PCP Query

[bitchstewie]

Asking here in the hopes of getting financial answers rather than opinions on PCPs

I have my car on PCP via BMW Finance and I'm 2 years in of 4 years.

I've been working from home for around six weeks and I guess like a lot of people it makes you think a little whether that shiny lump on the drive that costs you money every month is really worth it.

Especially if the Government guidelines on working from home where possible means I'm doing so for another 6-12 months.

If it came to that sort of thing I might consider just handing it back early and doing something cheaper.

I believe the threshold is 50% but what I'm not clear on is if there is any negative impact on things like your credit rating?

[Ducati996R]

Have done a voluntary termination three times with Audi and BMW with no impact on credit rating but you have to be 50%or over ...check your finance agreement it will give you your total amount payable to work this figure out

[MOBB]

I doubt you are 50% way through unless you paid a very large deposit

Bear in mind the 50% must include any final lump sum payment due

[bitchstewie]

Thank you

The deposit was sizeable but I suspect it won't be near 50% yet though I haven't done the maths as right now this is a (slim) "what if" if it looks like we'll still be working remotely for a long long time.

Paying for it isn't an issue job or no job so worst case I'd just sit it out if it puts a huge black mark on your credit record or something.

[djc206]

Have you got a settlement figure? Normally you can do that online these days. Once we all start moving again you might be able to flog the car if you’re not in negative equity rather than waiting out the 50% VT threshold. I’m assuming that on a 4 year deal the apr is pretty high? In which case acting sooner rather than later would be wise.

[bitchstewie]

djc206 said:

Have you got a settlement figure? Normally you can do that online these days. Once we all start moving again you might be able to flog the car if you’re not in negative equity rather than waiting out the 50% VT threshold. I’m assuming that on a 4 year deal the apr is pretty high? In which case acting sooner rather than later would be wise.

No not yet, as I said for now this is literally just a "what if" question if it looks like there are months or more of remote working ahead as without a regular commute a "nice" car is more of a luxury than a daily requirement.

I'm looking at that situation thinking it's inconvenient but definitely a first world problem compared to some poor sods

[bitchstewie]

anonymous said:

[redacted]

No if I did anything the man maths would be cheap runabout as I'd hardly be using it without a commute (weekends alone don't justify a nice car sorry if that's heresy here )

I think it's unlikely tbh but it's something that leaped to mind discussing a few "what if" scenarios around the current situation.

[Sheepshanks]

anonymous said:

[redacted]

With leasing it never arrives!

I read of someone whose job is an economist, so you'd think he might have idea of how something simple like a PCP works, who was very pissed with Mercedes as he'd been led to believe that he could turn the car in halfway through the deal. He got a bit of shock when he went to change the car at 18mths!

[BobSaunders]

https://www.bmw.co.uk/en/topics/owners/financial-s...

You will need to work out where one half is, and then pay up to that amount. Honestly... i'd just give them a call.

[roadsmash]

bhstewie said:

Asking here in the hopes of getting financial answers rather than opinions on PCPs

Here’s hoping.

bhstewie said:

I've been working from home for around six weeks and I guess like a lot of people it makes you think a little whether that shiny lump on the drive that costs you money every month is really worth it.

Agreed. Providing you don’t do much mileage then it is worth considering to free up that monthly cost.

bhstewie said:

I believe the threshold is 50% but what I'm not clear on is if there is any negative impact on things like your credit rating?

The VT point is 50% of the total amount repayable, to be clear; it is not 50% of your monthly payments.

The total amount repayable includes your deposit (so if your deposit was chunky that helps) and interest.

As above posters have suggested, a settlement figure will help you understand how much you have paid so far and what you have left to pay to own the car, but IIRC it won’t tell you where you are in relation to the VT point.

What would be better is if you have the original finance documents that you signed, as these will tell you your exact 50% VT figure in pounds and pence. No doubt it’ll be hidden away in the T&C’s, but it should be there nonetheless.

Based on the limited amount of information you’ve provided, I believe the amount you’ll be liable for will be considerable. It is then up to you to decide if that figure is worth paying to free up the monthly payment.

VT’ing will not harm your credit score.

[bitchstewie]

roadsmash said:

The VT point is 50% of the total amount repayable, to be clear; it is not 50% of your monthly payments.

The total amount repayable includes your deposit (so if your deposit was chunky that helps) and interest.

As above posters have suggested, a settlement figure will help you understand how much you have paid so far and what you have left to pay to own the car, but IIRC it won’t tell you where you are in relation to the VT point.

What would be better is if you have the original finance documents that you signed, as these will tell you your exact 50% VT figure in pounds and pence. No doubt it’ll be hidden away in the T&C’s, but it should be there nonetheless.

Based on the limited amount of information you’ve provided, I believe the amount you’ll be liable for will be considerable. It is then up to you to decide if that figure is worth paying to free up the monthly payment.

VT’ing will not harm your credit score.

Thank you

The last bit you've bolded is the main reason I asked the question.

Appreciate I've given limited info as really that was the key thing I was curious about - I know BMW sent me a statement the other week so no doubt the full details are in there - suspect if we're still working from home in six months time I might pay a bit more attention!

[roadsmash]

No problem at all.

Just bear in mind the VT figure and settlement figure are two different things.

[bitchstewie]

roadsmash said:

No problem at all.

Just bear in mind the VT figure and settlement figure are two different things.

