a read of this article, which contains more information on deposit contributions.

  17. Hi Stuart,

    I’ve never taken up a PCP deal before since i have always been risk averse. I’ve bought cars I can afford with little or no finance. The deal I’m considering is for a land rover discovery retailing at £48k, however I get 20% discount which brings the price down to circa £39k. I have been offered GMFV of £25k in 3 years, so with a £4k deposit I will finance £10k. I planned to sell the car after 12months to buy another discovery, I expect to sell the discovery at the same price as I bought it, therefore the only thing I should be paying is the interest of the £10k finance over the 12 months.

    This all sounds too good to be true so I thought I’ll post this just to check if there’s anything which may catch me out.

    Thanks

    Jason

    Reply
    • stuart

      Hi Jason. I’d be very cautious about taking a 3-year deal on this model and trying to sell after a year. The reason that Land Rover is offering 20% off the Discovery is because it is at the end of its life and about to be replaced by a new model. It will take a massive depreciation hit early on, and only get close to its GMFV by the 3-year mark (and it is a very strong GMFV offer under the circumstances). If you sell after a year, you will almost certainly have a lot of negative equity to clear.

      You are also calculating the interest incorrectly. You pay interest on the full value of the amount borrowed, which includes the £25K GMFV, so you are paying interest on £35K not £10K. This will hurt your 1-year settlement position even more, as you are basically repaying £35K-worth of interest up-front and then selling a car which is worth a lot less than your settlement.

      That’s why it sounds too good to be true…

    • Hi stuart, thanks for the prompt reply. The point you make on the interest calculation was new information for me and it’s enough to put me off taking out the PCP since I think I can get a better deal using a personal loan instead and take ownership of the car in my name offering more flexibility when reselling.

      However the 20% discount I feel is still quote generous because the discovery replacement isn’t planned until late 2016 so im predicting strong resale values in march 2016.

  18. Thanks Stuart you’re a star! Should I ask for all of the terms and conditions? If so do you know which terms and conditions I need to ask for?

    Love this website, it’s brilliant!

    Reply
    • stuart

      There should be a full set of terms and conditions as part of your agreement. You have the right to read these and take them away from the dealership before signing, regardless of what the dealer might try and tell you to the contrary.

  19. Hi,

    Due to expecting our first child we have just taken out pcp on a 62plate qashqui £219.00 pm over three years, putting in £1800 deposit I’m 1-2 months into the agreement. My husband has just come home in a 14 plate new shape qashqui which I love , why didn’t we consider a new one ! What sort of cost or penalties would I be looking at to settle my pcp early ??

    Thanks
    Diane

    Reply
    • stuart

      Hi Diane. You will probably have to pay a fair chunk of money to get out of the car so soon into your agreement. The car’s rate of depreciation is much quicker than you are paying off early in the agreement (even though it’s a used car), so if you try and sell the car back to the same Nissan dealer you bought it from, you will get a very rude shock at what price they offer you. Best bet financially is to stick with what you’ve got for about two years and then change it. You can change it earlier, but it will probably cost you a fair bit of money and it’s likely you’ll have plenty of other expenses to come between now and then!

    • Stuart, which is better? PCP or PCH

    • stuart

      Hi David. The decision as to which is better for you will depend on your circumstances and the specifics of each offer. Some brands push their PCP deals harder, others give the best deals on PCH. Have a read of this article which compares the two finance products.

  20. im about to sign the document for PCH and at the same time thinking of changing to PCP.

    Reply
  21. hi

    im interested in purchasing a used mercedes car for 38k with a 25k deposit but would like to know if its best to take out hp or pcp? i plan to pay off the debt in 6 months but what would work out better to avoid paying out to much interest. I have looked at taking a bank loan but as I have recently taken out a mortgage I don’t think the mortgage will allow me to borrow.

    what would you recommend? we are buying the car from a mercedes dealer.

    Reply
    • stuart

      Hi Tony. It is unlikely to make any significant difference to your overall cost if you are going to pay it all off within 6 months anyway. Usually the APR will be virtually the same for both HP and PCP. What you should do is take the finance over the shortest term possible – it might increase your interest rate slightly, but it will bring the Total Amount Payable down. The first 6 months of payments will be higher, but you will save money overall once you have settled everything.

  22. Hi Stuart

    So if i took hp there minimum term length is 2 years and if you pay off early its 3 months interest…I take it if i pay off in 6 months I will be making a huge saving than taken a 3 year term?

    Wouldn’t it be better to take out a 3 or 4 year term where the interest rate would be less so when I pay off the debt in 6 months the interest they calculate is what I fixed at the beginning of my term and would be much lower than taking out a 2 year term?

    Sorry but I have never taken finance options before and want to make sure that what ever I take I don’t pay too much interest as I am already losing money on buying a car I don’t want to be losing loads more on paying the loan because of interest paid.

    Reply
    • stuart

      The longer the term, the more interest you pay on the borrowing and the higher the Total Amount Payable, even if the rate is lower. Therefore after 6 months, you will have paid off less of that total. The Total Amount Payable is the number you need to look at in your situation. Again, if you are settling after 6 months then it really won’t make a lot of difference to the overall cost.

  23. Stuart – great site, if only more were this helpful! I would be interested in your opinion on the situation I am in. I am within the 14 day cancellation period on a PCP I have taken out on a used car and have realised I am probably better off paying the car with a loan (lower APR) – even if I stretch the loan repayments out longer than the PCP duration to maintain a cash-flow. On my finance agreement it has a figure for amount of credit and a figure for total charge for credit. The sum of these figures is obviously what I am about to start paying back monthly and in the final balloon payment. I was wondering if I cancel this agreement in the 14 day period what I would have to pay back – is it just the amount of credit or would I owe the charge for credit also? (The charge for credit is quite hefty so would affect the loan amount I would require).

    Reply
    • stuart

      Hi Hamish. If you cancel the finance agreement within the 14-day cooling-off period, you will be immediately invoiced for the amount borrowed. The finance company cannot charge you any fees or interest when you do this, and it will not affect your credit rating. However, you will have a limited time to pay the finance company back, so you need to be approved and have been paid by the bank in very short order to make sure you pay the finance company off on time. For more info, have a read of this article.

  24. Hi Stuart so your saying since I’m paying back in 6 months time it wouldn’t matter what length I have? I was thinking if I take out the 3 year period the interest is less and fixed, mercedes say when paying off early you pay just 3 months of interest.

    Reply
    • stuart

      You will pay a fee for settling early (the three months’ interest), but you save all the interest that you would otherwise pay over the remainder of the agreement. The main difference between taking out (for example) a 2-year HP and a 4-year HP is that you will have paid off more of the 2-year HP by the time you settle, so your total cost will be less. But as I have said, it won’t make a massive difference.

      The most important thing in your situation is being sure that you will settle after 6 months. Plenty of people have gone into an agreement with a similar idea and, for one reason or another, not settled early as planned so end up paying a lot more in total by the time they do eventually settle.

  25. Thanks Stuart. Do you know when the 14 day period starts – the date of me signing the finance agreement or the day I pick up the car?

    Reply
    • stuart

      As a rule, 14 days from when the contract is activated (ie – when the finance company pays the dealer for the car, usually the day of delivery or the day before). This is to stop finance companies sitting on the contract for a couple of weeks after you sign it, and not activating it until the cooling off period has expired. However, I would strongly advise acting as early as possible rather than waiting the full 14 days. If anything gets delayed or dragged out past the cooling off limit, you may lose the right to cancel without charge.

    • Thanks for your help Stuart. I managed to cancel my PCP and obtain the loan so have ended up happier with my finance arrangement.

    • stuart

      Hi Hamish. Really glad to hear that it has worked out well for you. Enjoy your new car, have a great new year and feel free to tell everyone you know how great this website is ;)

  26. Hi I’ve recently (3 months ago) purchased a Nissan juke on finance £223 over a 4 year period. Due to many circumstances I’m struggling to pay this along with insurance every month. I’ve heard there’s no way to take it back. Is this true?I have no money to pay a large amount for cancellation. Is there anything else I can do?

    Reply
    • stuart

      Hi Abby. Unfortunately there is no easy way out of it. The problem you have is that your settlement figure right now would be more than the new car price (because you have additional interest and fees which you have barely started to repay), but your car has already lost a large chunk of its new car value due to immediate depreciation thanks to VAT and other costs (see this article on depreciation for more details). So the only way you can get rid of the car is to pay out a large shortfall, which you have said you don’t have. Best bet is to contact the finance company and discuss your options with them. They may extend the loan period at a reduced payment or offer some other solutions, however fundamentally you are committed to keep paying back the money borrowed.

  27. Hi Stuart,

    Great help and advice on your site.

    I’m 14 months in to a 24 month PCP agreement, unfortunately my car has been written off by my insurer after an accident, which was my fault – no one else involved luckily. Where will I stand with the PCP agreement?

    Reply
    • stuart

      Hi Paul, sorry to hear about your accident. Unfortunately your accident does not alter your PCP situation, in that you still owe the finance company all the money as set out in the agreement. You will need to request a settlement figure from the finance company (if you are settling early, you will save on the interest you would have paid for the remainder of the term) and then hope that your insurance payout covers your settlement. If there is a shortfall then you will have to pay this yourself.

      Don’t be afraid to haggle with your insurance company over the payout figure as well. It’s a common tactic for them to try and low-ball you on the payout, then bully you into accepting it. Do your research as to what your car is really worth so you can hit back with valuations if necessary.

  28. Hi Stuart,
    I currently have an Audi S3 on a 4 year PCP deal. My mileage per year is 15k Miles on the agreement, however, at 12 months of owning the Car my mileage has exceeded this considerably (23k miles) and will continue to be around 23k miles per year for the remaining 36 months. My penalty for excess mileage is around 7 Pence per mile. Would I be better to start a new PCP deal (paying any negative equity) or wait it out further and be faced with the excess mileage charges?

    Kind regards,
    James

    Reply
    • stuart

      Hi James. You won’t be able to start another PCP on the same car, so you will need to work out whether it is worth settling your current PCP and part-exchanging your S3 on another car. It is likely that your current negative equity position is quite large, so you would probably have to shell out a large amount to get rid of your car. You should be able to call Audi Finance and get them to up your mileage allowance. This will put your monthly payments up, but will help reduce your negative equity over time.

  29. Hi Stuart,

    I have a Nissan Juke on PCP since May 2013. It is not big enough for my family needs so I am interested in changing the car. My husband has left so I do not have his income to help with the monthly repayments of £285 either.

    I have found a car I like for £10599 and they have offered me £9039 for the Juke. I have fully explained about the PCP I have and given them the settlement figure from RCI Finance. They are insitant that I only need to pay £1560 to collect the new car. Surely this can’t be right it seems too good to be true!!

    Please advise I have nobody to ask.

    Thank you.

    Reply
    • stuart

      Hi Rhiannon. The dealership should be able to provide you with a full breakdown of how they have arrived at their numbers. Based on what you have said, they are covering the Juke’s settlement amount (which you will have from RCI Finance) and there is no deposit on the new car.

      Check what your monthly payments are and how long the term is over. It may be that in order to reduce your deposit the dealer has extended the term. Or it could simply be that there is a good deal on that car.

  30. Hi Stuart.

    I just had a question about my pcp contract. I am 3 months into a 3 year pcp contract with mercedes. I was just wondering at the end of the pcp contract does the GMFV value need to be paid in full or can a new finance contract be started to pay off the GMFV value over a period of time if I cant afford to pay it in full.

    Thanks.

    Reply
    • stuart

      Hi Mike. Mercedes-Benz Finance does not allow you to re-finance the GMFV through them, which means that you have to go to your bank (or another bank/finance company) to pay off the GMFV to Mercedes-Benz. However, your monthly PCP payments include interest on the GMFV, so if you are borrowing money to pay off the GMFV then you are paying interest twice on that amount.

    • Thanks for the reply. So if I can’t afford to pay the GMFV at the end of the contract then the other options be to return the car or to get another car on pcp?

    • stuart

      Hi Mike. Yes that’s right – you either give it back or part-exchange it on another car. The disadvantage of PCP financing is that it tends to push you into a cycle of continually changing your car and starting another PCP.

    • Thanks for your reply. If I decide to part exchange it for another car, can it be with any other car manufacturer?

    • stuart

      Yes Mike, you can change it for any other brand of car. The dealer where you are buying your next car will settle the PCP on your behalf as part of the next deal.

  31. This is an excellent article and very informative.
    I am in the process of purchasing a new Audi A6 Avant and in order to benefit from the best price I am being ushered down the route of a PCP agreement.
    I have the cash to buy the car outright but the cash deal is £2,250 more than the PCP price.
    Obviously, I’d much prefer to pay the lower price.
    Can I avail of the PCP deal and settle it or does this incur a fine?
    I did ask the dealer but he said he was unable to comment on this.
    Many thanks in advance.

    Reply
    • stuart

      Hi John. Yes you can certainly do this; have a read of this article. As long as you settle the finance within 14 days, you will incur no fees or interest and still benefit from the deposit contribution.

  32. Hi Stuart,

    I found this article fantastic, thank you! :-)

    I wouldn’t mind asking some clarity on my PCP agreement that I have for my Mazda 2 (from a Mazda dealer). I am 30 months into a 42 month PCP, paying ~£140 p/month, with a GFMV of £3k, and the car was worth ~£9.5k. I paid a deposit of £3200 initially.

    What would be my options if I wanted to return the car now to Mazda? Can I just hand it back, or will I require to pay a settlement fee, I would imagine now that I’m over the 50%, in which case could do “a voluntary termination”, but by doing that, will it affect my credit standing?

    I hope this makes some sense!

    Thanks,
    Paul

    Reply
    • stuart

      Hi Paul. You should be able to voluntarily terminate the agreement and return the car, as you should have repaid over 50% of the total amount payable. It won’t affect your credit rating as it is your legal right (read the linked article for more info).

  33. Hi. I have a pcp taken with Mercedes finance. Period was 4 years with annual mileage @ 10k with advise from the salesman knowing my actual mileage would be higher. After 3 years I have done 125k. The agreement states 0.09p penalty per mile over the annual 10k. I have had all services done by same Mercedes dealership, it’s condition is very good even with its milage. Can I give the car back now without paying the penalty? If not what is my best course of action?
    Many thanks Ian

    Reply
    • stuart

      Hi Ian. If you knew the mileage of the agreement was far lower than you would actually be doing, why did you sign the agreement? If you are three years into a four-year agreement, you should have paid back enough to be able to voluntarily terminate the agreement and give back the car. Check your contract for the exact figures.

  34. Hi Stuart

    Very informative article. I have 7 more payments of £165.79 to make on my PCP agreement which will make 43 payments in total. The final payment will be £3920. If I settle now it will cost me £4799. My car is just over 3 years old with a mileage of 16400. My question is this, is it better for me to settle now using my savings and keep the car for a few years. Would it be better to wait until I’ve made the 43rd payment and then pay the final amount using my savings. Or would it be better to wait until the end of the agreement, give back the car and use my savings to get a good second hand one.

    Thanks for any advice.

    Reply
    • stuart

      Hi Leona. If you are going to keep this car, it won’t make a substantial difference whether you settle now or settle at the end of the contract. If you settle now you will pay slightly less overall, but it’s probably no more than a couple of hundred pounds. The main benefit of settling now would be peace of mind that it’s all done, if you have the funds available.

      If you like your current car, you are probably better off settling and keeping it rather than replacing it with a similar used car. If you were going to buy your current car as it is now from a dealership, it would cost you more than the settlement fee simply because you have to pay for the dealer’s costs and profits on top of the value of the car.

  35. Hi

    My partner has a three year vw up, we put a £3000.00 deposit down, but looking through the paper work we cannot find the GMFV on the finance information only the final ballon payment,

    How can we find out what the GMFV was three year ago as we have been asked if we want to upgrade by the garage, my concern is there no equity in the car. As the garage have asked us to put £300.00 deposit down with increased payments and over a longer time period.

    Reply
    • stuart

      Hi Peter. Assuming your parter has a PCP (Volkswagen Solutions), your GMFV is the balloon. It is normal at the end of a PCP agreement for you to not have any equity in the car (despite what car salespeople usually promise!). Usually the car’s value is similar to or slightly less than the GMFV/balloon, so you basically just give it back and start a new agreement based on whatever offers are in place at the time.

      It’s not unusual for a new agreement to be more expensive than for a similar car on a previous agreement. Manufacturers and dealers may have been doing deals on particular cars three years ago that they are not doing today, depending on supply and demand.

  36. Hi Stuart
    Bmw have offered me 520d m sport in white standard m sport features sat nav leather seats etc they offering 3k for my 320d that’s 06 plate and done 140k. They giving me 4 year deal with 25 mileage each year for monthly cost of 470. Is this a good deal or not. Thanks

    Reply
    • stuart

      Hi Raja. We can’t comment on whether any deal is any good or not, because there’s not enough information to analyse it, and it would quickly spiral out of control as everyone asks for advice on deals they’ve been offered.

      What you should do is speak to at least one other dealer and see what sort of quote you end up with from them. There shouldn’t be a great deal of difference, but they may offer you more (or less) for your current car, or they may have a perfect car for you in stock now that they are prepared to do a better deal on.

