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Car finance advice

Car finance: How do I settle a PCP early?

Changing circumstances mean you need to end your agreement now rather than wait until it ends. What are your options?

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If you are concerned about your finances as a result of the coronavirus pandemic, there is help and guidance available. Your finance company should offer you a three-month payment deferral on your car finance agreement. Make sure you also read our exclusive analysis of this payment holiday initiative to decide if it is right for you.

Most car dealerships are rubbish at explaining how various car finance products work. This is clear from the amount of traffic this site receives from UK car owners and car buyers 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, and a lot of that confusion comes about because people are looking for easy answers that simply don’t exist. In reality, it’s quite simple. You have borrowed a large amount of money to buy a car, and that money needs to be repaid.

You can repay this at any time if you have the money available to do so. However, the reality is that most people don’t have the thousands of pounds usually required to settle their finance and are looking for other options.

How does a PCP work again?

A lot of the confusion about settling a PCP early comes from borrowers’ misunderstandings about how a PCP actually works in the first place.

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When you take out a PCP, you will usually put in an upfront payment (referred to as a deposit) and borrow the rest of the money required to pay for the car. So if the car costs £30,000 and you put in £2,000 deposit, you will borrow the remaining £28,000. The finance company pays the dealer £28,000 and you get to drive home in your new car.

At this point, you will owe the finance company £28,000 plus interest and fees – let’s call it a nice round £30,000. This is your debt, and it needs to be repaid. Until it is repaid in full, the car remains the property of the finance company.

To repay this debt, you will have three to four years of monthly payments and then a balloon payment. In this example, that would probably mean monthly payments of £400-£500 and a balloon payment that’s probably somewhere between £10,000 and £15,000.

The key to a PCP is that the finance company offers a guaranteed (minimum) future value to cover the balloon amount. That means you can give the car back at the end of the agreement, or part-exchange it with a car dealer on another vehicle, instead of paying off the balloon. However, that only applies at the end of the agreement, not during the agreement.

A PCP is designed to work out neatly if you run it for the full term of the contract. If you want to settle up early and get rid of your car, it’s not so simple. You will probably find you have a negative equity problem thanks to the car’s depreciation.

What are depreciation and negative equity?

From the moment you drive off in your new (or used) car, it starts losing value. This is called depreciation, shown in the blue line below. The car loses value more quickly early on, because the price you pay for a car from a dealer will include the cost of the car plus the dealer’s costs and profit margin, plus a large dose of VAT if it’s a new car. Over time, the rate of depreciation starts to slow, which you can see as the blue line starts to flatten out.

Graph of PCP - depreciation vs finance outstanding
Depreciation vs finance outstanding (click to enlarge)

The “cost of purchase” (dealer’s costs and profit margin) push up the price you pay but they don’t add any value to the car, so once you drive away from the dealership your car is potentially worth thousands of pounds less than what you just paid for it.

Your monthly payments, of a few hundred pounds each month, gradually reduce your settlement figure (the red line above) over time. But because your monthly payment is fixed, this amount reduces in more or less a fixed amount each month, which is why the red line above is a straight line.

For the first year or more of your finance agreement, your car’s value is falling by more than you are repaying. This creates what is called negative equity (the grey area in the graph above; it’s simply an example and the actual result will be affected by many factors).

Negative equity is what you get when you owe the finance company (the settlement, in red) more than what your car is worth (the value, in blue). On a PCP, you spend almost all of your time in negative equity. Even if you were able to sell your car (and legally it’s not yours to sell), the money you would get for it wouldn’t cover your debt.

In theory, the value of your car and the amount you owe the finance company should come back together again towards the end of the agreement. At any point before that time, you will have negative equity.

What does that mean if I want to settle early?

Generally, it means you have a problem. You owe thousands of pounds (all your remaining monthly payments, plus the balloon amount, minus some minor interest savings), which you probably don’t have in your bank account.

Let’s look at the simple example graph above, which is based on borrowing £30,000 and having a GFV of £15,000 after three years. If you wanted to try and get out of your agreement after one year, you would owe £25,000 (actually slightly less because you would save a few hundred pounds on interest by settling early). If you want to settle after two years, you’d owe £20,000 (again, it would actually be slightly less).

