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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?

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.

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.

Read more: The Car Expert’s comprehensive guide to PCP car finance

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.

Read more: The Car Expert’s comprehensive guide to voluntary termination

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.

Here at The Car Expert, we are building commercial partnerships with companies who can offer you competitive PCP deals on either a new or used car (as well as other types of finance if you prefer). Check these out before signing any finance agreement with a car dealer:

  • We Finance Any Car can arrange PCP or HP finance at competitive rates
  • FairSquare can find and finance either a new or used car, and deliver it to your door

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 Massonhttps://www.thecarexpert.co.uk/
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.


  1. Hi Stuart

    I bought a new Tiguan on 1 March from my local VW retailer for which I used the VWFS Solutions PCP finance option as it gave me an additional £2,000 deposit contribution from the finance company/manufacturer. This was in addition to the dealer contribution I negotiated. I have the ability to pay the PCP off so contacted VWFS the day after collection and asked for a withdrawal quote. As expected it was the amount financed plus just one days interest. I now have until the end of the month to pay them to withdraw from the agreement. I’ve read through the terms on the finance agreement and can’t find any reference to needing to pay back the deposit contribution associated with taking the plan, however I noted that the retailer provided an invoice for the car sale that excluded the £2k finance deposit contribution, and then provided a supplementary invoice for -£2,000 for the VWFS deposit contribution.

    From what I’ve read, and your responses to other peoples’ questions, it seems that exercising my rights to withdraw is unlikely to result in the dealer wanting another £2,000 from me. However, the way they have constructed the invoice (which they asked me to sign the bottom of) makes me worry that they have a way of catching me. I’ve read the terms on the back of the invoices and again can’t see anything regarding paying back the deposit contribution.

    Should I be safe to proceed and withdraw from the PCP? If the dealer does then contact me and ask for another £2,000 how do I then handle that?

    • Hi Dave
      I am in the process of buying a Tiguan, and my dealer intimated that I could take the PCP option, with a £2000 dealer contribution, and providing I cancelled the finance agreement within 14 days, I would only need to pay a few days accrued interest, and neither VW, the finance company, nor the dealer would seek repayment of the £2000.
      How have you got on with your experience?

  2. Hi Stuart,
    I currently have a 70 plate VW Golf on PCP finance. When taking this out I traded in my car (£4500) plus a dealer contribution of around £1000. The agreement balance was then around £28000. I took this finance out in October but now would like to end the contract as I’m really not in love with the car with things going wrong and not really driving due to covid.
    The settlement figure generated is £25550 (below market value for the car). Should the finance company take the car back?


  3. What about if you have the cash to make a purchase, but the PCP offers you a finance contribution of, say, £3000 on a £30,000 car. I put £2000 down. That means I take finance on the remaining £25000.

    After 2 months, I ask to settle the PCP and pay the balloon payment. The early termination charges are 55 days interest and a £50 admin fee. That means I end up getting a cheaper car.

    What am I missing?

    • Nothing. That’s absolutely fine. It’s simply a sad reflection on the state of new car sales that they try to funnel every single buyer into the PCP merry-go-round and are not too fussed if a couple of buyers exploit the system.

  4. Hi Stuart. I have had my car on finance (PCP) for 19 months and my contract is 42 months, however, I would like to change my car for many reasons. Is it possible for me to part exchange it and take out a new finance option on a new vehicle? My vw polo was £8,999 market-price but I am paying £11,000 with interest. I have currently paid £4,264.50 off the car and I have £6,735.50 remaining (that’s including interest). Please could you help me. Thank you.

  5. Hi Stuart ….. i wonder if you can help me with some answers on a PCP. My partners son has a PCP with Seat Financial Services (VWFS) but now needs to get rid of the car due to losing his job through the COVID 19 Pandemic. However, for now his mum is making the payments but we have been told by a friend you can NOVATE the car but only to a company and not an individual. Can you explain how this works at all please

    • Hi Ricky. No, you generally can’t novate a PCP agreement. It is sometimes possible with a lease, but only with the agreement of the finance company.