  37. Hi Stuart, im about to enter into an agreement on a ford fiesta i get ford discount because my dad works at Ford. The dealer keeps telling me that people with ford discount are better off to exchange the car every year and get a new one. Is this true? or is it better to hand the car back after the 24 months term and start a new agreement?

    Thanks,

    Luke

    Reply
    • stuart

      Hi Luke. The dealer would love you to change the car every year, but it’s unlikely to be the most cost-effective option for you. Get a quote on both 12 and 24 months and see what the difference is. It may be that there is not a huge difference, but a 24-month agreement should yield a significantly lower monthly payment.

      Also remember that most new agreements require you to put up a cash deposit, so if you take a 12-month agreement then you will be having to find another deposit for your next car within a year rather than after two years.

  38. Hi, I am thinking of getting a Scirocco on PCP with VW Solutions, their interest rate for the monthly payments I’m looking at is really high at 17/18% APR. I only plan on keeping the car for the duration of the PCP and hand it back at the end. Should the interest being this high really affect me as I do not plan to purchase the car fully. Cheers

    Reply
    • stuart

      Hi Dan. I am guessing that you are buying a used car? I can’t imagine that VW Finance would have an interest rate anywhere near that high on a new car.

      A PCP is a cashflow agreement, as you don’t intend to keep the car, but such a high interest rate is still relevant as it is pushing your monthly payments up significantly. I would have thought you could get finance at a far better rate – try another VW dealer or other finance companies like Santander or Black Horse.

  39. Hi, I have a 4 year PCP agreement on an Audi A6. I’m almost 2 years in and want a change. I contacted the dealer who has said I have about £4k negative equity. However the price they would give me fit the car seems lower than I thought it would be worth when I compare my car to others on private sale and Parkers guide. I think they are being over cautious or more likely want me to invest more.
    Given the competiavtive market of selling cars I’m think of speaking to a BMW dealer to see if they would give me more for my car and a good discount? Can another dealer from a different brand pay off my PCP agreement? Would they want to or be willing to? Thanks

    Reply
    • stuart

      Hi Mighty. Two things: 1) your car is almost certainly worth less than you think; and 2) they probably are offering less than they could do, in case you say yes. This is called lowballing and almost every dealer will do it. You are under no obligation to accept it if you don’t want to. By all means shop around with other Audi dealers or BMW dealers; you may see a surprising variation in offers.

      Always take any prices/valuations you see online with a large pinch of salt. Private sale ads can tell you what sellers are asking, but they don’t tell you what they eventually sold for – it’s usually less than the asking price. And no-one in the industry uses Parkers. Dealers use CAP and Glass’s as a starting point and then make their judgments based on the condition and specific details of your car.

    • Thanks Stuart. It will have to be a large pinch of salt as its circa 20% difference. Would another dealer clear the negative equity of my car and add it to the cost price of a new one? I’m think of a non Audi dealer.

    • stuart

      Most finance companies won’t allow you to finance negative equity, especially on a PCP, as it is setting you up for big problems if you need/want to end the new agreement early (you would be even further behind than normal early on in the agreement), so you will need to pay off any negative equity separately to the new PCP.

      20% is not unusual. Given that a dealer will usually undervalue your car and hope you’ll say yes, and most people overvalue their own cars, it’s very common to find that sort of difference between what’s expected and what’s offered. By all means ask the dealer to show you the CAP and/or Glass’s values that they will be using to assess your car, and to justify any variation between that and what they are offering. A good dealer will happily show you how they have assessed your car’s value if they have nothing to hide.

  40. Morning Stuart….we have 2 PCP proposals in front of us…one from Mercedes (C220 SE Auto over 3 years) and one from Audi (A4 Black Edition plus over 4 years). Both have very similar deposits and monthly payments yet the residual value for the Merc is quoted at £17250 and the Audi £12500. The RV on the Merc appears to be very high at 53% of the original price and would lead to negative equity ? We would be looking to change in 2-3 years anyway….which is the best deal you think….we love BOTH cars so not too bothered, just want to make the right choice financially.

    Reply
    • stuart

      Hi Brian. Assuming that you are looking at new or very-nearly-new cars, the Mercedes will have a significantly higher residual value than the Audi. This is because the C-Class is a brand new model (launched middle of last year) and the Audi has been around since 2008, with a new A4 just around the corner. Within a few months, the A4 will be the ‘old model’ and its value will drop considerably. The C-Class will still be the ‘new model’ when you want to change it in 2-3 years’ time, so its value will be higher.

      The Audi should be carrying a hefty discount, so if the deposit and monthly payments are the same, you are hopefully being offered a fair chunk off the RRP (even allowing for the fact that they are covering a larger rate of depreciation).

      I always recommend that car buyers assume that they will have no equity at the end of the agreement, as that tends to be the case most of the time. Set your expectations low and if you do have any, then consider it a bonus.

      By the look of it, and assuming that neither car has any equity at the end, they’re going to cost about the same to own and run. I prefer the C-Class myself, but the Audi engine is definitely quieter and smoother. Both are certainly very good cars.

  41. Hi Stuart,

    I currently have a Mercedes A class on finance (£270 a month) this deal is over 3 years and we have had the car only 10 months but it is now not right for our needs ; we are looking to purchase a Range Rover eqove – could you provide some advice on what we can do as we have only had the car 10 months

    Thanks

    Reply
    • stuart

      Hi Mercedes. I’m not sure what needs you may have where an Evoque will do a better job than an A-Class – they’re not really any bigger inside and will probably cost considerably more to run.

      You can certainly settle your finance agreement as explained in the article above, and I’m sure a Land Rover dealer will be happy to assist you, but it will probably cost you a bundle to get out of it before you can start all over again on an Evoque.

  42. Hi,
    I bought a fiat 500 on PCP in may 2013 and already was in negative equity with a previous car. The deal i have now is over 4 years but i either have a lump sum or need to re-finance the rest. Is there a way i can sell the car early?

    Thanka
    Jennifer

    Reply
    • stuart

      Hi Jennifer. Yes, you can sell the car early, but you will have to settle what you owe – and that is certainly going to be more than your car is worth, especially if they have allowed you to refinance your negative equity. So if you want to sell your car early, it is going to cost you a lot of money.

  43. Hi Stuart , I wonder if you can help me. I selected a car with a dealer a week ago and they didnt take a deposit they didnt seem to be chasing for it, they offered me a good deal though it was on a 64 plate. Since i have been contacted by them and they say that the car must be registered by end of January for the discounts to apply because we are not paying with credit and are paying with cash. They have also asked for all the money up front. Is this normal to request all the money up front? I thought I should just pay a deposit initially and pay in full when i pick it up? The other thing is if its registered on the 31st Jan and they keep telling me they dont have a delivery date surely I could be waiting for 3 months to get the car I cant imagine they will be in a hurry that will leave me with a 64 plate in March, is this normal? Thanks Luke

    Reply
    • stuart

      Hi Luke. I’d be refusing to pay them until the car arrives. It’s normal for them to expect full payment up to 48 hours before delivery, but not without a delivery date and not without the car. It shouldn’t matter how you’re paying for it, cash or credit.

  44. Hi
    I am 2 years into my finance and paid off over half my valuation for part exhange is 3000 and i owe 3660 i would have to pay 660 extra as thsts the diff. However i am a student and iw it possible instead of as someone said the dealership adds the pcp onto a new one can the existing loan of 660 be paid off in several months after part exhange done or do they expect the whole 660 the day the finance is paid off? Many thanks

    Reply
    • 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.

  45. 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?!

    Reply
    • 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.

    • 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!

    • 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.

  46. 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….
    Debi

    Reply
    • 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.

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

    • stuart

      Thanks Debi, hope it all goes smoothly for you.

  47. 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.

    Thanks
    Mark

    Reply
    • 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?

    • 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.

  48. 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 …..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

    Reply
    • 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 http://www.legalbeagles.info – 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.

  49. 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.

    Reply
    • 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…

    • 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.

    • 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.

  50. 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?

    Thanks

    Reply
    • 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.

  51. 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!

    Reply
  52. 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!

    Reply
  53. 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?

    Regards
    Martin.

    Reply
    • 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.

    • 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.

      Regards
      Martin.

    • 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.

    • 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?

      Regards
      Martin.

    • 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).

  54. 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)?

    Reply
    • 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 webuyanycar.com). I’d say you probably still have significant negative equity to clear before you can start again on a larger car.

  55. 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.

    Reply
    • stuart

      Hi Bella. Forget WhatCar? and so on, and get real-world valuations from the likes of webuyanycar.com 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.

  56. 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.

    Thanks

    Reply
    • 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.

  57. 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.

    Reply
    • 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.

  58. 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?

    Reply
    • 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.

    • 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?

    • 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.

  59. 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.

    Reply
    • 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.

  60. 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.

    Reply
    • 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.

  61. 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?

    Reply
    • 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.

  62. 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!
    Thanks

    Reply
    • 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.

  63. 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,

    Reply
    • 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.

    • 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.

    • 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.

  64. 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

    Reply
  65. 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,

    Reply
    • 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.

  66. 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.

    Reply
    • 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.

  67. 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

    Reply
    • 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).

  68. 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.

    Reply
    • 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.

  69. 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.

    Reply
    • 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.

  70. 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

    Reply
    • 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.

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

    • 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.

  71. 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?

    Thanks

    Reply
    • 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.

  72. 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

    Reply
    • 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.

  73. 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

    Reply
    • 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.

  74. 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

    Reply
    • 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.

    • 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.
      Thanks

    • Hi Gavin it was from the Honest John website, if you go to https://www.honestjohn.co.uk/gap-insurance/what-is-gap-insurance there is a 'Quote Me' link.

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

  75. 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?

    Reply
    • 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.

  76. 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.

    Thanks

    Reply
    • 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.

  77. 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,

    Tom.

    Reply
    • 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.

    • 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 :-)

  78. 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

    Reply
    • 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.

  79. 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 ?

    Reply
    • 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).

  80. 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.

    Reply
  81. 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.

    Nik

    Reply
    • 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.

  82. 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.

    Reply
    • 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.

  83. 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.

    Reply
    • 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.

  84. 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

    Reply
    • Stuart Masson

      Hi Rob. I can't find the bit you mention. If you are settling the finance, the mileage (and condition, and service history) will be irrelevant. Excess mileage penalties only apply if you are claiming the GMFV and handing the car back to the finance company.

  85. Hi,

    I'm kinda in a situation where I needed a family car. Here is the story, my previous car broke down on me and is scrapped before I started my new job where travel by car is must. I've been recommended to buy a VW vehicle using their Solution (PCP) finance option and I bought the VW Polo 1.4 TDI 3 door (eco reasons). The vehicle is £12k but the overall total is £16500, I've paid £500 deposit and the monthly payment i £238 a month with a ballon payment at the end. The problem I got right now is the sales person from the dealer said they will put the annual mileage to 16000 but my actual mileage is around 23000. I needed a 5 door car because I have a baby due in a couple of months. The problem is I have a negative equity of £3700. Settlem is around 11k and the car part ex worth £7500. If I let the contract finish which I'm in 1yr out of 4 year, I will get sting with the mileage excess charge. Was wondering what options I've got now?

    Reply
    • Stuart Masson

      Your options are not good in the short-term. If you want to change your car now, you will have to clear your £3,700 negative equity before you can worry about a deposit on your next car. This is largely because you are very early into your agreement, and it should get better over time – if you can do something about your mileage.

      You can call Volkswagen Finance and ask them to increase your mileage allowance. This will mean a higher monthly payment but will reduce the chance of having an excess mileage charge at the end of the agreement. If you continue at your current mileage on your current agreement, you will end up with an excess mileage charge of about £3,000 after four years.

      The longer you keep the car, the better off you should be. But you either need to reduce your mileage or get the allowance increased to cover it.

  86. Hi,
    I have a BMW X1 on a PCP Contract 48 Mths. I like the car and would like to keep it when the plan finishes. Can i re-finance the the final payment and carry it on?

    Reply
    • Stuart Masson

      Hi Darren. You probably won't be able to refinance it through BMW, so you will have to take out a personal loan from your bank.

      Be aware that you have already paid interest on the final payment amount as part of your 48 PCP payments, so you will be paying interest on top of the interest you have already paid if you borrow more money to pay it off.

  87. Hi, my problem is fairly difficult, I had a C30 on HP which I sold to a dealer and bought a V40 on a 48 month PCP in July. After only 2 months and 2 payments my company was taken over and all contractors let go. I am now 61 and unemployed but have taken my pension for extra income. However my PCP cost is £300pm and I need to reduce it somehow but avoid a VT as without a car I won't find a job so vicious circle. Are there any circumstances in which I can negotiate lower monthly payments or can I talk to my dealer and hand back the car and take out another HP or PCP deal. At today I am not struggling but could be in 6 months so am taking note now. Thanks.

    Reply
    • Stuart Masson

      Hi Tony. You can speak to the finance company about lower payments over a longer term, and they may be able to offer some options. However, given that you have a 48-month PCP now, there's not really a lot that they are likely to offer that will reduce your monthly payments. A 48-month PCP gives about the lowest payments possible so I'm not sure what they could offer that would improve your cashflow position.

      There's no point going back to the dealer, as they will not be interested in helping you out either – they may offer to buy the car back, but it will be for a much lower price than what you just paid, and it almost certainly won't cover your settlement figure from the finance company.

      Sorry to not be more helpful, but the default argument you are likely to run into from the industry will be "Well, you shouldn't have taken out a 4-year finance agreement when you are 61 years old and contracting." Which doesn't help, but they are not obligated to help you. The usual response is to insist that you keep on paying, and then swoop in to take action as soon as you are not able to make payments.

      As you have said, you have time to try and find alternative income before it gets too difficult. Obviously, you need to be saving every penny possible to guard against future problems. If you have additional cash available now, you can usually put in additional overpayments to reduce your outstanding balance and bring your monthly payments down (and will also reduce the total amount you end up paying). Or you could keep it in a savings account, in case you need it later on.

    • Thanks, much as I thought, I will contact the Volvo main dealer to ask but think I need to plan on keeping the car as long as possible. At my age and with pensions and no mortgage I can find ways to fund at least until I reach VT point. Your website is most readable and the guidance given excellent. Best regards

  88. Hi Stuart,
    I'm hoping you can help me with some advice. My daughter bought a Micra on pcp with gap insurance in February 2015. In July this year she had an accident ( her fault ) and her insurance company said it's a write off. They valued the car at £6994 and asked for the finance settlement figure which is £5348.81. She has been told that her insurance company will pay the finance company direct. My question is what about her initial deposit of £1500, does she get that back or lose it? Obviously she had intended to use the Micra as a deposit on another car before the 3 year term was up as advised by the Nissan salesman. If she loses her deposit after just 5 months of having the car plus 5 months of payments it's a bit upsetting for her as she will have to find more money to get a new car. I had wanted her to buy the Micra outright initially( she had the money) but the salesman talked her into a pcp with gap assuring her she wouldn't lose out in the event it was a write off whether her fault or not. If she loses the deposit she'll have to start again with £1500 less in the kitty! .

    Reply
    • Stuart Masson

      Hi Kim. Your daughter will need to contact the GAP insurance provider, as usually they will pay the difference between the market value and the full invoice price of the car (‘Return To Invoice’). This is separate to her normal car insurance, which will only pay the market value of the car.

      The payout from the GAP insurance should be a separate cheque to whatever she gets back from her car insurance after the finance is settled.

      As for her next PCP agreement, don’t believe the salesman when he says she can use the Micra as deposit at the end of the PCP – it almost certainly won’t be worth more than its settlement value, so she will probably have nothing left over. For more information, have a read of our comprehensive guide to how a PCP works.

    • Hi Stuart
      Thank you so much for that information, we've had terrible trouble getting straight answers from either Gap or her insurer the latter taking 6 weeks to sort things out so far. Thank you also for the tip off about the end value of the Micra, this is exactly what I feared could happen. I have advised her to buy outright next time as I cannot believe the trouble she's having over this.
      Great site by the way, keep up the good work. Kim

  89. Hi Stuart,

    I am currently 25 months into a 36 month PCP agreement at £156 / month. I would like to pay the remaining 9 payments of my contract in one lump (except for the final GMFV) and give the car back early, Is this possible to do? I didn't want to go down the route of voluntary termination as this may affect dealings with them in future, or will they class this as the same thing?

    I hope this makes sense as the dealer is currently finding it a little difficult to grasp!

    Thanks in advance.

    Reply
    • Stuart Masson

      Hi Glenn. You will need to speak to the finance company directly rather than the dealer. The finance company owns the car, and the dealer is only going to be interested if you are wanting to part-exchange it on another vehicle (in which case, they will settle the finance and buy the car from the lender as part of the part-exchange process).

      The finance company may allow you to do this, as there is no real downside for them, but they may not. It will depend on their internal policy on the matter.

  90. Hi Stuart

    I’m 15 months into a 3 year PCP deal on a BMW 1 series. Just made a big mistake in going though a waterlogged road due to a burst water pipe, which has done some water damage to engine and possible other parts of the car. It is currently with BMW for assessment of damage. Looking ahead will this effect future value and BMW stance on taking the car back at the end of the term?

