Are my VT Sums Correct?

[tallpaul26]

I'm looking at a PCP on a new vehicle. The terms are 38 months at 0% APR based on the following:

Total amount of credit = £22,493
Upfront Payment = £3,625
38 x Monthlies @ £224.05 pcm
GMFV = £10,354

So, if were ever in the position of wanting to VT the agreement, I'd need to have paid 50% of the total amount of credit i.e. £11,246.50

Based on the upfront payment and monthlies it would take 35 month to reach this figure: £3,625 + (35 x £224.05) = £11,466.75

Is this correct?

Thanks for your help,

Paul

[rsbmw]

Not correct, your deposit isn't included in the calculation, so at £224pcm it would take 50 months to have paid off £11k.

I would ask, at 0% APR why bother with a large deposit? May as well leave that sat in your bank and pay higher monthlies, it will ultimately cost you exactly the same over a given period.

Edit: looking again at the figures they make no sense, you can't cover the £12k difference between the total amount of credit and the balloon with 38 months worth of £224 payments. Perhaps instead of total credit you meant sale price of the car, at which point your calculation is correct (i.e. your deposit is deducted from sale price leaving say £19k of credit taken)

Edited by rsbmw on Wednesday 2nd August 10:57

[tallpaul26]

rsbmw said:

Not correct, your deposit isn't included in the calculation, so at £224pcm it would take 50 months to have paid off £11k.

I would ask, at 0% APR why bother with a large deposit? May as well leave that sat in your bank and pay higher monthlies, it will ultimately cost you exactly the same over a given period.

Eh? 50 months is 12 months longer than the term i.e. it would not be possible to VT. Why isn't the upfront payment included? Surely I should deduct the £3,625 from the total financed amount in that case?

[rsbmw]

see my edit

[tallpaul26]

rsbmw said:

see my edit

Gotcha. Thank you!

[rsbmw]

Actually calculation is still not correct in that instance, as the financed amount is £19k you wouldn't reach the 50% point until after you had given back the car already (42 months). Not unheard of where balloon is more than 50% of financed amount, especially on 0% interest.

[tallpaul26]

So, the correct figures are:

Total amount of credit = £18,868 (Purchase price of £22,493 minus upfront payment of £3,625)
38 x Monthlies @ £224.05 pcm
GMFV = £10,354

So, if were ever in the position of wanting to VT the agreement, I'd need to have paid 50% of the total amount of credit i.e. £9434

Based on the upfront payment and monthlies it would take 43 months to reach this figure. Therefore, a VT would not be possible within the 38 month term.

Is this right?

Thanks,

Paul

[BUG4LIFE]

Ha! I'm looking into PCP deals for my wife's next car [we've both only ever bought cars with cash/loans]. I'm sure all the maths and T&C's are pretty obvious when you've got head wrapped around it but threads like these do confuse me...I'd like to know the answer to the OP question too!

[CYMR0]

tallpaul26 said:

So, the correct figures are:

Total amount of credit = £18,868 (Purchase price of £22,493 minus upfront payment of £3,625)
38 x Monthlies @ £224.05 pcm
GMFV = £10,354

So, if were ever in the position of wanting to VT the agreement, I'd need to have paid 50% of the total amount of credit i.e. £9434

Based on the upfront payment and monthlies it would take 43 months to reach this figure. Therefore, a VT would not be possible within the 38 month term.

Is this right?

Thanks,

Paul

Total amount payable = £3625 + £8513 of monthlies + £10354 = £22492 (so you have interest free credit)
50% of total credit price (not the total amount of credit) = £22492/2 = £11264
Less deposit = £11264 - £3625 = £7639
£7639 - initial amount you are short of the 50% mark - divided by the monthlies = 34 months.

[rsbmw]

That's incorrect, deposit is deducted (i.e. paid before finance, you're not financing the deposit) making it 50% of the credit amount (the £18k), or £9k. OP's calculation a couple of posts up looks correct.