You’re almost certainly not allowed to sell your car privately, because it’s not yours to sell. Some finance companies will allow it under certain circumstances, but will probably require the buyer to pay them directly, rather than paying you and then you paying the finance company.

Usually, a finance company will allow you to sell the car to a dealer because the dealer will settle the finance. However, a dealer will usually want to sell you another car rather than simply buying yours, so finding one that will buy your car and settle your finance may be difficult.

And even if you are able to sell the car, its value will be significantly less than your settlement figure, so you’d still be a few thousand pounds short. You would have to pay those few thousand to either the finance company or the dealer before the debt is considered settled.

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

It certainly used to be the case that finance companies were quite conservative in their GFV predictions, and customers would end up with a car that was worth a handy sum more than the settlement figure (called equity or positive equity, and obviously the opposite of negative equity). This money would almost certainly be used as a deposit for another PCP agreement, so it all worked out happiily for both buyer and lender.

However, as the market has become more competitive, the situation has changed. More finance companies appear to have increased their GFV predictions, while at the same tie used car values have been falling. This has kept your monthly payments down a bit but it has made it much less likely that you will have any equity in the car at the end of the agreement or any point during 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. There will be exceptions, but as a general rule you should always assume that you will be in a negative equity position.

What about voluntary termination?

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 half of the total amount payable. Voluntary termination is looked at in detail here.

However, due to the way that a PCP is structured (usually a low deposit, low monthly payments and a large balloon amount), you will probably only reach the point where you can give the car back a few months before the end of the end of the agreement anyway. So it’s great if you hit trouble three months before the end of the agreement, but no use whatsoever if you’re only a few months in (or even a couple of years, in many cases).

You can voluntarily terminate your agreement at any time, but if you haven’t reached your 50% point then you will have to pay the difference to make it up. For most car owners with a PCP, that’s still a negative equity position and not really any better than selling the car with the permission of the finance company and settling the full amount.

So does that mean I’m screwed?

Unfortunately, there’s not usually a good outcome if you want/need to change your car before the end of the specified term. The reality is that you will usually have to find several thousand pounds to settle a PCP early. This is the nature of a secured loan on a depreciating asset, where you’re paying for a product you don’t own and is losing value faster than you’re paying it off.

You should contact the finance company and discuss your situation. If you are suffering from genuine financial hardship, they may be able to offer alternative payment terms to help you work through your problems. You will probably end up paying more in the long run, but you may get some short-term relief. However, don’t pin your hopes on the finance company being too helpful – their first response will always be to insist that you pay what you owe.

If you are wanting to settle your PCP early because you’re trying to buy another car, you may find that there are deals on offer that will help you with your negative equity. Be very careful here, as you may be simply setting yourself up for more problems on your next car, and you could find yourself back in the same position (or an even worse position) very quickly.

If you genuinely can’t settle your debt, you may have to accept voluntary surrender. This is a very different thing to voluntary termination. You give back the car but still owe whatever is left to pay (and the finance company will add on extra costs for collecting and disposing of the vehicle). This is pretty much a worst-case scenario, as the finance company will still be chasing you for money even though you’ve already given back the car.

If you are suffering financial hardship as a result of the coronavirus pandemic, there is help and guidance available. Your finance company should offer you a three-month payment deferral on your car finance agreement. Before taking it, however, you should read our exclusive analysis of this payment holiday initiative to decide if it is right for you.

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’d like to hear more tips and advice on car finance and the coronavirus pandemic, have a listen to my podcast on BBC Radio 4’s Money Box programme.

This article was originally written in June 2014 and was most recently updated in May 2020. Latest changes include re-writing the section about negative equity and depreciation, as well as information boxes regarding information about our coronavirus-related car finance advice.

Stuart Masson
Stuart Masson
Stuart is the Editorial Director of our suite of sites: The Car Expert, The Van Expert and The Truck Expert. Originally from Australia, Stuart has had a passion for cars and the automotive 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.

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  1. 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.

  2. 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?


    • 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.

  3. 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.

    • 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.