    Just not sure on how this might make a difference to the overall contract if the car has to have extensive repairs…new engine for example?

    Thanks for your help

    Jim

    Reply
    • Stuart Masson

      Hi Jim. As long as the car is repaired to a BMW-approved standard by a BMW-approved repairer, it shouldn’t be a problem. If you have the work done elsewhere, they could argue that the work is not up to standard and refuse to take the car back at the end of your PCP.

  91. Hi, I bought a car worth 5999 two yearsd ago the dealership didnt explain the loand (it was the first tim eI had done this without my dad) the finance from balck horse worked out i would be paying bk 9k…. I have piad the value of the car but still have the 4k left is there any way i can get out of this withouth giving mycar back? as i have paid the value of the car but dont see why they charge an extra 4k ? i have also asked black horse to let me up my dds to py the loan back quicker but they wont do this eithwer.. seems harsh i have another 3 years worth of debt when the car wasnt even worht the 9k

    Reply
    • Stuart Masson

      Hi Nikki. Unfortunately, it looks like you are either going to have to give the car back or pay the the £4K balloon. You have presumably signed a legally-binding contract which would have set out all the terms and conditions. While it’s very likely that the dealer didn’t explain everything as well as they should have done, it’s still your responsibility to understand what you are signing yourself up to.

      The value of the car is not what’s important; it’s what you agreed to pay back on top of your borrowing. You have borrowed £6K on a payment plan which would see you ultimately having to pay back £13K. It sounds like a terrible deal, but it’s up to you to decide whether or not you want to take it. In hindsight, you would have saved a lot more money by taking out a personal loan for the original amount rather than taking the dealer’s finance. I realise that’s not helpful now, but you are probably best to give the car back or sell it, and get another one on a much more favourable finance agreement.

  92. Hi Stuart, when I send my letter requesting voluntary termination of my contract (I have paid what my contract states I would have to before I can return the car) which gives them 2 weeks, do I stop paying my monthly installment? (I have already paid my installment for this month). Many thanks. Debi.

    Reply
  93. Hi Stuart,

    I’ve found myself at your excellent website several times over the years and usually after spending ages reading the articles and all the latest comments still find my question remains. Hope I’ve not missed it..

    I use PCP as a means of getting a car, working as a form of bridge finance, whether it be a month whilst I’m selling my existing car (to get best deals I sell privately and buy PCP), or 18 months whilst I’m waiting for company dividends to come through. I never go full term and usually change cars every 12 months.

    I’ve done this loads of times with BMW, VW, Jaguar etc and normally I have an option with a lump sum to reduce my monthly payment, or reduce the term. And when I (most commonly) just pay it off in full within a few months of buying the car, they calculate the interest pro-rata so it works out very cost effective as I’m only paying a few hundred £ of interest rather than the £5-10k I would’ve paid over the whole term. This always works out very advantageous over poor part-ex prices.

    Every time I do it I’m nervous as I don’t know whether this is my right in law, or whether these ‘prestige’ finance firms allow me to do it voluntarily. The finance people never seem to know… Even the experienced guy I’ve just bought a Range Rover from didn’t know.

    I’d love to put this to bed once and for all as it creates nerves every time I buy a car that I’ll end up paying all the agreed interest when I pay it back early rather than pro-rata amount. Law or voluntary for financers?

    Thanks ever so much
    Peter

    Reply
    • Stuart Masson

      Hi Peter. Legally, you should be absolutely fine. Interest is calculated monthly based on how much is still outstanding. With a fixed interest rate and fixed monthly payments, they know exactly how much interest is being paid each month.

      When you settle early, you save on the interest payments you would have to make if you kept the car for the full term. It's similar to the principle for paying off your credit card in full rather than paying the monthly minimum.

  94. Hi Stuart, I've recently brought a car on pcp. I've had it a month. Due to the horrendous service I have had, i no longer want the car or want any dealings with this company. (It's a major player) how do I give the car back? Am I entitled too? I brought it for 42000 and my deposit was 7300. Will I lose my deposit? I've put a couple hundred miles on it only. Please help.
    Thanks

    Reply
    • Stuart Masson

      Hi Ws. You don’t have the right to return the car based on horrendous service; there has to be a fault with the car. Have a read of this article about the new consumer protection laws which came into effect last month.

  95. Hi Stuart,
    I currently own a Diesel Ford Fiesta which I've had on a 2 year PCP that ends in February. My agreement was 15,000 miles and I have already dont 35,000. In order to walk away from any agreements it would cost me about £1,500 as the mileage cost would be around £600 and the GFV is now void as my mileage is over.. meaning Ford can pretty much offer me whatever they want for my car. However, if I enter into a new deal most dealerships will clear that finance and start fresh. With such high mileage am I best off going into another PCP agreement with a high mileage and hoping to get equity at the end or would a HP agreement work better for me?
    Any advice is much appreciated.
    Thank you!

    Reply
    • Stuart Masson

      Hi Lowri. When setting up a PCP, you should always make sure you are covering the mileage you expect to do to avoid this situation. Most finance companies will allow you to increase the mileage allowance mid-term, so if your circumstances change they will increase your payments to cover the reduced GMFV. Check this when setting up a new PCP to make sure they allow it.

      A Hire Purchase will give you more flexibility if you are likely to try and change the car mid-term, as you will have paid more off and are less likely to have negative equity. So pay more each month to pay less later – it depends on what suits your cashflow best.

  96. hi there, I’m looking for a bit of advice. My PCP comes to an end in March but I am looking to get a new car in January. obviously the finance company will still own the car so how do I go about this? If I pay the outstanding balance and then use the money I make from the car to pay the final balance is this ok? Or will they not let me sell the car til March? And if I do it in January will the final payment change in anyway?

    Reply
    • Stuart Masson

      Hi Emma. The same principle applies, regardless of whether you are settling two months early or two years early. You lose the right to a guaranteed value, so it’s a question of how much your car is worth and how much you owe to the finance company.

      If possible, you are probably better off waiting until March so your GMFV still applies, but it depends on your reasons for wanting/needing to change early.

  97. Hi Stuart,

    From what I’ve read great advice, Keep up the good work!

    I am currently 1 year into a 5 year deal of repaying a 16K bank loan for my Mini. I am thinking of selling it soon as I would like a lower repayment cost. I’m thinking about going onto a PCP deal as I was with my last car. Are their companies out there that would refinance my current car on a PCP deal? If not I would probably get a nearly new car on PCP as my thinking is I wouldn’t take as big depreciation hit. If I wanted to settle early the possible gap I might need to cover wouldn’t be as big as well?
    Any advice is very much appreciated.
    Thanks

    Reply
    • Stuart Masson

      Hi Anthony. Firstly, you can’t take out a PCP on your current car to pay off your bank loan (well, technically there’s no problem with that idea but I don’t know anyone who offers that).

      Secondly, a PCP will give you a lower repayment on the same borrowing, because you are not paying off the whole value of the car. But settling early is likely to cause you to have a larger gap (negative equity), because you are not paying off as much of what you have borrowed every month.

  98. Hi Stuart,
    Great site and really informative, having only found it I have already discovered a wealth of knowledge.
    I have a PCP deal (just taken out a month ago) and spread over 4 years with and apr of 6.4%.
    In the interest of reducing the actual interest paid, I can get a loan from my own bank of 3.4%, is there any downside to using the bank to pay off say 90% of the loan (excluding the GFV), therefore keeping the PCP deal in place but reducing the amount of interest paid over the 4 years?
    We dont plan to keep the car at the end of the term but hopefully will change to a newer model.
    Is it worth it or is there any downsides eg if we decided to change it in 3 yrs?
    Thanks for your help.

    Reply
    • Stuart Masson

      Hi James. Assuming that the finance company is happy with that, there shouldn’t be any problem with it. Make sure you check the Total Amount Payable and all of the T&Cs with the bank loan, as any extra fees or charges could easily wipe out the savings you may make on the interest rate.

      Another potential downside is that you will have two finance agreements to manage for the same car, which will show as two large loans on your credit record, and having extra finance can potentially restrict you from future borrowings if you need it for anything.

  99. Hi Stuart,

    I have an A5 on a PCP from Audi (over 4 years). I agreed 12,000 miles per year but after one year I have done 20,000 (due to work).

    I have received a settlement quote of £4,000 from Audi to come out now.

    Is this £4k negotiable? Also, is it worth paying it to cut my losses rather than keeping it for another year and depreciating it further?

    What options do I have?

    Thanks

    Reply
    • Stuart Masson

      Hi Will. If your PCP is with Audi Finance, you should be able to call them up (the finance company, not the dealership) and ask them to increase your annual mileage allowance. This will increase your monthly cost, as it is covering a higher depreciation, but will reduce our negative equity when you want to sell.

      The settlement figure is simply a calculation of what you still owe on your agreement, taking into account any interest savings from settling early. It’s not negotiable, in the same way that you can’t really call your mortgage company or credit card company and offer to negotiate what you still owe. It’s your outstanding debt, based on what you borrowed, and it has to be paid off one way or another.

  100. Hi there
    I am currently just over 12 months into an interest free PCP with SEAT. The car was sold to me at just over 10k. I now owe about 8500 and the car is currently worth £4500 ish to trade in against another car.
    The car no longer suits me – I am travelling to a farm up a pot holey lane and am worried about the damage this will do to the car that I will end up paying for at the end of the term.
    Ideally I need to get out of this agreement and buy a larger, more robust car with the minimum cost incurred.
    Any suggestions would be most welcome.
    Charlotte

    Reply
    • Stuart Masson

      Hi Charlotte. If you are shopping around for a new car, you may find that a dealer is prepared to pay more for your SEAT to get a deal (Christmas is a good time for deals). Some manufacturers also let you put any deposit contribution towards your negative equity. But one way or another, you have to clear £4,000 of negative equity and most of it will have to come from your bank balance.

  101. Hi Stuart,

    I am looking for some advice buying a new car. My current vehicle isn’t worth enough to generate a significant deposit and I’m in a position where I need to change it ASAP as it’s on its last legs, not leaving me much time to save up a large deposit in cash.

    I am in the market for a BMW 120D Coupe M Sport and I am currently looking at going on PCP from BMW Approved used. Car is approx. £15,000 which works out to about £300pm over 48 months with £0 deposit (they’ll give me £400 contribution if I part-ex my current car).

    My issue is I am currently commuting approx. 60 miles a day to work meaning that my annual mileage estimate is in the order of 20k. I am trying to establish what would be the better option, should I get a PCP finance package from the dealer or would I be better off getting a loan with lower interest to cover the £15k?

    Any suggestions would be greatly appreciated.

    Thanks in advance.

    James

    Reply
    • Stuart Masson

      Hi James. Have a read of this article about different types of car finance to give you a bit more background. The best type of finance product will be the one that suits your requirements best, and that will be different for every person. We can’t provide specific financial advice, only information about the different types of products.

  102. Hi

    I am currently 23 months into a 3 year agreement with a Jan 14 Toyota Yaris, it was the last of the older models. I am looking to change to a seat Leon. I am on a 0% agreement. There are currently 3 small scrapes on the front bumper which I am going to get fixed. I am currently paying £158 per month and I think the balloon payment is £4.2k. Would there be much difference if I changed now or would I be better waiting to the end of the agreement.

    Thanks

    Reply
    • Stuart Masson

      Hi Catherine. It will depend on how important changing your car now is. It’s possible, even with 0% interest, that your car is worth less than the settlement figure, so you may have to pay to get rid of it before you worry about putting any money into your next car.

      Everyone’s individual circumstances are different, and we don’t offer specific advice to go one way or another (the FCA has strict regulations about offering financial advice, as opposed to general information). But as a rule, financial agreements are designed to run over a specific period and usually work out best if you stick to that plan. If you want to change early, it will usually cost you money to do so, so you have to weigh up how urgent the need to change really is.

  103. I have taken out a 48 month PCP on a 2013 Audi A3 Cabriolet which was valued at £15,000. I put a £3500 deposit down and pay £208 a month and the final balloon payment is £5875. I’ve recently been able to secure a £7000 interest free loan (which will be paid off over 36 months) as one of my work benefits and I’m considering putting some (maybe all) of it towards the current PCP which will reduce my monthly payments to £80 per month and a final balloon payment of £2400.

    For context, I can comfortably cover the current payments 0f £208 per month but am conscious that I’ll be able to reduce the amount of interest paid over the next 4 years. With that being said, I’m also planning on buying a house within the next two years and feel that the £7000 could go a long way to helping me out with the deposit.

    I’m in a bit of pickle over what I should do. I think I’ll definitely want new car at the end of the 48 month period and I’m thinking that if I put the £7000 into the PCP then this could allow me to do so once I pay the balloon at the end of the agreement (which I think I’ll definitely do as I’m likely to go well over my mileage allowance). I’ve estimated I’ll get at least £9000 for it which leave me with a good amount to put into my next vehicle.

    I’m not sure if I’m missing a trick here to any advice you could offer would be greatly appreciated.

    Thanks

    Reply
    • Stuart Masson

      Hi Nicholas. I think you’ve summarised your options well. We can’t offer specific financial advice, as FCA regulations forbid it. All I can suggest is you look at your overall costs/savings and cashflow to work out what will be best for your situation.

  104. Hi Stuart

    I have a Nissan Juke on PCP the final payment is due in June this year. I have decided to return the car as early as possible due to new commitments. I have been advised I can simply ring the Finance company and advise I would like to end the agreement and pass the car back, they may advise it would affect my credit rating, but would it if I am in a position where I have paid off what I need to hand the car back early.

    As I am here just thought I would ask :)
    Thanks

    Reply
    • Stuart Masson

      Hi Georgina. Have a read of our article on voluntary termination, as it sounds like that’s what they are talking about. It won’t affect your credit rating, but they may choose not to finance you again if you wanted another car from the same finance company.

  105. We entered into a PCP for a car in September ’15. We paid a 3000 deposit and pay 341 pm for 48 months. Am I correct in thinking that if we have paid over half of the value of the payments to be made over 48 months, then we can give the car back and walk away?

    Also, are there any other ways out of the contract? – the monthly payment is not as suitable as we previously thought.

    Reply
    • Stuart Masson

      Hi SYJL. The halfway point you refer to is half of the Total Amount Payable, which includes the balloon at the end of the agreement. Have a read of our article on voluntary termination for more detail.

      Other than that, you can sell the car and settle the finance. However, the car’s value is almost certainly less than what you still owe, so it would leave you with a gap (negative equity) which would need to be paid off.

  106. Hi Stuart, I bought a Kia Rio in December 2013 on a 4 year PCP, I changed my previous car early an had about a 1000 negative equity carry over.. I was told by salesman after 2 years I will be able to change my car but I returned after 2 years (half way through ) an was told not a chance. I’m now stuck in an agreement an the value of my car decreasing rapidly an paying over the odds! Im stuck in limbo. Do I wait out till the end of my agreement an my car be worth a considerable less or fight this due to be wrongly advised?

    I knew I was paying more for the car because of the negative equality in the first place?

    I’m wanting to change my car every 2 years as this helps keep my insurance down thanks

    Reply
    • Stuart Masson

      Hi Aim. Even without negative equity carried over, it’s very rare to be able to change your car two years into a four-year PCP without having negative equity to deal with. But having to carry over the extra £1,000 would make it even less likely.

      The good news is that you are probably now starting to close the negative equity gap between your car’s value and what you still owe. Depreciation is always most severe in the first year, and then it gradually eases off. Have a read of our article about deprecation for more info.

      You have virtually no hope of fighting the finance company over the salesman misselling the finance. Unless you have written advice (ie – an email) from him that you would clear your overall negative equity after two years, there’s no proof of misadvising or misselling.

      For future reference, if you are changing your car every two years, don’t take a four-year PCP as you will never clear negative equity until well after three years, if at all. Take a two-year PCP, although the increased monthly payments would surely outweigh any insurance savings.

  107. Hi Stuart my daughter had a pcp over 48 months in June 15. She has had an opportunity to go work abroad for work experience. Therefore she needs to return the car as she can’t afford to keep it. Any advice would be apprecitated.

    Reply
    • Stuart Masson

      Hi Stuart. She will have to sell the car and settle the finance. The finance settlement will almost certainly be more than the car’s value, so she will have to come up with the extra cash to pay it off. Trying to settle a 48-month PCP after 7 months does not usually work out well.

  108. Hi Stuart, I would like some advice on GMFV with PCP please?

    I’ve seen a 2015 Mini ‘John Cooper Works’ with 2000 miles at a Mini dealer.
    The car is 23.5k and I will be giving £3.5k deposit over 4 years PCP with a maximum 6k annual mileage.

    With the dealer finance the GMFV is £11000 and £326 a month but with the Halifax the GMFV is £8600 and £309 a month.
    My questions are: Should I go with the Halifax or Mini dealer and do I have the right to sell the car myself to the best offer at the end of the PCP?
    Can you advise on what my best options would be for getting the car on PCP?