      It may be that a three-month payment deferral could help avoid having to get rid of the car, but best bit is always to speak to the finance company and explore trhe options that may be available to you. The lenders are doing what they can to avoid lots of people defaulting on their loans or terminating their agreements, so they may be able to help find a way out.

  6. Hi Stuart – i am due to opt out of my company Car Scheme and have been offered an allowance. As i have reduced my total mileage from 30K to 18K a year i wanted to start changing my car more often. The company cars were taken for a minimum of 4 years. I now want to change my car every two years and was initially looking at PCH – searching the net can throw up some good offers. However many others at work have advised to take a PCP as this will allow me to gain a more expensive car, and as long as i have paid half of the total loan then i can give the car back after two years (if the numbers add up) however after reading your article the 2 year PCP option looks highly unlucky to be the best option – any advise on what would be the best / correct option for my situation would be greatly received . Thanks Bill

  7. Hi, I am now two years into a four year PCP, I have now got some money together and can afford to clear the PCP off…..I like the car and would be keeping it and not trading it in. Am I better off waiting till the four years are finished and then paying the ballon payment or paying it off now. The company say If I settle now I would be saving around £950.00

  8. Hi Stuart, I have a Ford on a 3yr PCP and am just over 1yr in.
    Because of the size of my deposit and the monthly payments made, my settlement quote (inc fees) is less than the market value of my vehicle (£19,100 settlement and dealership adverts average £21,500).
    I want to return back to buying an older used car outright rather than have a finance deal but before I contact the dealership about my possible options I want to have some knowledge in advance of them coming back with/without any offers.
    I have had offers from the standard companies that buy anyone’s car for circa my settlement figure already.

    • Hi Matt. You will need to speak to the finance company to make sure they are happy for you to sell the car and repay the finance – it’s basically their car so you can’t go and sell it without their agreement. If you plan to sell it to a dealership or car-buying company, it shouldn’t be a problem because the dealer will settle the finance as part of the transaction. However, if you want to sell it privately the finance company may not be so keen.

  9. Hello I have 2 years to run on my PCP deal but I am looking at going traveling therefore I am looking into options to exit my deal and allow me to move away. What are my best options for instance could I sign my contract over to someone else?

    • Hi Tom. No, you can’t sign over your finance agreement to anyone else. You need to settle your PCP with the finance company. If you have decided that you want to go travelling while you are still locked into an ongoing finance contract, you need to pay up the costs of exiting that contract before you go.

  10. Hello there,
    Are there any deals from anyone to take over my PCP finanace from my current vehicle financer at lower APR for the remainder term to reduce my monthly expense ?

  11. Fascinating article. My finance provider for the PCP doesn’t take big deposits but allows “Partial payments” (lump sums) during the agreement repayment. “If you wish to make a partial payment you must contact us and inform us if you want to reduce the monthly repayments or shorten the remaining term. Once the payment is made the finance Agreement will be re-calculated and confirmation will be sent in the post.”

    This will reduce the monthly payments as desired but my question is will it reduce the interest charged (also desired)? Or does the interest charge for credit levied at the beginning of the agreement still stand?

    Many thanks


    • Hi Mark. Yes, making additional lump sum payments will reduce your interest as you have less money borrowed for the remainder of the term. When you make a lump sum payment, the finance company will recalculate the amount outstanding to allow for this.

  12. This is brilliant article and love the support you show all of us – I bought a 2015 Audi Q5 (£24k) and pay about £400 a month – I have 4 years left on it (only got it a year ago). It is possible to, say, go to a dealer and sell the car back to them and then get a smaller car that’s worth, say, £10k? ie, then my repayments will be lower and the dealer can deal with the finance on the Audi?

    Or do I need an equivalent car worth +£20k every time?

