PCP and changing cars - how does settlement work?

[Sheepshanks]

Say you’re 2yrs into a 3yr PCP deal and want to get a new car.

You do the deal, which takes account of the settlement figure and the p/x value of your current car.

New car takes 3 months to be delivered so in the meantime you’ve made 3 more payment on the old one. That means the settlement figure will be lower.

Question is – who get the benefit of the lower settlement figure? Does the dealer do the deal at figure worked out 3 months earlier, or do they effectively give you 3 months payments back as the settlement has gone down?

[HTP99]

Different dealers do it differently, some value your car for 3 months time and take an educated guess as to what your settlement will be in 3 moths time after 3 extra payments have been made, there will be a bit of interest to take into account but likely only a few quid so figures can be finalised properly nearer the time and jigged about to take into account any interest.

We value the car for now and use the current settlement, however we will then drop the value of your car in relation to the drop of any settlement figure so the gap between the value of your car and any settlement is the same whether at point of order or in 3 months time.

So, say now you owe £4500 and your car is worth £5000, the equity you have will be £500, in 3 months time you will have made 3 payments taking your settlement to £3800, we will then stand your car in at £4300, leaving the same gap of £500.

If there is negative equity we do exactly the same as above.

[Sheepshanks]

HTP99 said:

So, say now you owe £4500 and your car is worth £5000, the equity you have will be £500, in 3 months time you will have made 3 payments taking your settlement to £3800, we will then stand your car in at £4300, leaving the same gap of £500.

Thanks - that's exactly what I would have expected.

I'm asking as there's a discussion on a non-motoring forum I go to where the person was told the value of her car had dropped £1000 but that the dealer would swallow all but £400 of it. She kicked off strongly and they agreed to honour the original deal. Now people are telling her she should settle the finance herself so she keeps the settlement difference (or the dealer should refund her).

Surely that would mean she's had 3 months use of her old car free?

[Mandat]

In my view, once the part-ex price is agreed between the customer & dealer, then the settlement figure that the custmoer has to pay to the finance company should be of no consequence to the dealer.

[HTP99]

Mandat said:

In my view, once the part-ex price is agreed between the customer & dealer, then the settlement figure that the custmoer has to pay to the finance company should be of no consequence to the dealer.

Not unless the dealer and customer have agreed for the dealer to settle the outstanding finance, which is often the case.

[HTP99]

Sheepshanks said:

HTP99 said:

So, say now you owe £4500 and your car is worth £5000, the equity you have will be £500, in 3 months time you will have made 3 payments taking your settlement to £3800, we will then stand your car in at £4300, leaving the same gap of £500.

Thanks - that's exactly what I would have expected.

I'm asking as there's a discussion on a non-motoring forum I go to where the person was told the value of her car had dropped £1000 but that the dealer would swallow all but £400 of it. She kicked off strongly and they agreed to honour the original deal. Now people are telling her she should settle the finance herself so she keeps the settlement difference (or the dealer should refund her).

Surely that would mean she's had 3 months use of her old car free?

Are you saying that the dealer valued the car at point of order as what it was worth then vs the settlement figure at point of order, reducing the value down in line with the reduced settlement, but she doesn't get it?

It so sounds as though the process hasn't been explained to her properly or she didn't understand, or is trying to pull fast one.

[Sheepshanks]

HTP99 said:

Are you saying that the dealer valued the car at point of order as what it was worth then vs the settlement figure at point of order, reducing the value down in line with the reduced settlement, but she doesn't get it?

Dealer told her that her car had dropped in value by £1000 but they would absorb all but £400 of it. So she would have to pay an extra £400.

She kicked off about it and they agreed to honour the original deal.

The settlement status isn't completely clear (despite me asking) but she does say she expected she would benefit from the extra payments she made.


I guess this happens on long lead-times even you own the car outright - I've only ever ordered cars on quick delivery so never experienced it, but what happens if someone orders a car that turns out to take 6 months?

[HTP99]

Sheepshanks said:

I guess this happens on long lead-times even you own the car outright - I've only ever ordered cars on quick delivery so never experienced it, but what happens if someone orders a car that turns out to take 6 months?

Most of our stuff is no longer than a 4 month lead time and we just take an educated "guess", majority of the time we are always in the right ball park, in the rare times that a lead time has been known to be longer then we'll just take a punt still.

I've heard that with brands with massive lead times such as 12m or more, the part ex won't be valued until a definate build date is confirmed, not sure what happens if an order is placed and then 12m down the line the customer isn't happy with the part ex price, though.

[ilikejam]

HTP99 said:

Mandat said:

In my view, once the part-ex price is agreed between the customer & dealer, then the settlement figure that the custmoer has to pay to the finance company should be of no consequence to the dealer.

Not unless the dealer and customer have agreed for the dealer to settle the outstanding finance, which is often the case.

I'd say it's the norm that the dealer settles the finance - they don't want to be left with a car that has an old finance agreement over it as the customer hasn't paid it off. Same happens at WBAC etc - they pay off the finance then hand you the difference.

[Dan W.]

ilikejam said:

I'd say it's the norm that the dealer settles the finance - they don't want to be left with a car that has an old finance agreement over it as the customer hasn't paid it off. Same happens at WBAC etc - they pay off the finance then hand you the difference.

For example if a customer order takes 3 months they will continue to make the payments until their car arrives. we ask them to request a new settlement closer to the time of handover.

if they have made 3 payments of £200 lets say, we would take those payments of the price of the car to cover depreciation.