Second opinion sought on PCP settlement

[Mandat]

I'm currently at month 22 of a 36 month PCP deal, which has a £25k balloon payment at the end.

Having received a statement from the finance company, I see that the current balance stands at £26.5k. This got me thinking that it would be better to pay off the balance and clear the finance now, rather than paying another 14 monthly payments (approx £5k total) to then paying the balloon as well.

Essentially I would be saving the 14 monthly payments, and paying approx the same amount to clear the finance now, rather than in 14 months.

This seems pretty clear cut to me, but I don't know whether I have missed anything, hence asking for a second opinion.

[Stupeo]

Seems to good to be true?

[Magic919]

Ask for a settlement figure and you'll be in a position to judge. Saving over a year's interest on over £25k must help.

[rsbmw]

That doesn't make any sense, PCP's by nature reduce by the portion of your monthly payment that isn't interest, every month, trending towards the GFV. In order for your 5k of payments to only affect the balance by 1.5k, you would have to be on some outlandish interest rate!

[sidicks]

rsbmw said:

That doesn't make any sense, PCP's by nature reduce by the portion of your monthly payment that isn't interest, every month, trending towards the GFV. In order for your 5k of payments to only affect the balance by 1.5k, you would have to be on some outlandish interest rate!

Interest on £25k @ say 10% for 1y and 4months would be circa £3,300 so the numbers could make sense if, as you say, the interest rate was fairly high (> 10% APR).