    • Hu Gyan. To get out of your current car now, you will need to settle the outstanding finance. Once that’s done, your next car can be as cheap as you like or as expensive as you can afford – it’s a new finance agreement and not connected to your current finance agreement.

  13. Hi Stuart. So I have 15 months left on a 48 month pcp contract. I am led to believe by Mercedes finance that I am in negative equity. Even if I have gone over the 50 % contract term can I still do a VT? I’ve gone over my mileage (roughly 3000 miles). When / if I VT do I need to pay the excess mileage?

  14. Hi Stuart
    I purchased a second hand Clio on PCP.
    I have had to have the car repaired on a few occasions, none of which were wear and tear, all were faults with the car.
    The latest one is a pipe for air conditioning, I have been waiting since June for this part and now they tell me it will be end of September at the earliest.
    I want to terminate this agreement early, do you think that I would have grounds for this considering the amount of times the car has been in for repair, without penalty. I have no confidence in the car any more.


  15. Hi Stuart,
    I’m 28 months into a 48 month PCP and plan to voluntary terminate in a couple of months or so once I reach the 50% payment criteria due to a change in life circumstances…..
    Assuming this goes to plan my intention was to fund another car to meet current curcumstances in full via a personal unsecured loan as I have the credit rating to achieve some of the better interest rates which makes it an affordable option.
    My question is will the VT effect my credit rating at a crutial point of application, I can obviuosly see the loan on my credit file and assumed, like previuos PCPs paid in full, it will disappear without any detromental effect on my score and therefore future ability to achieve best possible loan.
    Many thanks

  16. Hi Stuart

    Interesting article, thank you.

    My situation is slightly different though

    I purchased a Range Rover Sport on PCP for £42,000 over 4 years @ £590 /PCM

    After just one month, the car was stolen. The insurance paid out £38k but the remaining balance with interest was £12k – The PCP arrangement was for £42k + £8k of interest assuming the agreement ran the full course of 4 years. I am not sure what the residual was.

    The finance company called us about 10 times a day and sent letters everyday the moment the £38k was paid by the insurance. They were calling for the remaining balance of £12k. In a panic and in fear of getting bad credit as they advised i paid the £12k. The contract has now ended, however, after reflecting and having time to think, i can’t help but wonder if actually paying the full amount of interest at £8k was not right and that i should not have paid it.

    Surely after only having the car for a month and then paying the balance off in full, i would not need to pay £8k in interest? That seems a lot to me.

    Is there any advice you can give me at all? I fully appreciate that as the insurance paid out £38k and i paid £42k for the car then at the very least i would need to pay the additional £4k and some interest but it can’t be an additional £8k can it?

    Thank you for your time and for reading this. I look forward to any help you can give


    • Hi James. You are correct that if you are settling a four-year PCP after only a month or two, you should be paying a reduced settlement figure based on a substantially reduced interest amount.

      Now that you’ve handed over the money, it may well be hard work to recoup the difference. You can contact the finance company to point out what has happened and ask them to confirm the numbers to provide you with an appropriate refund, but you might be up for a lengthy and possibly fruitless chase. You could try contacting the Financial Ombudsman to see what they recommend as well.

  17. I am planning on getting a 2015 Porsche Cayenne, second hand, 10k mileage, with a price of £41.5K. with a deposit of £5k on PCP, monthly £490 for 36 months with final payment if 27K. I have never used finance before and making sense of it all through the earlier threads too. I am just going through the agreement which was sent to me before i signed anything.

    Question 1. Termination – the following is the clause in the agreement what does this mean?

    “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 £24,880.88. 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.”

    Q2. What happens if I want to come out after 1 or 2 years? I am not planning to pay final payment to own the car at the and I need the flexibility to come out of the agreement, if circumstances change etc with a huge charge.

    Many Thanks.

    • Hi Harry. For more information about the termination clause and your rights, have a read of our article about voluntary termination of a PCP.