[Vee]

I think you are incorrect.
Total amount of credit is usually BEFORE deposit.
The original post is right.

[rsbmw]

That's not true, the actual wording is generally the "total financed amount" - the sale price of the car is irrelevant, it's on the amount you are financing, or receiving credit on, which in this case is the £18k figure. Of course you are not financing the amount you are funding up front in cash, so this has no bearing on the finance agreement.

[Butter Face]

It will be in your documents in black and white...

[tallpaul26]

Butter Face said:

It will be in your documents in black and white...

I don't have the documents. I'm looking at a scenario based on these figures.

I thought that a VT was enshrined in consumer legislation - can the lender dictate terms such as whether the upfront payment is part of the credit agreement? Clearly this is important as it is the difference between a VT being possible (albeit almost at the end of the term) or not at all.

[CYMR0]

rsbmw said:

That's not true, the actual wording is generally the "total financed amount" - the sale price of the car is irrelevant, it's on the amount you are financing, or receiving credit on, which in this case is the £18k figure. Of course you are not financing the amount you are funding up front in cash, so this has no bearing on the finance agreement.

Here's the actual wording:

"Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.."

So the total price is very much relevant - not the price of the car alone, but in this case there is no interest to pay on the OP's figures and therefore it's the same thing. The deposit also counts towards it.

Otherwise, you could have a scenario where you put down a £20k deposit on a £22k car with interest free credit and couldn't terminate until you'd paid £1k of the monthly payments, but could terminate after £11k with no deposit.

Edited by CYMR0 on Wednesday 2nd August 17:14

[Dimebars]

Your deposit is deducted straight away from the 50% of total payable as it's already paid

Example

Total payable - £30k
Deposit paid £3k
Montly £300
VT value £15K

VT point is (£15k - £3k)/£300 = month 40

It's the total payable including interest that is the important figure, not the "amount of credit"

A. Price £26118
B. Deposit £3625
C. Amount of credit £22493
D. Interest £x

E. Total payable = A + D

F. VT = (E/2)-B

Edited by Dimebars on Wednesday 2nd August 17:20

[Butter Face]

Dimebars said:

Your deposit is deducted straight away from the 50% of total payable as it's already paid

Example

Total payable - £30k
Deposit paid £3k
Montly £300
VT value £15K

VT point is (£15k - £3k)/£300 = month 40

It's the total payable including interest that is the important figure, not the "amount of credit"

A. Price £26118
B. Deposit £3625
C. Amount of credit £22493
D. Interest £x

E. Total payable = A + D

F. VT = (E/2)-B

Edited by Dimebars on Wednesday 2nd August 17:20

This is it.

[rsbmw]

Apologies then for my flawed understanding.

I wonder if agreements differ, i.e. some you finance the total amount (plus/including interest) and your 'deposit' is the first payment towards the finance, whereas others the deposit is paid prior to finance (to the dealer), with the finance agreement only covering the outstanding balance. This would lead to two different answers to that question.

[CYMR0]

rsbmw said:

Apologies then for my flawed understanding.

I wonder if agreements differ, i.e. some you finance the total amount (plus/including interest) and your 'deposit' is the first payment towards the finance, whereas others the deposit is paid prior to finance (to the dealer), with the finance agreement only covering the outstanding balance. This would lead to two different answers to that question.

In theory, they could, as long as the second scenario gave a lower half way point than the first. The first scenario describes the statutory position, which means it's effectively a term of every contract in a debtor/creditor/supplier relationship. But the law is very clear that, unless the agreement specifies a lesser amount, the hand back point is when you've paid half of the (deposit + monthlies (including interest) + balloon).

In practice, the first option will give a higher figure and therefore it's hard to see why a finance company would write in a lower figure unless they wanted to charge a specific premium for the flexibility - but I doubt enough people would look into it in enough detail for a product like that to be profitable.

[tallpaul26]

Thanks for all the replies. Good to know I was right first time!