Exiting a PCP contract - advice please

[gweaver]

Advice on exiting a PCP contract would be appreciated.

I'm asking the following on behalf of my cousin, who has a three year old Kia Sportage 1.7 diesel on PCP with Kia/Hyundai finance. Her finances are in a poor state and it may make sense for her to get rid of the car. Unfortunately we don't have the PCP paperwork to hand as it's been mislaid in a recent home move.
I guess there may be an exit fee, and possibly a charge to cover the shortfall between the value of the car and the amount outstanding.

Questions

Is exiting a PCP deal (ever) straight forward?
Are exit fees likely to be punitive?

Assuming the following options, any recommendations?

• Hand the car back and pay exit fees
• Trade the car against the something cheap on a Kia/Hyundai dealer forecourt
• Pay off the finance and sell the car on the wider market
• Something else I've missed?

Is there a smart way of doing this? (Other than not entering into a PCP deal in the first place).

PCP details

She thinks that she has approximately 42 (of 48) payments of ~£250 remaining, plus the balloon (<£5k?). The interest rate on advertised Kia/Hyundai PCP deals is 4.9%, and I believe the sticker price was IRO £13000. This doesn't quite add up, so I'm assuming either the price was higher, the repayment period is shorter (37 months is typical), or the balloon payment is smaller.

Background

Car was acquired (in my cousins name) to ferry around her (now ex) partners small child. They split up shortly afterwards. She has successfully applied for a shared house with the local housing association, but still needs to get a mortgage approved, which may be tricky with the following debts:

• Kia Sportage (3yrs old) on PCP. Kia/Hyundai Finance ~£13500 purchase price, ~£250 month (x48m?), 4.9% interest, balloon payment IRO of £5k?
• Consolidated Personal Loan. ~£6500, 4% interest, £190/month (x36m?)
• Credit Card. £3500, 0% for the next nine months. Not used for purchases.
• Gym. £45/month, seven months left on contract.
• iPhone on Contract. £40/month, seven months left on contract.
• DFS Suite. £30/month, twelve payments remaining.

She has savings < £2000, otherwise no assets. Her salary is just over £30k, and she has recently started to do a few bar shifts. Bank of Dad may step in again - likely to pay off the credit card, as the mortgage broker has advised this. Getting rid of the Kia seems the obvious quick way to improve her finances - the rest will have to come through hard work.

Any other suggestions welcome..

[rsbmw]

You don't exit a PCP, you pay it off - it's a finance product not a lease. This means that you can sell the car to pay off the balance of the loan, if the car is worth more than the outstanding loan you pocket the difference, if worth less you make up the shortfall.

Get the settlement figure, and see what you can sell the car for.

[richatnort]

Not sure about the pcp but i got out of a gym membership by telling them I'm moving and can't go anymore and they cancelled it for free which was good.

Also as for the phone contract most phone networks allow you to reduce your contract after 12 months so maybe phone up and get that reduced.

[MrOrange]

If she's made only 6 payments (£1500) and the deposit was small (guess) then she'll likely be into negative equity (poss thousands?) so probably not viable to hand it back. You'll need the paperwork, and don't expect too much sympathy on here, sadly.

It sounds like she really needs good debt advice, Citizens Advice or https://www.moneyadviceservice.org.uk/en/categorie... is where to start IMHO.

[gweaver]

MrOrange said:

If she's made only 6 payments (£1500) and the deposit was small (guess) then she'll likely be into negative equity (poss thousands?) so probably not viable to hand it back.

I was thinking this - at least it's not a new car. I'd expect selling the car to crystallize a significant loss, effectively the dealer mark up. The advantage being that she wouldn't be paying the depreciation and the interest on the depreciation for the next 3 1/2 years (and still not own the car at the end).

MrOrange said:

You'll need the paperwork, and don't expect too much sympathy on here, sadly.

No sympathy expected. This is PH, after all

[gweaver]

Thanks all - all good advice.

[Mattt]

Given how far she is through, she may be able to VT the car with no penalty.

[Sheepshanks]

Mattt said:

Given how far she is through, she may be able to VT the car with no penalty.

She's 6 months into a 4yr old deal on a 3yr old car. That's going to be horrible.

If she needs a car anyway, it might be worth just sticking with it.

[Mattt]

Oh, I read original post as 42 months into 48! Yeah, ouch.

[curlie467]

She must have a house deposit then if she wants a mortgage?

[rfoster]

If she wants to dispose of the Kia she'll just need to call the finance company and ask for a settlement figure - it'll be regulated by the consumer credit act so she won't be 'stung' for early settlement. She can then sell the car in order to pay off the outstanding finance. Whether she has any equity or not will depend on how much she can sell the car for.

[gweaver]

curlie467 said:

She must have a house deposit then if she wants a mortgage?

Nope. Bank of Dad has stepped in. Again.

Not sure what'll happen with the Kia.

[CaptainSlow]

richatnort said:

Not sure about the pcp but i got out of a gym membership by telling them I'm moving and can't go anymore and they cancelled it for free which was good.

Also as for the phone contract most phone networks allow you to reduce your contract after 12 months so maybe phone up and get that reduced.

Yeah yeah, she can phone them up a tell them she doesn't want it anymore, see how that goes.

[mike9009]

Hi

Is the issue she is not making ends meet each month or the amount of credit she has run up (meaning she cannot get a mortgage?

If the issue is the former, I would....

a) Keep the car for the time being - the short term loss will be ££££. Better the devil you know and I presume the car has a warranty for a couple of years too....
b) Sell the iPhone, pick up something second hand and pay off the DFS loan. In 7 months renegotiate for a pay-as-you-go contract.
c) Renegotiate the consolidated loan for a 'slightly' longer term.
d) Check who she with for energy supply. (We saved £50/ month switching a few years ago)
e) Cancel any Sky/ Virgin TV deals (Freeview/streamed stuff is more than enough)
f) Religiously shop at Aldi/ Lidl

or

get bank of Dad to cover everything.

It is amazing how much st we buy/ pay for each month. Couple of years ago, I downsized my wage and the missus gave up work. We had a good, long, hard look at where the money was going and saved approx. £250/ month (that's without the savings from shopping at Lidl/ Aldi, stopping eating out twice a week and foreign holidays!). It was pretty shocking and life is not any worse......

Mike

[gweaver]

Thanks again all. Interesting to hear peoples perspectives. She has had some good advice, and now it's time to get some popcorn, sit back and see what she does..

[klmhcp]

gweaver said:

Thanks again all. Interesting to hear peoples perspectives. She has had some good advice, and now it's time to get some popcorn, sit back and see what she does..

Lovely and supportive.