      If you are planning to change the car after two years, the best advice is usually to get a two-year PCP rather than a three-year PCP. These types of finance are designed to run over the whole term, and ending them early will almost always result in a negative equity position that you need to resolve.

  18. Hello Stuart!

    I’ve come across this article a few times as I’m struggling with my PCP I’m now on my 4th car and tend to change it each year and get the new model but that means new PCP contract.
    Since I know that if I try and exit now (as personal circumstances are making payments tricky) I will be stuck with the large negative equity or other. So I was thinking to try and hold out until they offer me another car , typically a year early to the 3 year period again, enter a new contract (since they buy back and settle the old/current contract) and use the 14 day legal right to terminate the new contract in the cooling off period, could this work do you think?

    • Hi John. No, that won’t work. Your 14-day cooling-off period on the finance contract doesn’t apply to the vehicle purchase itself. If you withdraw from the finance agreement, the finance company will simply invoice you for whatever you borrowed.

  19. Stuart,
    I have a motorbike PCP deal. I paid £3500 deposit, £14.999.00 was the cost of the bike, under the termination section it says £8.892.92 is half the total amount payable, I pay £173.19 pm, all of the payments added together (36) don’t add up to half the amount payable. Does this mean I will have to pay a lump sum to terminate at any point in the agreement.
    My circumstances have changed and after June this year I will no longer be able to afford repayments.
    Any advice?

    • Hi Shawn. You need to add your £3,500 deposit to your monthly payments, as that’s part of the total amount payable. Do that, and you should find that you cross the VT point after 32 months.

      You can VT at any time, but you will have to pay whatever you still owe to get to the 50% point.

  20. Hi Stuart. I have a similar question. I am looking to by with cash and no part exchange. The dealers salesman has told me that if I take out a PCP they will reduce the car price by £1500. He tells me that I can pay it off (ask for a settlement price) at any point with no penalty charges etc. So whilst I am happy to get £1500 off, I’m nervous that if I pay it off after a month that I’m going to get stung on the settlement price or worse, that the £1500 I got off doesn’t cover my overall savings. Can they inflate the price or charge early penalty even if I’m told I can settle at any point? I’m feeling that paying full price might just be simpler?
    Thanks Simon

    • Hi Simon. Have a read of our article about deposit contributions. You can withdraw from the finance agreement within 14 days, and the only cost will be the interest accrued before you cancelled (which will be a few quid at most). Unless there is anything written into your sales contract (and there never is), they have no grounds to try and claw the deposit contribution back.

  21. Thanks Stuart, that’s a great help. It’s not that I don’t trust the dealer, and I want him to get his cut, but there was something about the 10 month tie in which didn’t seem to make sense. I’ve emailed him and asked for a further explanation and if there’s any update I’ll post it on here. All the best.

  22. Hi Stuart,

    I’ve been reading this thread with interest and wonder if you might be able to confirm/clarify/debunk an offer that I’ve been given by a nameless main dealer on a used car purchase on PCP. I’m in the fortunate position where I can buy the car outright by using cash and an old banger that I’m going to be trading in but as a sweetner the dealer has ‘offered’ me finance with a deposit contribution. The used car is valued at £33,500 (+ the cost of a few extras like alloy and bodywork protection) and the trade in value of the old car is £2k. I’ll be making a deposit of £11k and the dealer has offered to throw in £1,250 as a deposit contribution on 48 month PCP. The total finance is £19,500 and I’ll be paying £248pm (10.5% APR).

    Now I know that I can cancel the agreement within 14 days and just take the cash contribution but I quite liked the sales guy (he was helpful and seemed ‘honest’ – I’m no fool so I’m happy to admit this) and when I asked if he would lose out on commission he told me that the finance agreement would need to be in play for 10 months to avoid it being clawed back. I asked what the net effect of the £1,250 deposit contribution would be if I did this and he said it would net down to about £750.