    Thanks,

    Reply
    • Stuart Masson

      Hi Ronnie. We don’t advise you to go with one or the other, as that requires providing specific financial advice and that is strictly regulated by the Financial Conduct Authority (FCA).

      It seems strange that there is such a significant difference in the GMFV and monthly payments for two PCP offers over the same term (48 months). I would suggest comparing the two quotes side-by-side to see exactly where the differences lie. My initial guess is that the BMW Finance numbers sound more like a 3-year PCP.

      At the end of the agreement, you can sell the car yourself (either privately or as a part-exchange on any other car from any brand) as long as the finance is cleared. If you are part-exchanging the car or selling it to a dealer, the dealer will settle the finance for you. If you are selling the car privately, you will need to make sure the finance is paid off in full before you hand over the V5 to the new owner.

  109. Hi Stuart, I purchased a Vauxhall astra back in 2013 on PCP through The Car Shop, I have realized it was the complete wrong choice as the interest rates are through the roof with it and it is an all round rip off. I can voluntary terminate it after I have paid off another £1500. This may be a long shot but do you know any other way I can terminate it before paying off the £1500.

    Thanks

    Reply
  110. His Stuart, hope you can help! I have a 15 plate VW sirocco, it’s my 3rd car with the dealership on a PCP plan, just completed the first year of a 3/4 year arrangment. The payments each month are pretty high, and due to unseen circumstances I need to get my monthly payments down, so I thought about ‘trading’ my sirocco in for an older and lesser model and more mileage. So say a golf for instance? Would this be possible to do? I’d be getting my monthly payments down and in return they’d be getting a better car to lease out to someone else?

    Reply
    • Stuart Masson

      Hi Grant. The difficulty you will have in the short term is that your Scirocco will almost certainly be worth less than what you owe the finance company. This agreement needs to be settled before you can worry about your next car.

      The fact that the dealer would be getting a ‘better’ car isn’t really relevant, because you owe more money on it than it’s worth, and that needs to be dealt with before you are clear to buy a cheaper car next time.

  111. Hi Stuart,

    Hope you can help. I am on a 3 year PCP contract with Audi finance. I have completed 1 year of the contract & I am now considering whether it would be financially viable to end the contract early (ASAP) with Audi and purchase a cheaper PCP per month. I have a top spec Audi so am paying quite a lot – this is no longer a priority for me & am hoping for a cheaper per month PCP. What would you advise?

    Thank you

    Reply
    • Stuart Masson

      Hi Ashleigh. You will need to find out what your settlement figure is and what your car is worth. Normally after one year of a three-year PCP, you will be in negative equity (so you will owe the finance company more than your car is worth), meaning that even if you sold the car and gave the finance company all the money, it still wouldn’t be enough and you would have to put in extra cash (hundreds or probably thousands of pounds) to settle the finance. Only then can you worry about buying another car.

  112. Hi Stuart,

    I am in the 33rd month of the 36 months deal (37months effectively). Apparently I have got negative equity on my car of around £3k (according to the dealership) and I have got 58k miles on the clock with 69k miles limit on the PCP. If I want to exercise my right to the voluntary termination (I have repaid more than 50%), do I need to pay the £3k negative equity to the finance company or the dealership?
    Also, I can’t really see how I can be in the negative equity of £3k if I only got 4 months left on my PCP and I only pay just under £500 a month, but that’s a different story.

    Thanks in advance for your help.

    Reply
    • Stuart Masson

      Hi Martin. If you exercise your right to voluntary termination, you don’t need to worry about any negative equity at all – not your problem. This is one of the reasons that finance companies don’t like VTs.

      It’s certainly not unusual for a car to be worth less than the settlement figure at the end of the PCP term. That’s the beauty of the PCP; the finance company has guaranteed the value after 36 months, and if the car is not worth that much (assuming you have fulfilled your requirements in terms of mileage, condition and servicing), then they wear the loss rather than you.

  113. Hi, so I have started a PCP with Hyundai on March 2015 for a brand new i20. I will want to continue paying until the end of the 2 year contract. However, at the end I do not want to keep the car. I want to change car companies as I want a different car. Will I get any of my deposit back? (It is a £10k car, and I paid £3.5k deposit on it. Paying £118 per month right now)

    Reply
    • Stuart Masson

      Hi Jun. Your ‘deposit’ is in reality an upfront payment towards the car, so you won’t get any of it back again. Had you put in less deposit, your monthly payments would be higher.

      At the end of the agreement, you have some equity in the car when you want to part-exchange it on a different vehicle (ie – the car is worth more than the finance settlement). However, this is not often the case anymore.

  114. Good Morning,

    I have 6 months left on a PCP deal, i can settle the figure early with mercedes there is no penalty to do this. The Mercedes payments are around 4.8% apr, i can get a sainsburys loan at 3.8%. As i was planning on keeping the car an extra couple of years after the agreement and paying the outstanding amount at end of the 42 month pcp deal (3 1/2 years).
    Am i best settling early by paying off the deal with a sainsburys loan. I can get a 5 year loan at 3.4% which keeps the payments around £360 which we pay now?

    Reply
    • Stuart Masson

      Hi Andy. We can’t offer advice as to whether one way or another is best for you. What you do need to be aware of is that you have already paid 4.8% APR for your ballon amount to Mercedes-Benz as part of your PCP agreement. If you borrow money to pay off the balloon, you are paying interest on that amount again.

      It may or may not be an issue for you, but many people don’t realise that they pay interest on the balloon amount on a PCP, not just on their monthly payments.

  115. Hi Stuart
    I am currently in the 18th month of a 48 month PCP with VW. Bought car for 30k with 3400 dep and 431 per month.
    I lost my job in Nov last year and have been struggling to pay. Cannot pay any more but am nowhere near the half (termination) settlement which is 17k. I cannot afford to pay any difference or the monthly payments. What can I do?

    Reply
    • Stuart Masson

      Hi David. Your best best is to call Volkswagen Finance and discuss your situation with them. They may be able to offer some amended terms to reduce your monthly payment – although this would probably increase your total repayment over the course of the agreement.

      Alternatively, you could look at a personal loan to get you to the VT point, but this may be difficult if you do not currently have a job.

    • Thank you for info. Will contact VW finance tomorrow.

  116. Hi Stuart
    I am currently into 18th month of a 3 and 1/2 year PCP on aSeat Ibiza. I want to upgrade or move to another car company. What are my options? or will i have to stick out the 3 1/2 years?

    Jack

    Reply
    • Stuart Masson

      Hi Jack. You can settle now if you want to, but it will probably be expensive as you are likely to have negative equity that needs to be cleared before you can start to worry about your next car.

  117. Hi i wonder if you could give me some advice please. I have a pcp 4 year agreement and im 2 years into it now. Im having financial difficulty and ideally would like to hand my car back but i do not want any bad credit against me. Can i just hand it back and walk away? Thanks amanda

    Reply
    • Stuart Masson

      Hi Amanda. You don’t have the right to give the car back and walk away from a PCP unless you repay 50% of the Total Amount Payable – this amount should be stated quite clearly in your finance contract. If you are two years into a four-year agreement, you probably still have some way to go yet, but you should be able to work out how much you have paid and how much further you still have to pay. The finance company should also be able to tell you how much more you have to pay to reach this point. For more information, have a read of our article about voluntary termination of a PCP.

  118. Hi Stuart. Very impressed with your site which I discovered while researching a car purchase idea.

    I have access to various new car discount schemes, e.g. Ford Privilege and some others through various memberships. We own 2 cars that we bought from new (not on PCP) with Ford Privilege but both are now getting long in the tooth (9 and 15 years old). It strikes me that if we bought again using a discount scheme but sold when 9-12 months old the depreciation could be less than the original discount enabling us to change cars every year at minimal or no cost, possibly even a small profit! Changing at 9 months would mean not incurring service costs and most likely avoiding consumable costs such as tyres. This is obviously dependent on the actual discount achieved and the expected depreciation rate of the chosen model. For example the combination of Privilege and dealer discount resulted in 20% off the list price of our Volvo when new (and it was a newly introduced model, not an outgoing one), with 1st year depreciation possibly 15-18%. Can you see any flaws in this approach?

    The various discount schemes cover a broad range of marques, and one thing I am struggling with is an easy way to identify residual values – any pointers?

    Thanks in advance for your help and comments.

    Reply
    • Stuart Masson

      Hi Gez. The majority of these preferred customer schemes (memberships, family & friends, etc) have a limit on how often you can purchase a car through the scheme. So you would be unlikely to buy a new Ford (for example) every year under the same scheme.

      Obviously if you have access to multiple schemes, you could buy a Ford this year and sell it for a small profit/small loss, then buy a different brand car next year and so on.

  119. Hi Stuart. This is a really helpful thread to read through – I’m glad I found it!

    I took out a PCP with Audi on 30/01/16 for a £18K car. I part exchanged giving me a £5-6K deposit and I pay £228 a month on a 36 month contract. My first payment came out on 1st March.

    I’ve had a huge financial change in circumstance this week and wondered if I have any rights to hand the car back and take back my deposit, less the first payment I have made/second payment due/withdrawal fee? Or am I stuck now I have passed the 14 day right to withdraw? The car is valuing at £13k-£16K online, so selling privately doesn’t seem an option to clear my finance, it also wouldn’t leave me with anything left to buy a cheap car outright. Have I really just lost my chunky deposit and tied into a car I now cannot afford?

    Reply
    • Stuart Masson

      Hi Jess. No, you don’t have the right to hand the car back unless you repay 50% of the Total Amount Payable – and you won’t reach that point until the third year of your PCP.

      In a nutshell, you either stick with this car somehow or you sell it (and even with your large deposit, you would probably have some negative equity so you would probably have to come up with hundreds or even thousands of pounds to clear the loan).

  120. Hi Stuart

    i’m looking to get a ford kuga from a relative who works at ford. He gets the price for me at trade price, the car in question is up on the forecourt for 18,000 but i can get it for 16,100 i would put down a deposit of 10,500 and get the rest on pcp but i would be looking to pay it off in 12 months time, what roughly would the settlement figure be, i think its roughly 9% apr.

    monthly payments are 60 pound.

    many thanks
    Craig

    Reply
    • Stuart Masson

      Hi Craig. Ford Credit should be able to give you an idea of what the rough settlement should be after a year, but you may not be able to put that much deposit down on a PCP. Usually, there is a maximum deposit of about 30% (ie – about £5,000 in your case) and it often depends on the final GMFV amount.

  121. Hi Stuart.

    I am 1 year into a PCP contract with Fiat. I paid a low deposit and have a fiat 500, over 4 years. I was told after i had paid more than half of the contract, i could change (no or small fee). But after 1 year i find myself needing an upgrade.

    I would still like to drive a car from Fiat, just an upgraded model. I phone the garage and they said there would be negative equity. Im just wondering what my options will be or whats the best action to take.

    Looking forward to your reply, appreciate your time

    Steven

    Reply
    • Stuart Masson

      Hi Steven. As the article above explains, you almost certainly still have a significant amount of negative equity. To sell the car now, you would probably have to pay thousands over the sale price to clear that. Once you have paid off half of the Total Amount Payable, you can voluntarily terminate the PCP, but that won’t happen until probably 3+ years into your agreement.

  122. Hi Stuart,

    Just so I can get my head around this. There is no final balloon payment/GMFV amount if I settle the finance deal before the agreed time?
    So if I decide to say for example make a massive overpayment after the first payment, will the finance deal re-calcuate my monthly payments so I will naturally pay it off in the time?

    The sales guy was telling me if I do it this way I can treat the PCP like a HP but at the same time get the perks of PCP such as free servicing/warranty.

    Thanks!

    Carl.

    Reply
    • Stuart Masson

      Hi Carl. Yes, you still have to pay the ballon as part of your overall settlement. If you settle early, you will save on future interest, but you still have to repay the entire amount borrowed, which includes the balloon amount.

      Most finance companies will allow you to make overpayments with little or no penalty, which will reduce your monthly payment amount (e.g. – from £300/month to £200/month) but does not affect the term length or the balloon figure. It doesn’t turn your PCP into an HP.

  123. Hi Stuart thanks for your reply! Can I give you the example they gave me as I still a bit confused!

    I am buying a car for £18.9k
    Because it’s only PCP, they will accept a deposit of £5600 maximum. Because I am trading in my car they have to give me back £7.7k cash back.
    So total amount I am borrowing is £13,300.
    They have said I owe them 36 x £196.00 with GMFV of £10k after the three years.

    Ok so after the 1st payment of £196.00, I will phone the finance company and make that payment of £7.7k back to them so left on the loan is £5600.

    If I carry on with my regular payments (which would have been adjusted based on my overpayment), if I call them in year 2 of the agreement to say I want to pay it all off – surely I do not owe them the GMFV of 10k as I have settled? Otherwise I would be completely overpaying for the car in the long run and I want to keep the car at the end and not change again.

    My main worry is that somehow I got in my head that I owe them the £10k final value regardless of what I do during the agreement.

    Thanks for you patience and looking forward to your answer.

    Carl

    Reply
    • Stuart Masson

      Hi Carl. I think you are getting confused about how a PCP works.

      You are borrowing £13,300 plus your deposit of £5,600, to cover the vehicle price of £18,900. You will repay the £13,300 borrowed plus interest and fees. So your total amount payable is approx. £22,656 (36x£196 + £5,600 deposit + £10,000 GMFV). The GMFV/balloon is money you have borrowed and therefore have to pay back, either in cash or by giving the car back at the end of the agreement instead. If you settle early, you have to pay it in cash.

      If you want to pay off £7,700 immediately, they will have to do some recalculations as that is more than all of your monthly payments (36 x £196 = £7,056), and I’m not sure how they will handle that. They may not let you make such a large overpayment. You will need to speak to the finance company and ask them about it.

    • Stuart Masson

      By the numbers you have provided, your part-exchange appears to be worth £13,300 (£5,600 deposit + £7,700 refund). You may be better off part-exchanging at its full value and simply borrowing the extra £6,300 from your bank, as you might well end up paying less interest overall.

  124. Thanks Stuart! You really have made a lot sense and I fully appreciate your advice.
    So I think I kinda got it. If I go down PCP, as long as I make over payments on a regular basis and keeping in line with my monthly payments, the GMFV figure will drop from it’s 10k.

    So I might call the finance company and ask them to predict what my GMFV value is after 4 years if they do allow me to make the 8k payment.

    Kind Regards,

    Carl

    Reply
    • Stuart Masson

      No, the GMFV is calculated based on the predicted value of the vehicle at the end of the agreement. You can’t choose a GMFV, and it won’t reduce from £10K. The only thing you can reduce is your monthly payments down from the original £196/month.

  125. Hi Stuart, I think I am guilty of thinking the GMFV is like a final payment that will get reduced if I make over payments on my monthly payments.
    What I am having trouble grasping is the concept is that if you say total amount repayable is £22,656, if I decide in year 1 to put make a 7k payment, year 2 I put in another 7k – that would leave £8656, why would I still owe then GMFV 10k after that?

    Many Thanks.

    Reply
  126. Hi Stuart,

    I think I finally understand now.
    Like you said the final amount repayable is ££22,656. So effectively I am paying £3656 in interest over 3 years.
    If I go for the HP deal they offered using my car as a full deposit, that leaves around £6200 at 11.3APR over three years. Effectively that is over 2k I am paying back in interest.

    So the difference is £1.5k in interest I am paying if I chose the PCP option. The PCP comes with 2 years free servicing, 2 years breakdown cover and the extra year warranty. If I add the price of the 2 services together (minor and major) plus the breakdown that would be say roughly 1k. Therefore I am paying £500 for the extra years warranty which maybe high but at the same I guess you can’t put a price on piece of mind.

    I guess with if I don’t over pay and put the 7.7k in the bank, that more then covers the 3 year’s worth of monthly payments so I am effectively paying nothing for 3 years leaving me with £700 towards the 10k final payment.

    I hope I got that all right.

    Reply
  127. Hi stuart, i am near the end of my PCP contract with a motorcycle, GFV is £2500 with 5 monthly payments of £115 and a final payment of £2750.
    if i choose to trade in at the end of my contract then my GFV is my depsoit (£2500)

    if i want to trade in now, can i expect to pay the remainder of my monthly payments (5 x £115)

    thanks in advance
    scot

    Reply
    • Stuart Masson

      Hi Scot. I’m not sure why you have a GMFV of £2,500 and a final payment of £2,750 – the final payment should be the same as the GMFV, and you either make the final payment or give the car (bike) back.

      If you part-exchange the vehicle at the end of a PCP, you can’t use the GMFV as the deposit – only any equity. SO your deposit would be whatever the bike is worth over and above £2,500.

  128. Hi Stuart

    I’ve not checked my own agreement yet for info, but thought I’d ask to see if you knew anything on this anyway.

    I’m 18 -19 months into a 4yr PCP contract on a brand new car. I’ve had to return the car for repair this month due to an engine fault (which turns out to be a faulty sensor installed). I now have to wait an unknown period for the part to be replaced, as its on back order. Since the car isn’t fit to drive, it remains with them at the garage until then. The dealership themselves have been mostly terrible on every occasion I’ve had to deal with them…and I’m at a stage where I’ve lost faith in both them and the car they supplied. Is there any known process to get out of a contract where the vehicle had a fault when it was provided?