In what way please?

I had the settlement figure in mind when I took out the agreement but I honestly didn't (and still don't) know if I'd intend to keep it or just throw back the keys.

I used to buy outright but recently I'm one of those awful people who just sees a car as a tenner a day cost of living etc.

That probably makes me sound lazy but of all the things I thought of when I took it out not being in a position to drive it due to a pandemic didn't really fit into my thinking

[roadsmash]

bhstewie said:

roadsmash said:

No problem at all.

Just bear in mind the VT figure and settlement figure are two different things.

In what way please?

I had the settlement figure in mind when I took out the agreement but I honestly didn't (and still don't) know if I'd intend to keep it or just throw back the keys.

I used to buy outright but recently I'm one of those awful people who just sees a car as a tenner a day cost of living etc.

That probably makes me sound lazy but of all the things I thought of when I took it out not being in a position to drive it due to a pandemic didn't really fit into my thinking

As it is a PCP, not a lease, then typically the settlement figure is the amount required to clear the finance and own the car, this would include the OFP (balloon).

The VT figure is the maximum amount of money a lender can pursue you for if you hand the car back early. It includes your deposit and all the payments you’ve made to date. If you’re over the magic number you can hand the car back, if you’re not over the magic number you just need to pay the difference.

I.e if you hand the car back after just 1 month of having it, the lender can only send you an invoice for the remaining amount owed but only up to a maximum of 50% of the total amount payable.

In other words, you pay the settlement figure to own the car, but the VT figure is all you need to reach to get shot of the car.

[djc206]

bhstewie said:

In what way please?

I had the settlement figure in mind when I took out the agreement but I honestly didn't (and still don't) know if I'd intend to keep it or just throw back the keys.

I used to buy outright but recently I'm one of those awful people who just sees a car as a tenner a day cost of living etc.

That probably makes me sound lazy but of all the things I thought of when I took it out not being in a position to drive it due to a pandemic didn't really fit into my thinking

Settlement figure is the entire amount required to buy the car off the finance company essentially. The VT figure is to buy you out of the agreement and involves you handing the car back

[phope]

The key thing to confirm is the total amount repayable under the agreement, by checking your original finance agreement

You can voluntarily terminate the agreement early by paying 50% of the total amount repayable, either by letting the agreement continue until that point is reached, or by simply overpaying on the agreement to reach the 50% mark.

As you are simply exercising your legal right to terminate early, under the Consumer Credit Act, VT'ing does not affect your credit rating, but some finance companies may choose not to accept your business in the future, particularly if an applicant had a frequent pattern of VT'ing. That is their commercial decision but not a reflection of the applicants credit rating.

• In the CCA regulated example shown here, the total amount repayable is £37,850.91.
• The 50% figure is shown under "Termination, your rights section", which is £18.925.46
• In this 4 year example, the 50% mark is reached after 41 months, which is 41 months at £395.27 plus the initial deposit paid of £2780.45
• A bigger deposit paid at outset, or overpayments during the term would bring that date forward.

[bitchstewie]

Thanks all

So rounding up or down slightly in the "Termination your rights" section it has a figure of £20K.

My deposit was £10K and 2 years in I've paid around £7000.

So the principle is £20K - £10K - £7K = £3k to pay to hit 50% if I was to VT it tomorrow.

And of the course ongoing payments keep reducing that amount.

As I said I'd need to be pretty certain that working from home would be a long term thing but so long as I've got my understanding of the calculations roughly right.

I did say I'd try and keep the "PCP good or bad" politics out of this but at times like this it does make you somewhat grateful for having cash in the bank and having put down a decent deposit.

[ToastMan76]

bhstewie said:

Thanks all

So rounding up or down slightly in the "Termination your rights" section it has a figure of £20K.

My deposit was £10K and 2 years in I've paid around £7000.

So the principle is £20K - £10K - £7K = £3k to pay to hit 50% if I was to VT it tomorrow.

And of the course ongoing payments keep reducing that amount.

As I said I'd need to be pretty certain that working from home would be a long term thing but so long as I've got my understanding of the calculations roughly right.

I did say I'd try and keep the "PCP good or bad" politics out of this but at times like this it does make you somewhat grateful for having cash in the bank and having put down a decent deposit.

No thats not correct. The VT charge includes interest, and like a mortgage, interest payments are front loaded so your VT will probably be more like £5-6k in your example.

[The Cardinal]

The world seems rather different at the moment and it's natural to want to batten down the hatches. However, releasing yourself from ongoing payments would also mean you'd have given over a large amount for the last 2 years of use - no matter whether you settle or VT.

Would things change if you looked over a longer term? If you like the car, can you foresee some use from it over a longer - post-Covid - time horizon of, say, 3-5 years?

One option would be to take a new personal loan over a longer term (probably with a lower monthly payment), to then settle the outstanding amount (i.e. buy the car) and keep it over a longer timeframe than originally intended. That way, you'd also benefit from the payments already made over the last 2 years, which would otherwise be lost - and avoid having to pay additional cash now to VT or settle.

[bitchstewie]

ToastMan76 said:

No thats not correct. The VT charge includes interest, and like a mortgage, interest payments are front loaded so your VT will probably be more like £5-6k in your example.

Well that's confusing as that seems to be a figure that would be closer to £23K paid (based on £10K + £7K plus the £5-6K you mention) so why would the "Termination your rights" section say a specific figure of £20K