    I like a deal and I’m happy for there to be some mutual benefit but I’m now wondering whether the figures stack up and if I’m making a rod for my own back for the sake of £750! I intend on keeping the car and my original plan was ‘cash is king’ but £750 will cover the cost of fuel for 6 months so maybe its not a bad deal … what are your thoughts on this?


    • Hi Paul. Have a read of our article on deposit contributions, as it covers exactly this situation.

      The dealer is probably not throwing in the extra £1,250, although they may be providing part of it. The rest will be coming from the manufacturer and/or the finance company.

      Unless there is a clause written into the contract (and there never is), they can’t claw back any of the deposit contribution if you withdraw from your finance agreement within the 14-day cooling-off period. The sales exec will lose out on that aspect of his commission (could be £20-£50, maybe), but he will still get his commission for selling you the car so you don’t need to feel sorry for him.

      The 10-month excuse is almost certainly nonsense. Yes, the finance company will normally withhold its commission to the dealer for 2-3 months in case you cancel the finance, but not 10 months.

  23. Hi
    I took an 18-month-old Toyota Aygo on finance about 6 months ago, put down a sizeable deposit in exchange for monthly payments of only £80. But circumstances have changed and I need a bigger car. Will Toyota let me upgrade or is it going to end up with me losing my cash deposit (£1300), and having to pay a negative equity fee and then having to find the deposit for something new and bigger?

    • Hi Billy. You will probably find it’s a very expensive proposition to change your car and settle your finance agreement after only six months. Your deposit is gone, and you are probably still in significant negative equity.

  24. Hi – I am thinking of getting a 2012 Porsche 911, second hand, 32k mileage, with a price of £50,500.00 with a deposit of £10k, I will keep the car for one year, the monthly amounts are £599.61 for 47 months. Is this monthly amount vatable? I have never used finance before and making sense of GMFV is bewildering. If I settle early as I keep cars for about a year do I just not pay back the figure borrowed less the amount paid over the year, this area is I think made wilfully difficult by some lenders, many thanks

    • Hi Menpal. If you only intend to keep the car for one year, then a 48-month PCP is almost certainly the wrong kind of finance agreement for you. You will probably have considerable negative equity in your agreement, meaning your settlement figure will be more than the car is worth.

      You can settle your PCP early, and some very quick maths suggests that after one year you will owe £33,300 + any interest + an early settlement fee.

  25. Hi Stuart – Planning to buy a Skoda with PCP – I plan to cancel within 14 days to benefit from deposit contribution etc – Is it a statuary right that I can cancel with 14 days for no penalty with any finance provider? -except small interest amount for time loan is take out ?

    • Hi Chris. Yes, it is your legal right. Any finance agreement has a 14-day cooling-off period during which you have the right to withdraw. Technically you are not cancelling, you are withdrawing, so the agreement never exists. The finance company can charge you interest for the period of time you have borrowed their money (which will only be a few pounds), but they can’t charge you any fees.

    • And just to be absolutely clear, the contribution sum provided by the pc company cannot normally be clawed back?

  26. Thanks Stuart, I have just checked the valuation with CAP-HPi (amazingly free service). They put the valuation for a trade-in at £17,750 for top price excellent. According to their definition of excellent my car is better than excellent! My GFV is £17,500, so I should be able to save some interest payments and end the PCP early and as long as they do indeed give the top end for my car its all fine. As your other article says, dealers have about a 3k margin for re-sale and CAP-Hpi reckon the forecourt price should be £19,500 to £20,750. I see on Autotrader, franchise dealers have clones of my car/same mileage for 21 to 24k.

    • Bear in mind that CAP-HPI and other valuation service don’t actually buy cars, they simply monitor what has been (in the past tense) going on in the marketplace. Ultimately it’s worth what someone is prepared to pay for it. For a contrasting position, check its value on a car buying site such as We Buy Any Car. You’ll probably find they’re offering less than CAP-HPI suggests.