    Lee

    Reply
    • Stuart Masson

      Hi Lee. You have had the car for over a year and a half, and it has only developed a problem in the last month. There’s no way you are going to be able to claim that the vehicle had a fault when it was provided, since it clearly worked perfectly for 18 months. Your new car warranty should cover replacing any problems which develop in the first 3+ years (warranties vary from brand to brand).

  129. Hi Stuart.
    I currently have a Vauxhall corsa on PCP that I have had for 1 year. My family circumstances have changed (not financially) and I will need a larger car. What would my options be to upgrade or change my car early? I currently pay £156 per month for my corsa and I would happily pay more for a bigger car (not necessarily newer). Am I able to do this or would I have to pay a lot of money or have new deposits for the new car?
    Thank you

    Reply
    • Stuart Masson

      Hi Lesley. If you read the article above, you will see that it should be possible, but it is likely to cost you a chunk of money to get out of your current contract before you can even start to think about your next car.

  130. Hi Stuart
    I’m looking into going into a PCP agreement. I just have some questions you might be able to help with. If I do get the car, but then 12 months down the line it begins to fault and costing me £1000’s to fix would I be within my rights to change the car for a different one i.e take the car back and start a new pcp with an alternative?

    Reply
    • Stuart Masson

      Hi Katy. No, your finance doesn’t cover that scenario, and is simply a means for you to fund the cost of the car.

      If you are buying a new or meat-new car, you would be covered by the New Car Warranty. If you are buying an older car, it may come with a warranty of some sort but you are liable for any repair costs outside that.

  131. Hi Stuart I took out a 48 month pcp agreement in November 2015 on a 2014 Peugeot 308. I put down 1500 deposit. However my circumstances have now changed and the car is going to be too small. I have checked with the finance company and they have said the settlement figure is 8298. If I pay this does this clear the debt and the car is mine or do I still have to pay the balloon payment at the end?

    Reply
    • Stuart Masson

      Hi Shawne. Yes, the settlement figure clears the entire debt, including the balloon figure.

  132. Hi Stuart,

    A quick question if I may on GAP Insurance. I Bought a LR EVOQUE for £29K, I added another 2-Years Warranty for £1k & some Alloy Wheel Cover for £250.00. I received a £1K Dealer Contribution by taking the LR PCP Finance, Which I will be cancelling, having missed-out on the 14-Day Option, by believing that this occurred, after you’d received a Copy through the Post, instead of from the moment you signed the Finance Deal…My Fault, But 1-Month’s PCP Payment is better than 48-Month’s worth. I have Re-Financed using a Personnel Loan at a heavily Discounted Rate than that which I got from LR Finance…

    My Question is, If you take out a PCP Loan, It is all in B & W, that it was used to Purchase a Car, So any shortfall, if the worst happens, can be claimed on the GAP Insurance to payoff any Settlement Figures…

    But what is the situation with a Personnel Loan, as it’s not “clear”, You state on the Application that it is for a Car, But You don’t really need to use it to Purchase a Car, do you???

    So in that case, which is Best? Which type of GAP insurance do I take out, which would also cover me for the Personnel Loan & Interest, together with the Cost of the Car & the Extra’s mentioned above…

    Thanks for any guidance…

    Peter

    Reply
    • Stuart Masson

      Hi Peter. To the best of my knowledge, the finance shortfall component of GAP insurance (if you have it, and not all GAP policies do) only applies to secured car finance (ie – a PCP or HP) rather than a personal loan.

      The type of GAP insurance you would be looking at is “Return to Invoice” rather than “finance shortfall”. Also, there are plenty of GAP insurance offers on the internet which are generally massively cheaper than those offered by the dealer. One of the reason that dealers push their GAP cover so hard is that they have massive profit margins on it…

    • Thanks Stuart,

      Have just paid off the PCP using the Personnel Loan, so now will have a search for some “Return to invoice” Policies, with the Money saved on the LR Finance!!!!

      Thanks a lot for your advice…

  133. Hi Stuart, excellent information and I am looking for some advice please. Bare with me as this might take a while but I’ll try and keep to the point. I am completely new to financing a car in this way so appreciate your expert advice to help me come to a decision.

    I have paid a £1000 car order deposit on a Lexus IS300H F-Sport with Premium Nav, Full Leather and metallic paint. The total price is £37550. Due end of June.

    I was considering a Contract Hire as this will be through my business but didn’t like the idea I will have to just hand the car back and be in the same situation with having to finance another car.

    The PCP option comes with a dealer contribution is £1925 and Finance contribution of £1500. The deposit will be made up of PX I have been offered of £2025 plus £6250 so total deposit of £8275 plus the 1500 finance contribution = £9825.

    Focusing on the PCP for now I have had a few quotes:-

    A 3 year PCP with the above deposit/contribution this is a monthly payment of £350.72 x 35 and a GFMV of £14871.60 with a permitted mileage of 30,000 over the 3 years. 12p a mile excess charge

    A 2 year PCP with the same deposit etc and a monthly payment of £398.02 and a GFMV of £17876.35 with a permitted mileage of 20,000 over the 2 years. 12p a mile excess charge

    I have always just paid cash for second hand cars but as I run my own business I need a car that is reliable and is fuel efficient more so than my smelly diesel IS220D.

    I don’t know what will happen in 1, 2 or 3 years so want to try and understand which of the two PCP options is best if I am looking for flexibility and lowest cost.

    I have in my mind I might want to keep the car after the PCP term but at the same time this may not suit my business needs not my needs.

    On one hand I want to keep the term short as possible but can’t afford to pay for the car out right and don’t like to sound of a 17k final payment should I choose to keep the car.

    Another consideration is that Lexus debuted a face lift model of the IS earlier this year which has no release date yet but expect it will be in the new year if not end of 2016. Does this effect how I should perceive the GFMV? Would Lexus consider a lower GFMV based on the fact there will be a newer model out soon?

    Appreciate you help as you have done so with so many on this subject.

    Reply
    • Stuart Masson

      Hi Richard. We can’t provide a recommendation on which way you should go or how you should spend your money. All we can do is point out the relevant issues you need to be aware of.

      With either PCP or PCH (personal contract hire), you usually end up giving the car back at the end of the agreement. With contract hire you don’t have a choice anyway, but with PCP most people don’t have the cash available to settle the balloon/GMFV amount and so they simply start a new PCP.

      You say you are looking for “flexibility and lowest cost”, but those things are usually incompatible. It’s a bit like buying a plane ticket – the cheapest tickets are the least flexible if you want to cancel or change your flight. If you want a ticket with more flexibility, it will cost you more money.

      PCH is often cheaper on monthly payments, but is the least flexible if your circumstances change and you need/want to return the car before the end of the agreement. A PCP also has costs if you want to return the car early, but those costs are usually lower. You also have the option to buy the car outright at the end, and if your car is worth more than the balloon at the end then you can keep that equity. With contract hire, you simply rent the car for the term and then give it back.

      If a new model is launched later this year as you suggest, it is more likely to affect a shorter-term agreement (2 years) rather than a longer one (3-4 years), as the immediate effect of the devaluation of the car when the new model is launched is spread over a longer period.

  134. Hi Stuart, thanks for the reply. So is a PCP really a bit pointless if most people give the car back anyway over a PCH?

    Reply
    • Stuart Masson

      No, it’s certainly not pointless. A PCP is always much better than PCH if your plans change and you want to change your car before your contract is up. Penalties for breaking a PCH contract can be enormous. Plus if you have equity at the end of your PCP agreement (ie – your car is worth more than the GMFV), you get to keep or use that equity. With PCH, you give the car back and the finance company gets the benefit when they sell it.

      Plus, a PCP has voluntary termination rights, whereas a PCH doesn’t, which can be a massive benefit if you need to change your car once you are in the latter stages of your agreement.

    • Thanks for clarifying. I am leaning back towards PCP.

  135. Hi Stuart, so as I am a director of my own limited company, does it benefit me or the company to make the final payment so it becomes a Capital Asset and what does that actually mean?

    Reply
  136. Hi Stuart
    I want to buy a used car and I want to pay it cash, however the dealership guy suggested to try PCP finance which means I get £500.00 of the price + two free services, and he said ( off the record) that after 3 months I can practically pay all outstanding amount in a lumpsum, and walk away without any fees or penalties, except intrests incured during that 3 months, It sounds too good to be true, so I wonder what is your view about this?, many thanks and regards,

    Reply
    • Stuart Masson

      Yes, you should be able to do this and you certainly don’t need to wait three months – you can cancel the finance within 14 days and incur no fees or interest. Have a read of our article about deposit contributions.

  137. Hi Stuart
    You may already have answered a similar query apology if you have, there have been a lot of comments submitted here, too many to sift through for a response.
    I am about to hand back my vehicle based on the VT and pay just over 1000pounds to make up the shortfall, I have a new vehicle waiting to be picked up but the new dealership has put terms on the new finance agreement. The terms are that the current finance company have to supply a letter stating that they have ‘no further interest’ in my current vehicle before I can collect the new vehicle.
    My current finance company want to collect, and inspect the vehicle first, determine if it is in good condition, put it up for sale at auction and once sold will supply the letter of no interest, in the meantime I will be without a vehicle. Is this normal?
    Surely if I terminate the agreement under the VT terms which in the agreement only state that if I wish to do so I only need to pay at least half of the finance, that should be the end of it. Why are the current finance company now adding additional terms to the agreement?
    I am self-employed a rely on my vehicle for work. Once the car is collected on Wednesday I will be unable to travel for work, so I need the letter of no interest as soon as the car is collected because as far as I am concerned that is where the agreement ends.
    Thanks in Advance

    Reply
    • Stuart Masson

      Hi Carmen. It is unusual for a finance company to insist on getting this confirmation from your existing finance company. Obviously, your credit rating will show that you currently have a finance agreement in place, which you would be paying £X/month towards, and this is an area of concern for them.

      Your current car belongs to your current finance company, so they will retain a financial interest in the vehicle until they sell it, which is normal. Once you VT the agreement, there is nothing else you should need to pay unless there is damage over and above normal wear and tear.

      It may be that the new finance company is concerned that either: a) you are overstretching your finances according to the information you have provided, and therefore they are not prepared to finance you until you confirm that you have no further commitments to your existing vehicle; or b) you are applying for an Accommodation Deal, and that the new vehicle will be for someone other than you. If you have two finance agreement for cars for yourself, this is immediately suspicious and finance companies are taking it very seriously.

  138. Hi Stuart,

    Apologies if a similar question has already been answered…
    I have a PCP with Audi and am 22 months into a 46 month contract.
    The Hire Purchase is £19,120.00 with a final payment of £9951.25.
    i have agreed 8,000 miles a year with the final mileage being no more than 51,000 miles. Due to unforeseen travel over the last year I already have around 45,000 miles on the clock.
    I am worried about the excess mileage charges at the end of the contract and am exploring options in terms of when to end it to minimise the cost to myself. as I will definitely be doing more than 6,000 miles over the next 2 years.
    I have read that Audi don’t charge excess mileage if, at the end of the contract, you give the car back to them and take out a new PCP contract. Not sure how true this is without asking them (I will be doing this)
    I am just wondering what any early termination options could be with as little extra cost to me as possible, if any, or whether to see out the full term of the contract?
    Obviously if I take the car back to them with higher mileage than agreed the car will be worth less and I won’t have any equity in it so I would have to potentially pay the excess mileage and a deposit on a new car (which will be a lot of money all at once).
    I should probably note that I am probably looking to get another Audi after this one but don’t want to lease from a company as they are more strict on the excess mileage. I will most likely go for another PCP deal as I am now based in one location (military) and shouldn’t be travelling around as much.
    Hope this makes sense.
    Thanks,
    Joe

    Reply
    • Stuart Masson

      Hi Joe. If you are planning on running the car for its full 46 months, you should be able to call Audi Finance (contact details here) and ask them to bump up your mileage allowance. This will increase your monthly payent, but would cost less than paying an excess mileage charge at the end of the agreement.

      I am not aware of Audi Finance waiving excess mileage if you take out another PCP. This may have happened in the past on occasion, but it is not normal. Alternatively, it may have been that a dealer had covered any mileage charges or settled the finance and sold the car separately. Normally finance companies don’t offer to waive charges, so I wouldn’t bank on this happening for you – especially when your mileage will be significantly beyond your allowance.

      If you voluntarily terminate the contract after paying back 50% of the total amount payable, you will probably end up in an argument with the finance company about whether you have to pay excess mileage (in short: there’s no definitive answer – probably not, but the finance company will get very grumpy).

  139. Hi Stuart,

    Excellent article, tried my best to understand it. Still a little confused though and wondered if you could oblige? I started a PCP deal with BMW in June 2015. I paid a £2500 deposit and £257/month for a supposed 48months. I want to change cars before the 48 months is up, as i find the £257 quite expensive. Im still slightly confused with how the ins/outs of the PCP works and was looking for some advice to end this agreement without being screwed by another Multinational Conglomerate

    Reply
    • Stuart Masson

      Hi Calum. Depends on your definition of “being screwed by another multinational conglomerate”. If you want to break your legally-binding contract, they are entitled to charge you as indicated in that contract.

    • wrong choice of phrase. I am aware of this fact. to find out termination costs would it best to speak to the dealer then ?

    • Stuart Masson

      You will need to speak to the finance company, not the dealership. Once the dealer hands over the keys and waves goodbye, the finance is no longer anything to do with them and the car belongs to the finance company. If the finance was done with BMW Financial Services, you can find their contact details here.

      You are 14 months into a 48-month PCP. If you settle the agreement now, you will save on 34 months’ of interest payments, but will pay an early settlement charge. The main issue is likely to be that the settlement figure is still likely to be higher than the market value of your car, which means you would need to sell the car and find some extra cash to pay off the finance.

  140. Hi Stuart,

    I will try and be very concise with regard to my issue

    I have a Mazda 2- £175pm with 6 months remaining on agreement

    Dealership where we purchased valued car at £3,900 yesterday. Slight paintwork damage

    We have £4,500 remaining on finance

    We have a family now so require a larger car. Have been looking at used cars and and the total value of cars we are looking at are in and around £4,500/£5000

    We have £2000 cash and then plan to put the remaining amount to purchased our new card on a no interest credit card ( 15 months no interest) and plan to spend the previous £175 payments per month on the credit card.

    Our current Mazda is due its first MOT and service so there will be a significant spend there

    Basically we want out of the agreement. In simple terms is the only way to do that right here right now is to pay the negative equity and I’m sure some sort of early exit cost to the finance company?

    The car dealer was very unclear about it all.

    I don’t really want to stay with Mazda and would rather go to ford or Kia.

    Use Kia as an example, could I approach their dealership and they make their own assessment of the Mazda and I then enter a new agreement with them?

    Am I right and thinking if I were to do this there would have to be some sort or PCP agreement?

    Let’s say the used car was £4,500. Am I better putting a £4000 deposit down ( cash/credit card) and then having a very small PCP agreement?

    My thinking here is that by doing this I won’t be ending my current PCP agreement and would hope any new deal will help me avoid the costs of negative equity, servicing, early exit charge.

    I accept I could be talking absolute rubbish here.

    Hope you can help

    Reply
  141. Hi Stuart.

    I am 13 months into a 42 months pcp agreement, I am looking to change cars.

    I phoned the finance company and asked how to change they all they kept saying was the settlement figure is £8500.
    So if I went to a dealership and wanted to part exchange this car what is the deal with the £8500 do I have to pay that? does the dealership pay that?

    Thanks in advance.

    Reply
    • Stuart Masson

      Hi James. £8,500 is the amount you need to pay the finance company to settle your current agreement, regardless of what you decide to do with the car.

      If the car is worth more than the settlement figure, you can keep the difference or use it towards your next car. So if the car is worth £9,500 as a part exchange, the dealer will pay your finance company £8,500 and you can use the remaining £1,000 on your next car. However, if the car is only worth £7,500, you would have to pay £1,000 to settle the outstanding amount before worrying about your next car.

  142. Hi Stuart

    I am 18 months into a 48 month PCP with VW. I agreed a mileage of 12,000 a year (which was more than sufficient at the time) but due to a change of job, I am now doing 20,000 a year in commuting (plus any extra weekend mileage).

    As the mileage isn’t currently too much higher than the agreed run rate (22,000 vs 18,000) I have tried to do the right thing and move into a more appropriate PCP (with higher annual mileage agreed) but the negative equity is significant (c. £7,000). I expected some negative equity at this stage because of the way depreciation and PCPs work, but not this much. I wonder whether the VW emissions scandal has also harmed the value as at c. £15,000, my 18 month old car is worth less than 50% of the new car value.

    Anyway, I’ve worked out that if I wait another 16 months I will be able to voluntarily terminate the agreement and be prepared to fight any excess mileage charges (I estimate that I will be 15,000 miles above the agreed amount at that stage). I can’t see any reason why I should go past this point as I know that the car won’t appreciate over time and it’s already worth less than the amount that will be owed in 16 months. Also, as I know I’m not going to pass this point, I don’t see the benefit in increasing the monthly payments to account for higher mileage.