  4. 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.

    • 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.

  5. 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?

    • 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.

  6. 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!

    • 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.

  7. 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.

  8. 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

    • 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.

  9. 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.

  10. 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

    • 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.

  11. 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


    • 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.

  12. 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.

    • 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.

  13. 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! .

    • 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

  14. 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.

    • 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

  15. 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?

    • 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.

  16. 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?

    • 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.

  17. 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

    • 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.

  18. 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.

    • 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.

  19. 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.

    • 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.

  20. 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.


    • 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.

  21. 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.

  22. 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 ?

    • 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).

  23. 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

    • 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.

  24. 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,


    • 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 :-)

  25. 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.


    • 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.

  26. 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?

    • 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.

  27. 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

    • 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.

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

  28. 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

    • 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.

  29. 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

    • 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.

  30. 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?


    • 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.

  31. 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

    • 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?

    • 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.

  32. 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.

    • 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.

  33. 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.

    • 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.

  34. 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

    • 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).

  35. 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.

    • 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.

  36. 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,

    • 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.

  37. 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

  38. 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,

    • 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.

    • 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.

  39. 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!

    • 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.

  40. 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?

    • 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.

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

    • 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.

  42. 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.

    • 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.

  43. 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?

    • 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?

    • 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.

  44. 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.

    • 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.

  45. 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.


    • 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.

  46. 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.

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

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

  47. 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)?

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

  48. 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?


    • 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.


    • 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?


    • 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).

  49. 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!

  50. 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!

  51. 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?


    • 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.

  52. 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.

    • 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.

    • 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.

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

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

  54. 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.


    • 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?

    • 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.

  55. 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….

    • 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.

  56. 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?!

    • 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!

    • 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.

  57. 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

    • 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.

  58. 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

    • 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.

  59. 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?


    • 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.

  60. 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


    • 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.

  61. 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.

    • 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.

  62. 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

    • 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.

    • 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.

  63. 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

    • 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.

  64. 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?



    • 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.

  65. 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

    • 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.

  66. 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.

    • 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.

  67. 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.

    • 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.

  68. 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

    • 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.

  69. 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!


  70. 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.

  71. 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.


    • 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?

    • 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?

    • 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.

  72. 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.

    • 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.

  73. 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,

    • 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.

  74. 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?

    • 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.

  75. 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?

    • 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.

  76. 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?

    • 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.

    • 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 ;)

  77. 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.

    • 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.

  78. 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).

    • 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.

  79. 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.

    • 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.

  80. 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.

    • 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.

  81. 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 ??


    • 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!

  82. 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!

    • 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.

  83. 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.



    • 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.

  84. 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?



    • 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?



  85. 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

    • 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.

  86. 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?



    • 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.

  87. 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.

    • 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.

  88. 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.

    • 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 ;)

  89. 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?

    • 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.

  90. 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?

    • 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.

  91. 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

    • 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.

  92. 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?

    • 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.

    • Hello
      I need your help
      My partner and I started a pcp in Dec 2017
      Now we really need to terminate

      What are our options please?

    • Hi Paula. You don’t have a right to terminate your PCP, so you will need to work out the least-worst option.

      You can voluntarily terminate the agreement, but you will need to have paid 50% of the total payable – and you will be a long way short of this after only six months, so you will have to come up with a large amount of money to reach the 50% point.

      You can sell the car to a dealer, who will pay off your finance agreement, but your car will be worth a lot less than your finance settlement, so again you will have to find a lot of money to clear this.

      You can voluntarily surrender the car back to the finance company, but this is also a bad option. The finance company will sell the car at auction (for below its PX or private sale value), and then come after you for whatever is still owed, plus the costs of selling it. This is usually the worst option.

      You may be able to get a bank loan to cover your shortfall with any of these options, but it’s not an attractive option as you are borrowing more money to clear other borrowings.

  93. 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?

    • 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.

  94. 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.

    • 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.

  95. 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

    • 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

  96. 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!

  97. 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!

    • 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).

  98. 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?


    • 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.

  99. 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 .

    • 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

    • 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

    • 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.?

    • 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).

What are your thoughts? Let us know below.