  27. Hi Stuart, I have 6 months left on a 3 year PCP with Mercedes Finance. I would like to change to a different make. As expected, the new dealer made an offer for my Mercedes that was less than even my GFV. I wondered if it’s allowed to make the final 6 payments on the Mercedes in advance and hand the car back? After all, I would have thought it’s in Mercedes advantage, they get all the monthly payments and the car back with less miles and a bit newer than waiting another six months when they get the car handed back anyway. Thanks.

    • Hi Bill. Would those six payments cover the negative equity between your car’s current value and the GFV? If so, I’m sure the dealer would be happy to arrange it for you.

      I’d also check your pricing with the dealer where you’re planning to buy your next car. They may offer you a better price for your car, although probably not a lot. It’s a buyer’s market at the moment, so make sure you shop around to get the best deal possible. Also, have a read of our article about part-exchange values.

  28. Hi Stuart,

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

    Thanks in advance

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  32. Hi

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

  33. Hi

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

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

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

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

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

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

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

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

  36. Hi stuart,

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

    Thanks, Alfred.

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

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

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

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

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

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

  39. Hi Stuart,

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

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

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


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

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

  40. Hi Stuart

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

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

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

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

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

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

  43. Hi
    Can you help please..

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


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

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

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

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

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

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

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

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

  46. Hi Stuart,

    Just a bit of advice.

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

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

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

    Thanks a lot,

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

  47. Hi

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



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

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

    Thanks for help


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

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

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

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

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

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

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

  51. Hi Stuart

    We have an PCP agreement with a dealer.

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

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

    my current deal says its worth what is owed.

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

    Then start a fresh else where….

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

    Can I VT with the finance company

    What would be you advice please?

    Your help with be appreciated.

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

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

  52. Hi Jason

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



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

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

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

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

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

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

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

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

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

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

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

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

  58. Hi,

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

    Thanks for your help.

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

  59. Hi Stuart

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

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

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

    Any help or clarification would be great.

    Kind Regards
    James Gibbard

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

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

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


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

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

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

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

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

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

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

    I have therefore paid back more than 50%

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

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

    I look forward to your response. Thanks

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

  64. Hi Stuart,

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

    After 3 years you have the following options:

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


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

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

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


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


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

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

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

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

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

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

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

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

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

  65. Hi Stuart,

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

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

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

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

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

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

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

  68. Hi Stuart

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Am i missing something here? Thanks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  83. Hey Stuart,

    Great website and very informative!

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

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

    Thanks for your help!

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

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

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

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

      Thank you again for your help


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

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

  85. Hi Stuart

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

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

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

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

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

    Thank you very much for your help


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

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

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

  86. Hi Stuart.

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

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

    Thanks in advance.

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

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

  87. Hi Stuart,

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

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

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

    We have £4,500 remaining on finance

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

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

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

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

    The car dealer was very unclear about it all.

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

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

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

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

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

    I accept I could be talking absolute rubbish here.

    Hope you can help

  88. Hi Stuart,

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

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

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

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

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

  89. Hi Stuart,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  95. Hi Stuart,

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

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

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

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

    Thanks for any guidance…


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

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

    • Thanks Stuart,

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

      Thanks a lot for your advice…

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

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

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

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

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

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

  99. Hi Stuart

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

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


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

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

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

    thanks in advance

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

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

  101. Hi Stuart,

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

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

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

    I hope I got that all right.

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

    Many Thanks.

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

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

    Kind Regards,


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

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

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

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

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

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

    Thanks for you patience and looking forward to your answer.


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

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

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

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

  105. Hi Stuart,

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

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



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

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

  106. Hi Stuart.

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

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

    Looking forward to your reply, appreciate your time


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

  107. Hi Stuart

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

    monthly payments are 60 pound.

    many thanks

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

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

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

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

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

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

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

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

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

    Thanks in advance for your help and comments.

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

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

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

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

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


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

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

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

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

  113. Good Morning,

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

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

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

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

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

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