    The ideal solution for me is to terminate today and I will move on and take a deal out that’s appropriate for my circumstances. However, as I don’t think that will be possible, it seems to me that the best thing to do would be absolutely nothing and then hand the car back in 16 months time.

    I feel that I’m missing a possible solution, what would you recommend I do?

    Thank you very much for your help

    Andy

    Reply
    • Stuart Masson

      Hi Andy. Normally, the finance company will allow you to bump up your mileage allowance to cover your increased driving. So basically you would pay more per month to ensure you are back on target by the end of 48 months and not have to pay off any negative equity.

      You can terminate the contract now, but you will have to pay the balance of the 50% owed to do so, which will probably be thousands of pounds.

      If you carry on and VT once you have paid off 50%, you will have to fight the finance company over the excess mileage. They will almost certainly come after you hard, as you will be a long way over and it will be quite a chunk of change to try and claim.

  143. Thanks Stuart. I will give VW Finance a call to see how much more it will be per month to avoid the fight (it does make sense to try to avoid the fight, particularly if they will fight hard!)

    Reply
    • Hi Stuart, I spoke with VW Finance today and they have said that I can’t increase my monthly payments to cover the increased mileage. It was a “computer says no” reason rather than anything sensible. Do you know any reason why that would be?

      I think I will just put some cash to one side each month instead and see what happens on VT.

      Thank you again for your help

      Andy

    • Stuart Masson

      Er, no idea. It may be that it tipped the agreement too far in a direction they didn’t want to go, which may not have been approved had it been submitted that way in the first place. It may be a policy from VW Finance not to allow amendments after a certain point or beyond a certain level.

      If you plan to see the contract through to the end, you should be able to calculate what your excess mileage charge would be, as the mileage fee will be listed in your paperwork.

  144. Hey Stuart,

    Great website and very informative!

    On the subject of PCP Financing, do you think my grandfather would be likely to be approved for the financing?
    He’s 75+ with an income of about £12,000 – £13,000 from pensions/investments. He owns his own home outright and has significant sums of cash and investments.

    If he is approved, our plan is to use the PCP financing to haggle for a better deal on a used VW Golf from the dealer, then cancel within the 14 day cooling off period and pay the borrowed amount with cash.

    Thanks for your help!

    Reply
    • Stuart Masson

      Hi Anish. The finance company will be looking at guarantee of income as well as likelihood of expenditure, which are both likely to be fairly consistent. They will also be looking at affordability, so your grandfather will need to make sure the repayments are not too high a percentage of his declared income.

  145. Hi Stuart,
    Love all your professional advice, but would appreciate advice on this one in light of your general guidance.

    Basically bought new Toyota with £1000 deposit contribution on offer if I signed up for PCP, which I did. I have now contacted Toyota finance with the 14 days cool off and advised I wanted to withdraw.
    They have got back to me saying I have to options 1) to ‘withdraw’ but the credit sum owing pay back would include the £1k contribution or 2) ‘settle’ for a sum which does not require paying back the deposit but they have added around £130 which looks like a fee equiv to two months PCP payments and must be a fee.

    Are they trying it on, there is no reference in the PCP contract paperwork anywhere regarding loosing the contribution if withdraw within 14 days?

    Reply
    • Stuart Masson

      Hi Dave. It would depend entirely on how the contract has been written. Unless the contract states that the deposit contribution is contingent on you taking and keeping the PCP agreement for a period of time, there’s probably not a lot they can do.

      The other alternative, as they have stated, is to settle the finance early rather than withdrawing from the agreement. There is always an admin charge, and it is is usually equivalent to a couple of months’ of payments, so that sounds about right.

  146. Hi
    We’re 24 months into a 36 month PCP contract with Ford. We’re about to take a lease car through my wife’s work and want to VT the contract with Ford. We paid a deposit of £2544 and the termination fee is £4631.89. Will we be allowed to VT the contract?
    I was wondering if we could pay the remaining 12 months (we pay £91 a month) and hand the car back straight away?

    Reply
    • Stuart Masson

      Hi James. If you have paid back more than 50% of the total amount payable, you should be able to VT the car. For more information, have a read of our article about voluntary termination of a PCP.

    • Thanks.. I have just had a settlement figure of £3971.68 so presumably, as this is less than the £4631.89, quoted by Ford we are within our rights to VT the agreement?

    • Stuart Masson

      Two separate ways of settling. The numbers quoted by the finance company are to settle your finance in full and own the car outright. This is generally what they would prefer you to do, regardless of whether it is best for you.

      If you want to VT the car and give it back, you have to have paid 50% of the total amount payable. This figure should be written down in your finance contract, or the finance company should tell you if you specifically ask for it. Often, finance companies will wilfully misundertand references to VT unless you are very clear and specific.

  147. hi stuart i bought a car from john clark on pcp. due to employment changes iam going to pay of the agreement and make up the negative difference. the finance company is northridge i have obtained the figure. do i have to inform john clark once i pay it off? the car is under one of there service plans that supposedly came free

    Reply
    • Stuart Masson

      Hi Neil. No, you don’t need to inform the dealer about settling your finance – it has nothing to do with them once they have sold the car.

      It shouldn’t affect your servicing plan, but if you end up selling the car then it probably can’t be transferred across to the new owner.

  148. Hi Stuart. We are in major financial difficulty and can no longer afford the car payments. We could even end up defaulting on the payments. I am getting a company vehicle so we no longer need the car. The car is a Ford Focus 2012 plate bought for £9600. We only put about £100 down as a deposit. We are worried sick about it and we have a growing family. A two year old and just had twins. My partner no longer works so we have complately lost her salary. We need some help and advice. My partner is considering bankruptcy. Can you help?

    Reply
    • Stuart Masson

      Hi Simon. There is usually no provision in car finance agreements for financial difficulties. If your finance is a PCP or HP and you have paid off more than 50% of the total amount payable, you can voluntarily terminate the agreement and give the car back.

      However, if you have not yet paid off 50% (and can’t afford to make up the difference) or you are not on a PCP or HP, your options are not as good. If your car’s value is more than the settlement amount, you can sell the car and use the funds to pay off the finance company. If the car is worth less than the finance settlement, you would have to pay out any negative equity from your own pocket.

      Alternatively, you could ask your employer to give you additional salary in lieu of a company car, and use that extra to cover your finance payments.

      If you are genuinely considering bankruptcy, you should discuss with an accountant or financial expert who can explain the full implications for you. It is usually a last-resort option.

    • If we can no longer afford the payments will they not just take the car anyway?

    • Stuart Masson

      It is likely that the value of the car will not cover the debt owed, as the car will depreciate faster than you are paying it off in the early stages of the agreement and you don’t catch up until the end. For more information, have a read of our article on depreciation.

  149. Hi Stuart… advice would be appreciated! Took out a PCP plan on my car in July 2016 with a 25,000 millage limit each year. Now have a new job with a company car. However, I have exceeded my millage and I am now on 33,000 – do you know where I stand? Ideally I’d be happy to just hand straight back or do you think I would be best to keep it and don’t use it until my millage meets again hopefully once I hit 2 years? Thank you!

    Reply
    • Stuart Masson

      Hi Lucy. If you want to settle the PCP now, you will almost certainly have a significant amount of negative equity, which means you will have to pay a fair chunk of money to get rid of your car. If you keep it, you will be paying off smaller chunks every month until your settlement is the same as the car’s value (which won’t be until about the end of the agreement; two years is highly unlikely).

  150. Hi Stuart – great article – I have read all the comments but can’t seem to find an answer to my query. I am never used car finance so it maybe a silly question so bear with me!

    Example:
    I have seen a car that is £38000, I have £6k deposit, the GFV after 4 years is £18000 apr of 10%
    Can i pay off all the 4 years monthly payments by means of deposit & borrowing from my bank at 3% and drive the car fee free for 4 years? The idea being to lower the monthly payments.

    Am i missing something here? Thanks

    Reply
    • Stuart Masson

      Hi Kammy. Most finance companies will let you make overpayments – some will charge and some will not. In theory you can do this, assuming the finance company allows overpayments, but check how much it will cost in fees since you will be paying interest and fees on a bank loan – the combination of both may add up to more than you are paying now.

      The other thing to remember is that it may not be that easy to get a bank loan if you have just taken out a PCP for a £38,000 car, so you may have it all worked out and then find that the bank says no – or the interest rate offered is not 3% after all.

  151. Hi
    Thought I’d give a quick update. Ford have now taken the car and there was nothing for us to pay in the end! It appears, to me, that the jargon on the original agreement was to try and scare into not taking this course of action. The figures suggested that we’d have to pay thousands to them as I described above but there was no way of knowing the exact figure without actually phoning them as I did.

    They did give us some apocalyptic warnings about what would be recorded on our file.

    Also, I wouldn’t describe them as unhelpful but it’s fair to say that they obviously tried to dissuade us from handing the car back. They weren’t over enthusiastic about the termination.

    We just had to write a letter. I didn’t use any of the stock ones available just a simple one of my own.

    Reply
    • Stuart Masson

      Hi James. Glad it all worked out well for you. As you found, while the finance companies can’t stop you from carrying out a voluntary termination, they usually won’t go out of their way to be helpful about it.

      Your credit file should not be affected, as you are carrying out a perfectly legal termination to your contract. It should not affect your chances of being offered credit from other providers in the future.

    • Thanks for all the advice – it was very helpful. Regards

  152. HI,I bought a car for the value of R303000.00 and i plan to settle the car in 2 years ,i want to know if im still going to pay all the interest as indicated on the contract of which my interest will be R147000.00 in 72 months and i also want to know if is a good thing to keep a car

    Reply
  153. I we bought a new car in march this year, but we are thinking of changing to an older 4×4 to tow our caravan and would like to give up the car. Can you just take it back, as they say you can just leave the car and no further finance? Thank you

    Reply
    • Stuart Masson

      Hi Shirley. No you can’t. You have to settle what you owe to the finance company, and your debt is almost certainly significantly more than what your car is worth.

  154. Hi, we are in a position to buy an Audi second hand for approx 22K, luckily we have the cash available to just pay for it. We’ve been offered a PCP over 18 months with a 50% deposit (mostly us and a £500 deposit contribution), small final payment (about 2/3 months worth) and a couple of free services thrown in. Is there a possibility to pay the PCP off early after say 6 months, to get the benefit of the deposit contribution and the services, or are we likely to get hit over the head with some sort of early exit fee? Much obliged.

    Reply
    • Stuart Masson

      Hi Dave. Yes, if you settle the finance early, you will almost certainly have to pay some kind of early settlement fee. This is usually equal to about a couple of months’ of payment. However, you will save interest on the outstanding finance, as you are not borrowing the money over the whole term. Ultimately, you need to work out whether the costs are more or less than the savings.

    • Much obliged, pretty much as I thought, will see what they say.

  155. Hi Stuart
    I’m thinking of buying a £46k car for on a PCP for £41k over either 2 or 4 years with a £5k deposit. I will then pay it off in 4 months time when I am due to receive enough money to do so. What will I end up paying? The dealer say they can’t advise me of what that will be.

    Reply
    • Stuart Masson

      Hi Mark. The dealer simply plugs numbers into the finance company’s computer programme to tell them how much you will be paying, and the system generally doesn’t allow them to predict early settlements (because the finance company doesn’t want you to settle early).

      Effectively you will only be paying for four months of interest, plus fees.

    • Very many thanks for your helpful and prompt reply, much appreciated

  156. Hi Stuart
    great site by the way, I’m new to owning a new car but went for the PCP option on a car worth £26,500 , I was probably too quick to do this – as the thing is I can pay this in full so wondered if I should. The total finance cost is over£30k and the settlement figure is £22.4k . It seems a no brainer so have I missed something?

    Thanks

    Reply
    • Stuart Masson

      Hi Alex. Your monthly payments to repay the Total Amount Payable (the £30K+ in your case) are based on paying interest over the whole period. However you are wanting to settle the agreement early rather than letting it run its full course. So if you settle six months into a 48-month PCP, you would basically only pay interest on six months (plus an early settlement fee, usually).

  157. Hi Stuart, this is a wonderful site, answered alot of questions I had. Would be grateful if you give me your views on this: I am thinking of buying a brand new mercedes for just over 20k through one of the main sites that give you the best price, recieve your deposit, then introduce you to the dealer. The price is alot better if I pay using Mercedes Benz finance, but I do have the cash in hand. Would it be any issue if I took the finance then payed off the balance + penalty within the first few weeks (or cancelled it altogether within 14 days)? I believe this should generaly be OK, but have you any specific knowledge if this would work with Mercedes Benz finance? I am fine paying a penalty of 1-2 months worth of interest (£300-£400), but is there any chance they could use any fine print and demand a penalty payment of more than this? Appreciated.

    Reply
    • Stuart Masson

      Hi Usman. Have a read of our article on deposit contributions. Unless there is anything in your vehicle or finance contract, they can’t stop you from cancelling in the first 14 days without penalty.

  158. Thanks Stuart, this is good to hear and article is most useful. As far as I can tell there is no deposit contribution on my quoted price. But I will double check this before agreeing to any finance.

    Reply
  159. Hi Stuart

    Quick question as regards early settlement if you don’t mind.

    I have an option to buy a tesla 60d for 70k. As my limited company is new rather than go through traditional tesla pop I have ended up with an offer from Hampshire trust who will match tesla finance 620 a month x 48 months with 35k balloon. There are no mileage restrictions which seems like a good deal. My concern is that the broker has told me that the deal is front end loaded with the interest which I understand but my question and concern is around early settlement – I am paying 16k deposit and if I chose to change the car after sat two years does this mean that I would effectively have to pay 4 years interest back at this point and are they allowed by law and tcf to do this? I would expect a small penalty of a few months but in this example I am ending up out of pocket it seems ? Thanks for advice

    Reply
    • Stuart Masson

      If you settle early, the settlement figure should be recalculated to reflect you are no longer borrowing the money over the full period.

      Your interest will be calculated daily. Front-loading means that the finance company calculates the interest on each payment first, followed by the balance – as opposed to a fixed split between balance and interest on every payment. This means you are paying more interest early on in the agreement (and more interest in total). However, if you settle that agreement early, the numbers are recalculated to determine the total interest payable based on the actual period you have borrowed the money (eg – two years instead of four).

      Of course, you need to check all T&Cs carefully and make sure this is what they are doing. If this finance company is offering an HP or PCP or LP, that’s how it should work. If it’s a personal loan or any other form of finance, the above may not apply.

  160. Hi Stuart, what a great site.
    Apologies if you have answered this before. If I order a new car now for delivery in 3 months time, when will I sign the PCP agreement, and when does the 14 days start? Many thanks, Richard

    Reply
    • Stuart Masson

      Hi Richard. You should sign the agreement just before your car is ready for collection – no more than 48 hours in advance. The 14-day cooling-off period should only commence once the contract is activated – which means when the finance company pays the dealership (which should be the day or day before you take delivery of your car). This is to stop the dealer or finance company sitting on your signed contract for 15 days before activating it and denying you the right to withdraw.

  161. Hi Stuart. Happy New Year. Bit of a strange question. If I were to change my current PCP car/deal and change it for a new PCP car/deal, I understand that any finance left over from the previous deal gets carried over to the new deal. I believe I get a 14 day period with the new deal, if I took the option to hand the car back and walk away, what happens to the finance? As it’s a new deal, can I just walk away or is the old finance still left to pay?

    Reply
    • Stuart Masson

      Hi Paul. If you cancel the finance within the 14-day cooling-off period, it doesn’t cancel the vehicle purchase. It just means that you need to find another way to pay for the car as the finance company will be invoicing you for the amount you borrowed (which will include the negative equity carried over from the old car).

    • Cheers. I did think as much.

  162. Hi Stuart,

    I’m coming to the end of a 36 month PCP on my (their) Mazda CX5. The car is worth between £16,500 and £18,000 depending on whose valuation site you look at and there is a balloon payment due of around £12,000. I like the car and would like to keep it. Would the finance company consider extending the PCP if I asked them?

    Reply
    • Stuart Masson

      Hi Clive. Most finance companies will not allow you to extend a PCP, although they may allow you to take out another finance agreement on the outstanding value (or you can go to a bank and get a loan).

      Be aware that you have already paid interest on the balloon value as part of your monthly PCP payments, so if you take out a new finance agreement on the balloon then you will be paying interest on it all over again.

  163. Hi Stuart,

    I bought an Audi A3 1.6 Sport 5DR in March 2014. When I signed up the contract was 4 years (and agreed 8k miles per year). I was sceptical of mileage but was told, by the salesman, that my options during the contract would be as follows:

    After 3 years you have the following options:

    Hand it back – cost will be £0 to do so. At this point they would check the mileage. If we are within the 8k per year (24k total) then the total cost will be £0. If we are over the mileage then they charge between 10-15p per mile.

    Or

    Trade it in for another car. – Cost will be £0. They do not check mileage for trade ins so wouldn’t matter.

    After 4 years (contract end)you have the following options:

    Hand it back – cost will be £0 to do so. At this point they would check the mileage. If we are within the 8k per year (32k total) then the total cost will be £0. If we are over the mileage then they charge between 10-15p per mile.

    Or

    Trade it in for another car. – Cost will be £0. They do not check mileage for trade ins so wouldn’t matter.

    Or

    Buy the car. At this point they would say you can buy the car for 6838.00 (The trade in value). You can either give them the cash to cover remainder of the contract or sell the car privately and then pay clear the finance (If you had run up a million miles one the car by year 4 and didn’t want to take another contract then this is what we would do).

    However, today I enquired about trading in after the 3 year mark and was told that I would need to pay for excess mileage. Upon complaining they indicated that the salesman had misinformed me on mileage. I would never have agreed to such low mileage else.

    I looked on webuyanycar also and it indicates that my car is worth £7210.00 currently. I find it hard to believe that in March 2018 (when due to return) that it will be worth the £6838.00 they want me to pay for it. What happens in this situation if I simply wanted to hand back and get a trade in?

    Any suggestions on what is the best way to get out this contract for year 3 or year 4?

    Reply
    • Should also mention car was bought for £14,043.00

    • Stuart Masson

      Hi Barrie. If you have a PCP and that is what you were advised for settling early, then it’s wrong. You can’t simply give the car back to the finance company before the end of the agreement unless you are voluntary terminating the contract – and the issue of excess mileage is disputed.

      If you are part-exchanging the car, it is simply a matter of what the dealer is prepared to pay you for your current car and what your settlement figure is to pay off the finance company (and mileage is irrelevant). You will only know whether this works in your favour by getting a dealer to value your car and getting the latest settlement figure from the finance company (it will change every month, and it’s not linear).

      Next time around, never agree to a lower mileage than you know you will need, regardless of what the salesman says.

    • Thank you. Have you ever heard of a situation where the car value is less than the price to buy at end of PCP? If the car is currently worth 7k then it is likely to be massively lower of the £6838 agreed on contract in 14 months time. It looks like I am stuck to pay excess mileage as I doubt the car company are likely to give me a price of 6838 or better at the end, are they?

    • Stuart Masson

      Yes, these days cars are worth less than the GMFV most of the time, even without excess mileage.

    • **It looks like I am stuck to pay excess mileage as I doubt the car company are likely to give me a price of 6838 or better at the end, for a trade in, are they?

  164. **It looks like I am stuck to pay excess mileage as I doubt the car company are likely to give me a price of 6838 or better at the end, for a trade in, are they?

    Reply
  165. Hi helpful site! I am wondering if you can offer me some advise on my current situation…

    I have a fiat 500 on pcp since May 2014. The total amount payable plus interest and other costs is £13134.

    So far I have paid £4046 (deposit+fiat privelige discount) and 31 monthly payments of £93.45 making the total amount I have paid to date £6942.95

    £13134 (total amount payable)-£6942.95 (total amount paid)= £6191

    I have therefore paid back more than 50%

    The final payment is £5818.00 due after the next 5 monthly payments.

    I no longer need the car and am wanting to hand it back to the finance company. Am I in a position where I can voluntary terminate my pcp?

    I look forward to your response. Thanks

    Reply
    • Stuart Masson

      Hi Lana. Yes, based on those numbers you should be able to voluntarily terminate the agreement.

  166. Hi
    I have a 3 year pcp with Jct600 can i hand my car back in with out any payments? I have had the car for 15months

    Reply
  167. Hi Stuart,
    Sorry to pester you although you seem like an expert. If i wait until the end of my 4 year PCP and completely pay it off, does that mean that i have the £8,000 (price of the car – £12,000 after Interest) to spend on another car. Or do i need to sell the company back the car at whatever price the car is worth after the 4 years? They also sold me something about depreciation insurance? I’m not sure if this stops the price of the car falling but I though’t i’d get your input.

    Thanks.

    Reply
    • Stuart Masson

      Hi Dale. At the end of the PCP agreement, you are unlikely to get anything back. If your car is worth more than the GMFV (balloon), you can sell it or part-exchange the car, but you will only get to keep whatever the car is worth over and above the GMFV. For more information, have a read of our article about how a PCP works.

      The ‘depreciation insurance’ is GAP insurance. It is only activated if the car is stolen or written off, so that you should end up being paid the original value of the car rather than whatever it is worth when it is stolen/written off. Have a read of our article about GAP insurance.

  168. Hi Stuart

    Thanks for the great site! Please could you give me some advice?

    I’m 18 months into my PCP with Mazda / Santander on a Mazda 6 (manual), 15 plate. I’m paying £339 a month. I originally committed to do 6,000 miles per year. A year ago I changed jobs and have found myself commuting further. In the 18 months I’ve done 20,000 miles. Due to the different commute with much more heavy traffic, my knee is causing me pain & I’d like to look at changing the car and getting an automatic. I’m extremely happy with the car and I was originally intending to save for the balloon payment to pay it off at the end of the contract (until my knee pain started).

    Do you think that I would be able to arrange a swap and pay the excess millage charges? From what i’ve been reading, I think I’d have to pay negative equity and then be subject to higher monthly payments based on my current millage.

    Any help or clarification would be great.

    Kind Regards
    James Gibbard

    Reply
    • Stuart Masson

      Hi James. You can’t swap your car for another one under the same finance agreement. You would need to settle the existing agreement and start a new agreement on another car. You’re probably correct that you would be in negative equity after only 18 months and with much higher mileage than originally agreed.

      And yes, for the same car with a higher mileage, you would pay more per month as the GMFV/balloon amount is less. If you are getting a more expensive car (automatics are usually £1-2,000 more than equivalent manuals), your payments will be higher again.

  169. Hi,

    Just wanted to ask, if i pay the final payment on my car of £4000, but have excess millage. Will they still charge me for the millage?

    Thanks for your help.

    Reply
    • Stuart Masson

      Hi Tom. If you make the final GMFV/balloon payment, the car becomes yours and the mileage is irrelevant. They will only charge you for excess mileage if you are giving the car back to the finance company at the end of the agreement.

  170. Hi Stuart, I’m so glad I have found this site. We have just ordered a new car from Skoda and the salesman wants us to use credit in order to get 2000 pounds off the price. We would rather pay cash but we like the idea of the reduced price, so if I understand this correctly from 2014 comments, we can take out the PCP and cancel within 2 weeks and just pay the loan immediately with no penalties. Is my understanding correct? Thank you.

    Reply
    • Stuart Masson

      Hi Elizabeth. As long as there are no clauses in the contract, you should be able to do this. For more information about this, have a read of our article about deposit contributions.

  171. Hi Stuart, sorry if this has been answered before. If I plan to take out PCP to take advantages of incentives but plan to cancel within 14 days and pay in full, are there any problems doing this if the finance is provided by the manufacturer themselves rather than a third party (e.g. a bank)?

    Reply
    • Stuart Masson

      Hi Alex. It only applies to manufacturer finance – a bank is not going to give you a deposit contribution to buy a particular car.

  172. Hi Stuart, I’d be very grateful for your advice on my situation. I purchased a Merc Cla on PCP yesterday but I’m having second thoughts now on the financing. The total price for the car is 24591 pounds, I paid 1591 in cash, 7000 was taken off as deposit and the amount borrowed is 16000 pounds for 48 months with a balloon payment of 9685 pounds at the end of the term.The total charge for credit is 8883 pounds with total amount to pay of 33474pounds. I am planning to take this car abroad in 10 month’s time so I have to settle the finance before I go (or it would be stealing!). I don’t have enough funds currently to settle it now but would be able to settle it in 10 months with no issue. I have to buy the car now due to legal import laws for the country I am exporting the car. Would it cost me signficantly to continue with the PCP, as I paid in a significant deposit and will be paying monthly of 316 pounds? I am concerned with how much interest I have to pay (I find the figures confusing) and the rate of early settlement.A ny advice is much appreciated. Thank you.

    Reply
    • Stuart Masson

      Hi Izzie. If you settle the finance in ten months’ time, you will only pay interest for those ten months, plus an early settlement fee (which is usually equivalent two about two months’ interest).

  173. Hi,
    My daughter entered into a shared car loan (pcp I think) with her (now ex) boyfriend. The agreement is in her name as he has been bankrupt in the past and said he could’t get finance. He was, however, paying half of the expenses. The relationship has broken down and now my daughter is stuck with a lot of debt that she is struggling to repay. I was wondering if the loan company would allow me to buy the car outright and then we could sell it privately? She is only two months into a four year agreement.
    Thanks.

    Reply
    • Stuart Masson

      Hi Sophie. There is generally no such thing as a shared PCP. What has most likely happened is that your daughter has a PCP in her name, but her boyfriend was informally paying half of the monthly bill. In legal terms, he has no responsibilities.

      Yes, you can give her the money to settle the PCP now and then you can do whatever you like with the car. Bear in mind that the settlement figure will be considerably more than the car will be worth, so you are likely to take a fair loss on it.

  174. Hi stuart ive ordered a toyota AYGO X PRESS i paid deposit £3.128.50 to get 42 monthly payments at £99 it is the first time i’ve use pcp. he quickly talked about extras gap. smart policy.toyota protect i ended up with 2 invoices .1 for £2.000 car deposit and 1for extras £1.128.50.when all i want is the £3.128.50 to be taken of the car .the delivery date is said to be 20th of March i am retired.all i want is the car ..i would be grateful for any advice thanks..JILL

    Reply
    • Stuart Masson

      Hi Jill. Car dealers will always try to sell you GAP insurance and other assorted extras because they make an enormous profit margin on them. They are not remotely interested in your wishes or best interests.

      You are perfectly within your rights to advise the dealer that you do not want these extras, and that you would like them removed from the contract (do this in writing, email is fine). They will probably fight hard to keep them in there, because they get a handsome commission on them, but that’s not your problem.

  175. Hi Jason

    We are 15 months into a 36 month PCP agreement for a c4 Cactus. Cash price for the car was 18350, we are paying 259 a month and we initially put down an advance payment of 3250. They added interest at the beginning of 1676 and I forgot VAT which added another 3k so according to the paperwork the total amount payable was 20k. We were looking at the price of the car now and it only reckons about 8k even though it only has 17k (Depreciation is annoying!)… i checked the termination and it states 50% which is 10k but even after paying all of it for three years we still wouldnt have paid over half to give it back… is this correct and if so it would cost more to terminate than just letting in sit on your driveway doing nothing than give it back? (Might be missing something very obvious here so apologies!)

    Cheers

    TJ

    Reply
    • Stuart Masson

      Hi TJ. You need to include your deposit in your calculations. If your total amount payable is £20,000 and your initial payment was £3,250, then you have £16,750 left. Your VT point is £10,000, so you have to pay off £6,750 to VT the car. This is just over 26 months at £259/month, which seems about right for a three-year PCP.

      *Updated answer* Check your contract to see what your total amount payable and VT point are. The finance contract may show the total amount payable as £16,750 (so deposit not included). In that case, your VT point would be £8,375, which you would hit after 32 months.

  176. Hi Stuart

    We have an PCP agreement with a dealer.

    Ideally I want to change car, but not with the same dealer.

    The new dealer says my car is worth less than what is owed…

    my current deal says its worth what is owed.

    So ideally I want to give the car back at no cost

    Then start a fresh else where….

    Current dealer says I cannot just hand the car back…..is this true? (even though he say its worth what is owed)

    Can I VT with the finance company

    What would be you advice please?

    Your help with be appreciated.

    Reply
    • Stuart Masson

      Hi Darren. You can only hand your car back to the finance company and claim the GFV at the end of the term. If you are trying to change the car before that time, the GFV is not valid. You have to sell the car and pay off whatever you owe.

      If you have repaid 50% of your Total Amount Payable (including the balloon/GFV amount), you can voluntarily terminate the finance agreement.

  177. Hi Stuart,
    I have a fiat 500 on PCP. It was the 3rd one I have had this way, always taking the dealers upgrade at 2 years as I was happy with the car and system.
    However my circumstances have changed.
    I now have a job where I have a company car, so have barely driven my Fiat this year, but figured it wasn’t worth trying to break the contract.
    I am now in the position where my company car is changing to a car allowance. So I need to have a car that is suitable for business use, so needs to be good for the motorway and present a better image than my mint green Fiat.
    I still have 2 years left on the PCP. My question is really, will a different brand such as Audio or BMW do the same thing as Fiat do with their ‘upgrade’ / change to new deal?
    My only other option will be to take out a separate lease, which seems pointless ?
    Keeping the Fiat for business use is not an option.
    What would be your best advice?

    Reply
    • Stuart Masson

      Hi Kate. You will need to sell the Fiat and pay off your finance settlement. It will probably be expensive, because you are still likely to have significant negative equity. Whether you get a better price as a part-exchange on an Audi/BMW or by selling it privately is hard to say, but there’s not likely to be any cheap way out of it.

  178. Hi Stuart, I’m currently 4 months away from the end of my PCP agreement. Would a new dealership accept a trade in and are there likely to be any financial repercussions?
    Also it may be an obvious question but are there any major advantages to getting a car loan as opposed to a new pcp agreement?
    Thanks!
    Stacey

    Reply
    • Stuart Masson

      Hi Stacey. If you trade your car in at another dealership, they will assess its value and you will need to provide your current settlement figure. If the valuation is more than the settlement, they pay off your current finance company and you can use whatever’s left towards your next car. If the valuation does not cover the settlement (which is called negative equity), you would need to pay for the shortfall.

      The main advantage of a personal loan (car loan) over a PCP is that the APR is usually lower – although the monthly payments are usually higher as you are paying off the whole loan with no balloon. If you can afford the monthly payments, you have much more flexibility and better options during the agreement on a personal loan (or HP) compared to a PCP.

  179. Hi Stuart. I am currently 10 months off the end of a three year pcp lease on a 2014 corsa which I would usually hand back in and then find a new deal. However, my circumstances have now changed and im looking at getting a mortgage. However due to my pcp my affordability is not very good. I am looking for some advice on my next move. The current settlement figure as we speak is £7000 but think the car is worth £5000. I need a car for work so would it be worth just huying the car out right as I’ve already paid nearly £5000 for it. Or do I pay my negative equity of £2000 then walk away and try find a cheaper car?

    Thanks for help

    Vicky

    Reply
    • Stuart Masson

      Hi Vicky. We can’t provide specific advice about what you should or should not do (we’re not financial or legal advisors). All we can do is explain how the processes work and what you need to be aware of so that you can make an informed decision.

      Obviously if you have the cash to settle the finance now, your monthly commitments will disappear – which helps your affordability position on a mortgage – but means you have £7,000 less to put towards your deposit. If you sell the car and pay off the negative equity, you will still have to find a new car. That probably means another deposit and then another ongoing monthly commitment. So you will probably spend less than £7,000 cash up front but still have a monthly outgoing.

    • Thank you

  180. Hi

    One month ago I got a pcp deal for 21k on a nice vignale mondeo, love the car but like an idiot I didn’t test drive it first (after having had one before thought it was ok). The nice defined seats kill my back as I suffer from lower back degeneration due to the sport winged seats which lock you in one position. Now I realise this is my mistake and I will have to pay for it but the figure they gave added 3k on for interest to 24k and the trade in is 19k… will they charge the full amount or does it work like a loan and I’ll pay a penalty of a few months plus the original 21k?

    Thanks

    Terry

    Reply
    • Stuart Masson

      Hi Terry. You are correct – if you settle the finance now, you will only pay interest on the time you have had the debt. As you estimated, it will be equivalent to a few months’ payments over and above the original borrowing.

  181. Hi Stuart,

    Just a bit of advice.

    I entered into a PCP agreement with Audi at the end of November 2016 for an Audi A4 (12 Plate). Payments are roughly £250pm with a final payment of roughly £8,500.

    Since then, I have had a considerable downturn in income due to change of career. It has not got to the stage where I am likely to miss payments, but it means my own free spending is now extremely limited.

    I am willing to listen to any options you think I may have? I hate the fact I may have to give up the car, as it really is fantastic and I love driving, so it’s not my ideal situation, but one needs to eat!!

    Thanks a lot,
    Kevin

    Reply
    • Stuart Masson

      Hi Kevin. First step would be to see a financial advisor so you can set out all of your incomes and expenses for them to make a proper recommendation.
      In terms of your PCP: if you really think that you won’t be able to afford the payments, your best bet is to get in touch with the finance company ASAP and see if they are prepared to accommodate any changes to the payment schedule (which they probably won’t). If not, you will probably need to sell the car and then pay off any additional negative equity (which could be quite a lot).
      It may be that you can then get a loan to pay off the negative equity at a reasonably low APR that means your monthly payments are significantly reduced and you can get your finances in order. But as I said, you will need to speak to a financial advisor for a proper recommendation of the best way for you to proceed.

  182. Hi There Stuart. thanks for great website. few questions if I may

    23k car, 8200 deposit and 14,500 remaining, 9925 GMFV and the difference at 189 pm over 36 months
    My question are:

    1 – Can you clear the difference between the GMV and the balance outstanding asap leaving only the GMFV to pay on the 37th month?
    2 – failing that could you overpay on the payments monthly like you would a mortgage thus reducing the interest if you were repaying off the principle hence the term would also reduce?
    3 – Is PCP for the financially inept?

    Reply
    • Stuart Masson

      Hi Niall.
      1) Depends on the finance company, but usually yes. You will also save on interest, as you have paid back 36 months’ worth of payments early.
      2) Depends on the finance company. Usually any overpayments will be used to reduce the future monthly instalments (eg – from £189 to £160, to £140, etc.), rather than reducing the term. The GMFV is calculated as the car’s expected value after three years.
      3) Not necessarily, although it is allowing the financially inept to access a lot of money that they will never repay. There is concern that this is not a sensible or sustainable state of affairs.

  183. I am in the second year of my 3-year PCP contract with Seat. I am planning to change into a bigger car at the end of the contract next year. Can I bring my car to a different dealer like Ford, Mazda or Hyundai and let their finance company pay the balloon from Seat just before the third year is up? Or do I have to talk to the Seat dealership?

    Reply
    • Stuart Masson

      Hi Clarissa. Yes, you can take your car anywhere. Your finance agreement is with the finance company (probably SEAT Finance, which is part of Volkswagen Bank), and has nothing to do with the dealership. If you go to a Ford or Mazda or Hyundai or any other dealership, they will settle the finance as part of the new vehicle contract.

  184. Hi
    Can you help please..

    I bought a Hyundai i20 on PCP in Sept 15 with an annual mileage of 8000 miles. I currently pay 189 £ and a final fee of 4000 £. This was a 4 year PCP. 1 year 9 months down the line I have done just 5000 miles and was wishing to close this PCP and move on to a merc / bmw. Can I make an earlier exit as Merc/BMW are happy to settle the remaining with Hyundai directly or will I need to settle 189£xPending Payments + Final Cost before I can exit ?

    Thanks

    Reply
    • Stuart Masson

      Yes, you can settle at any time. Your current finance company can provide you with a current settlement figure, which will be less than the remaining payments + final payment because there will be a reduction in interest.

      When you part-exchange the car, the dealer who buys your car will settle the finance with your finance provider. If the settlement figure is more than the car is worth (which is likely this early into the contract), you will have to pay any difference to the dealer.

  185. Thank you. I always had it in my mind that I have to get a car from the same dealership even if I don’t like their car range anymore. I thought I was stuck with another SEAT. Thanks for the information.

    Reply
    • Stuart Masson

      Plenty of dealers will try to give you that impression…

  186. Hi – Are there any disadvantages to settling a PCP deal early if you have the spare cash? I’m 30 months into a 48 month deal. I’ve got the settlement value for the car, checked it against the market value on Webuyanycar and I’m in surplus. I therefore figure by paying it off I’ll be saving the interest for the remaining 18 months. Am I missing something?

    Reply
    • Stuart Masson

      Hi Adam. If you have the cash handy then you can absolutely settle the finance early. You’ll save on 18 months’ worth of interest compared to continuing to pay it off at the normal rate.

  187. Hi Stuart

    I am 24 months into my 48 month PCP with Audi and am in negative equity of around £3,500 as there is £17,000 left to pay and the car is valued at £13,500. Do i keep my car for longer and change it with Audi at the 3 or 4 year mark, but I will prob still have negative equity, or do I get a low-interest rate loan (5.3%) with Zopa to pay the £3,500 and then use the value of the car (£13,500) as a deposit on a new one?The car I want is the same age as the car I have now, but is a better model, and is around £19,920, but is £22,988 inc. interest over 36 months at 10.9% apr. Am i correct in saying that it will be £22,988 minus the £13,500 deposit (part x from old car) leaves just £9,488 to spread over 36 months, which equates to £263.55 a month (less than what I pay now), and I will therefore have positive equity after 2 or 3 years to get another car as they estimate it will be worth £8,773 in 36 months. Another thought….I could have a final payment fee of £3,000, leaving £6,488 to spread over 36 months (£180.22 per month), and then I would be able to afford the Zopa loan for the neg equity payment on my current car. Does this sound correct? It seems too good to be true for me! I’d be in a better position than I am now.I don’t know which would be more beneficial to me for saving money in the long run?

    Reply
    • Stuart Masson

      Hi Roxanne. We can’t advise you on what you should or shouldn’t do; only explain how the finance products work so you can make an informed decision that suits your needs.

      You are right about one thing – it is too good to be true. Your car is worth £13,500 but you owe £17,000 – therefore you have no deposit and you need to find £3,500 to get rid of your current car. Your calculations and assumptions are way off. Have a read of our article on how a PCP works.

  188. Hi Stuart,

    I am within the last 90 days of my agreement with Vauxhall, I have exceeded the mileage on the agreement and understand I would be liable to pay for this extra mileage.

    If I keep the car and finance it would this mean I wouldn’t be required to pay the charge?

    Also if I decide I do not wish to keep the car can I do this any time during the 90 day period or only at the end?

    Thanks,
    James

    Reply
    • Stuart Masson

      Hi James. The excess mileage penalty only applies if you are giving the car back and claiming the GMFV. If you are going to pay out the balloon and keep the car, the mileage doesn’t matter.

      There will be an earliest date when you can return the car to claim the GMFV; you would need to speak to the finance company to find out when that is (probably once you have made your final monthly instalment).

  189. Hi Stuart….I have 7 months left on my PCP contract with Nissan, how do I go about ending my contract with them early. I am well below the mileage that Nissan have set out and the car is in excellent condition. Many thanks.

    Reply
    • Stuart Masson

      You will need to contact the finance company, who will provide you with a current settlement figure (usually valid for 30 days or until the next monthly payment goes out). Once you pay that off, the car’s yours.

  190. Hi Stuart, i have been reading your articles and have found them massively useful. i currently have a PCP deal with Mazda and paid a fairly sizeable deposit and a mileage limit of 12,500. The car is now 2 years old and due to changes in circumstances, the car has only done circa 7,000 miles and will probably be substantially less than the 43,750 miles when we return the car after the 18 months. I spoke briefly to the dealer last week when it was in for its second service and he said the best option is to continue paying as we are and use the equity that i am building up in the car by doing such low miles. Is it possible that when the agreement ends and the miles are still much lower than originally anticipated, is the GMFV all i owe to the finance company if i wanted to buy the car, despite the fact the value may well be much more due to low miles? Also what would your view be on the best way to proceed….

    Reply
    • Stuart Masson

      If you want to settle the outstanding finance, you can do that at any time. If you wait until the end of the agreement, the final payment is equal to the GMFV. The car’s market value does not affect this amount, as you are simply paying what you still owe on the original loan. If you want to settle it now, you will save on interest as you are paying it off early, but obviously the settlement figure will be higher as you haven’t paid as much off.

      Always be wary of any promises or expectations from salespeople regarding equity. Regardless of your low mileage, you may still find that the car is worth no more (or possibly even less) than the GMFV/balloon at the end of the agreement. It is definitely more likely that you will have some equity if you are significantly under your mileage limit, but it’s not a guarantee. Over the last few years, finance companies appear to have been increasing the final GMFV figures across the board (in order to bring monthly payments down), so customers are finding that they have less equity than they had on previous PCPs, or no equity at all.

  191. Hi stuart,

    I have a BMW 116D M Sport £1000 deposit £293pm 36-month deal with a 16k mileage PCP agreement and the finance is with motonovo (£8300 balloon payment at the end) car price at the time was £18000. The car was at 10,400 miles at purchase. A year and 2 months in I have done 20,600 miles. Based on my new job I think that i will be doing a similar amount of miles. This is my first PCP deal and I wanted to know, If I am thinking to upgrade my car to a BMW 118d or 120 (bigger engine) can I do that now, or shall I wait one more year, or is it best to see the car through until the end? And if I am allowed to part exchange my car early, how does it work in terms of settlement fee and remaining payments?. Let’s assume this will be for a new loan with MotoNovo again.

    Thanks, Alfred.

    Reply
    • Stuart Masson

      Hi Alfred. You can change your car at any time, but you will have to settle the existing finance agreement (usually done as part of a part-exchange). As a rule, the earlier you want to end your contract, the more expensive it will be to change your car.
      Right now, you will probably have a lot of negative equity in your agreement. If you keep the car for longer, this should decrease. It’s up to you to decide how much you are prepared to spend to change your car for one with a slightly more powerful engine. It’s probably never going to be good value, but it depends how much you want it.

  192. Hi
    I’ve just signed an agreement on PCP and I’m due to pick the car up tomorrow the salesman gave me so much information I couldn’t take it all in, can I get out of this agreement and just pay for the car.
    I spoke to the salesman today who told me they had already got the money from the finance company but I could pay 4 months on PCP then pay for the car, why would I have to wait 4 months?
    Isn’t there a cooling off period where I can change my mind?
    If I had to stay 4 months how much would I have to pay? The total cost was 11.800.
    Thanks Jackie

    Reply
    • Stuart Masson

      Hi Jackie. You can withdraw from the finance agreement within 14 days at no cost. The salesman won’t want you to do that (he won’t get his commission for selling the finance), which is why he is lying to you about having to keep the car for four months.
      If you withdraw from the finance agreement, the finance company will simply invoice you for whatever you borrowed. Usually you will have 28 days to pay this.

  193. I have a bike on pcp at the time of getting it I was told how great it was and if you ever can’t afford it you bring the bike back and that’s that. Reading this I know know that this was wrong.

    Recently my partner left and I have been thinking of giving up the bike as money is really tight (3 children one wage) but looking at this is may be not the best idea.

    Reply
    • Stuart Masson

      Depending on how long you’ve had the bike and how much you’ve paid off, you may be able to voluntarily terminate the contract. You have to have repaid 50% of the total amount payable.

      If not, you will be liable for any negative equity if you give the bike back to the finance company. What that means is that they will sell the bike at a trade auction, and then come after you for any shortfall on what you still owe. So if you still owe £10K, but hand the bike back and they sell it for £6K, they’ll chase you for the outstanding £4K (plus costs).

  194. Hi

    Our current PCP runs out in the next couple of months, the final payment is due on 29th September. However our new car from a different manufacturer will be ready at the start of September. What is the most economical way of getting rid of the old car? We have asked about returning the car early and been told we have to make the final payment before the car can be collected, this doesnt sound correct, is it?

    Reply
    • Stuart Masson

      Hi James. You should be able to return your current car to the finance company any time after the final monthly payment has been made. They may be happy for you to make your final payment(s) earlier so you can hand it back earlier. Alternatively, you can hold off on taking delivery of your new car until later in the month.

  195. Hi

    i have a year and a half left on my pcp contract, and i can really no longer keep the car because of my current situation, (need a higher car as no longer can get in/out of my current car as it is too low) maybe sounding a bit silly here but is there any way i can get out of the contract without paying anymore or as little as possible.

    Reply
    • Stuart Masson

      The only possibility is voluntary termination, depending on how much you have already paid off. But there is no right to exit the contract because the car is no longer suitable.

  196. Hi, can you tell me if you VT a PCP deal under the 50% rule, are you legally obliged to pay the excess?

    Reply
    • Stuart Masson

      Hi Max. It’s an area of dispute. Majority opinion seems to be that the finance company cannot enforce excess mileage charges when you VT, but it’s not unanimous and they will usually try. For more information, have a read of our article about voluntary termination.

  197. Sorry, I meant excess milage.

    Reply
  198. Hi
    Got motorcycle Pcp 1st March 15 36mth changed my payment date to 15of month so my final payment will be March 25th 2018 when I will be handing it back
    However the bike will need a new mot on the first is it now up to me to mot it?
    If I were to pay 1 month overpayment would the term shorten the androids at black horse want me to vt and pay the equivalent of 10months

    Reply
    • Sorry for the grammar.

    • Stuart Masson

      Hi Paul. Your contract end date will be different to your payment date. If your contract started 1 March 2015, it should end on 28 Feb 2018 – the payment date is irrelevant (as long as you pay it when it’s due!).

      You need to be giving the bike back or part-exchanging it before end of Feb 2018, so you won’t be liable for the MOT. If you want to keep the bike beyond the end of the contract (which will mean being billed for the GFV), then you will need to MOT it.

  199. Hi Stuart,
    I’m after some advice re PCP.
    I have 6 months to go on a PCP with Nissan Finance on a Qashqai, I’ve started looking into what I should do next.
    I’ve had my current settlement (£11010) & had a few PX valuations for it, depending on who & what deal they are trying to get me into; I’ve had 1 offer that put me in negative equity (just) & some offers that put me in positive equity, but only between £100 & £600.

    I’m wondering whether I should hang on until May 2018 & hope that the equity has gone up a bit more for a PX, or, as a lot of dealers are close to their year end & putting deals out there to entice the punters, should I cash in my chips now & try to bag a bargain (if there is one!). My balloon payment is set at £10695.

    I thought about buying the car outright in May, though that will involve putting cash in & getting further finance (bank loan); would that basically mean I will be paying interest twice on the car though?
    Last option, if the equity is going to be that close, I hand it back & pay the penalty for the excess mileage (currently 2500 over the agreed mileage) I think that would be about the same as the interest on a loan if I bought the car outright. but then I could take the cash I would have put into it for a decent deposit on a new or 2nd hand car.

    One further (related) question, I had a dealer quote me for a 3yr PCP on a new Qashqai, I then asked him what a 4yr PCP would work out at, hoping it would be a lot less on monthly layout. strangely it came back higher, he explained this by saying Nissan Finance, charge a £480 subsidy for a 4 yr deal, which comes out of the ‘Manufacturer discount’ & 4yr deals often come out more per month as the final payment reduces going over the extra year so the actual loan amount kind of increases.
    Does that sound right?
    My local Nissan dealer offered me a 4yr PCP, should I question him on this?
    I rang RCI Nissan help centre & all they could say was, they don’t know about deals for different term PCPs, they only see the paperwork when it comes in from the dealer, that would be the underwriters &you cannot talk to them as its a conflict of interest!!
    thanks in advance
    J

    Reply
    • Stuart Masson

      Hi Jim. Your position on your current car sounds pretty normal. Your settlement position will only drop by £315 if you keep the car until next May (not including any penalties that the finance company can try to slug you for), whereas your car’s value is probably going to fall by at least the same amount in the same time – so your position on the car is unlikely to improve, and you don’t have a lot to lose by changing the car now.

      Which means that it comes down to the sort of offers that are about on the cars that you are interested in right now, and whether they are likely to be better now than in six months’ time. Obviously if you change now, you need to come up with another deposit for your next car six months earlier than planned, so you should take that into consideration when evaluating the deals offered.

      If you borrow from your bank to pay off the balloon on your current car, you will be paying interest on the balloon figure twice (you’ve already been paying interest on it), but it may not be a significant amount and it means you don’t need to come up with a deposit for your next PCP.

      Sounds like the salesman has explained the three-year vs four-year situation poorly. The longer the term, the more interest you will pay – even at the same APR – because you are borrowing the money for longer and repaying it more slowly. That’s normal. However, it may be that Nissan Finance is offering better deals on a three-year PCP (the ‘manufacturer discount’) because it suits Nissan to do so (it’s never about what might suit you!), and if you want a PCP over four years then you miss out on the advertised deal. It would be unusual, but not unheard of.

  200. Hi Stuart,
    I am purchasing a second hand car which I can fortunately purchase in full. However I have been told that if I take out finance then I will get a £750 deposit contribution and 2 years free servicing. It has been mentioned that I could make 2 monthly repayments and then cancel the finance by paying off the balance thus getting the £750 deposit contribution & 2 years servicing all for the cost of the interest charge on just months repayments. Does this situation sound possible or is there likely to be an early settlement fee that could cancel out the benefits? It is hard to get all the T&C ahead of starting to go down the finance route.
    Many thanks,
    Neil

    Reply
    • Stuart Masson

      Hi Neil. You don’t need to wait two months – you can (and should) cancel within the 14-day cooling-off period, which is your legal right and will incur no fees. You will only pay a few pounds in interest, as you have only borrowed the money for a few days. If you cancel in two months’ time, you will pay a chunky early settlement fee as well as two months’ worth of interest.

      The reason dealers tell you two or three months is so that they get paid their commission for selling you the finance. The finance companies deliberately hold back paying commission until a few months have past, so that’s why the dealer won’t like it if you cancel any earlier.

  201. Hi Stuart,

    I am around 2.5 years into a 4 year pcp and I am about to apply for a self build mortgage, which is tricky enough to get nevermind with a £400 per month pcp conract. I have been told by my broker that this monthly payment will severely affect what the mortgage companies will offer me, a reduction of between £30-50k.
    I am aware that I could hand the car back under VT but is it possible I would be able to pay off my monthly payments in advance and keep the car until the end of the term?

    Thanks in advance
    Chris

    Reply
    • Stuart Masson

      Hi Chris. Most finance companies will allow you to make overpayments, although there may be a fee. Some may even be happy for you to pay all of your monthly fees in advance, although this probably won’t affect the balloon payment amount or timing. Speak to your finance company and see what they have to say.

      Be aware that this might not actually help your mortgage application, however. The mortgage company will see from your credit history that you have a car finance agreement of 48 months that is still running, so they will assume that you are making regular payments. Only concluding the agreement, whether that is by VT or other means, will show that the finance agreement is finished and that you no longer have any financial commitments associated with it.

What are your thoughts? Let us know below.