Voluntary Termination on a PCP
Discussion
Hi,
So I’m planning to purchase a new car with Mercedes on PCP Finance. I recently read about Voluntary Termination on a PCP and I’m thinking of doing that as it just works out better for me.
My question is if I am taking out a PCP with the intention to VT, what is the most ideal way to arrange the finance deal?
1. Should I pay a large deposit to reduce the amount of interest on the loan so the total amount payable is less? Will this mean I’ll have paid 50% of the total amount payable sooner? Or does it not matter much what deposit I put down if I plan to VT?
2. What is the best term, a longer term or a shorter term?
3. I’m guessing it wouldn’t matter what the balloon payment is because you need to reach half the total amount payable?
4. I would choose the lowest mileage possible which will be either 5k or 8k. I won’t be doing many miles anyway but if I did go over, it won’t really be a problem with VT?
Any advice would be really appreciated
So I’m planning to purchase a new car with Mercedes on PCP Finance. I recently read about Voluntary Termination on a PCP and I’m thinking of doing that as it just works out better for me.
My question is if I am taking out a PCP with the intention to VT, what is the most ideal way to arrange the finance deal?
1. Should I pay a large deposit to reduce the amount of interest on the loan so the total amount payable is less? Will this mean I’ll have paid 50% of the total amount payable sooner? Or does it not matter much what deposit I put down if I plan to VT?
2. What is the best term, a longer term or a shorter term?
3. I’m guessing it wouldn’t matter what the balloon payment is because you need to reach half the total amount payable?
4. I would choose the lowest mileage possible which will be either 5k or 8k. I won’t be doing many miles anyway but if I did go over, it won’t really be a problem with VT?
Any advice would be really appreciated
kiethton said:
Mileage is now a problem with VT although the legalities are still somewhat unclear around it.
Generally you are best to put down as little deposit as possible although most PCP’s won’t be VT’able until right at the very end
How is it a problem now? Do they chase you for payment? I'm sure legally they can't make you. Generally you are best to put down as little deposit as possible although most PCP’s won’t be VT’able until right at the very end
The clause on the contracts say "If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more".
Having excess mileage doesn't necessarily mean you haven't taken 'reasonable care' of the goods ... ??
Hmm I just thought about it - the FGV will be the same regardless of the deposit put down. So if you put a larger deposit, the total amount payable will be lower, therefore you will pay less if you plan to VT (since you pay 50% of the TAP). So a larger deposit will mean lower monthly payments and a lower total amount paid throughout the term till you VT ... am I right?
SteBrown91 said:
Why are you planning to VT? VT is a safety clause for people to exit the agreement in financial difficulty. Unless you think you will be in negative equity at the end then use the car as part ex and any equity in the car can be used against the next.
This. Saved me some typing.
DaBaws said:
kiethton said:
Mileage is now a problem with VT although the legalities are still somewhat unclear around it.
Generally you are best to put down as little deposit as possible although most PCP’s won’t be VT’able until right at the very end
How is it a problem now? Do they chase you for payment? I'm sure legally they can't make you. Generally you are best to put down as little deposit as possible although most PCP’s won’t be VT’able until right at the very end
The clause on the contracts say "If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more".
Having excess mileage doesn't necessarily mean you haven't taken 'reasonable care' of the goods ... ??
Hmm I just thought about it - the FGV will be the same regardless of the deposit put down. So if you put a larger deposit, the total amount payable will be lower, therefore you will pay less if you plan to VT (since you pay 50% of the TAP). So a larger deposit will mean lower monthly payments and a lower total amount paid throughout the term till you VT ... am I right?
I sell cars and buy cars - We VT our car and knew we were over the mileage, told them over the phone what the mileage was, they confirmed straight away that we would be charged.
Mileage doesn't make a difference, if you were buying the car outright at the end of the agreement.
DaBaws said:
Hi,
So I’m planning to purchase a new car with Mercedes on PCP Finance. I recently read about Voluntary Termination on a PCP and I’m thinking of doing that as it just works out better for me.
My question is if I am taking out a PCP with the intention to VT, what is the most ideal way to arrange the finance deal?
1. Should I pay a large deposit to reduce the amount of interest on the loan so the total amount payable is less? Will this mean I’ll have paid 50% of the total amount payable sooner? Or does it not matter much what deposit I put down if I plan to VT?
2. What is the best term, a longer term or a shorter term?
3. I’m guessing it wouldn’t matter what the balloon payment is because you need to reach half the total amount payable?
4. I would choose the lowest mileage possible which will be either 5k or 8k. I won’t be doing many miles anyway but if I did go over, it won’t really be a problem with VT?
Any advice would be really appreciated
If you know at the outset that you want to hand the car back at the end of the term, it sounds like a lease would be a better option for you rather than a PCP purchase.So I’m planning to purchase a new car with Mercedes on PCP Finance. I recently read about Voluntary Termination on a PCP and I’m thinking of doing that as it just works out better for me.
My question is if I am taking out a PCP with the intention to VT, what is the most ideal way to arrange the finance deal?
1. Should I pay a large deposit to reduce the amount of interest on the loan so the total amount payable is less? Will this mean I’ll have paid 50% of the total amount payable sooner? Or does it not matter much what deposit I put down if I plan to VT?
2. What is the best term, a longer term or a shorter term?
3. I’m guessing it wouldn’t matter what the balloon payment is because you need to reach half the total amount payable?
4. I would choose the lowest mileage possible which will be either 5k or 8k. I won’t be doing many miles anyway but if I did go over, it won’t really be a problem with VT?
Any advice would be really appreciated
With a PCP, the balloon payment forms part of the total amount payable. Therefore most PCP agreements I have seen (I spent 3 years in the motor trade so I have seen plenty) only actually reach the point where a VT is possible a few months before the deal is due to end anyway.
I can't think of any benefit of taking out a PCP with the intention to VT it. Please forgive the assumption, but are you confusing Early Settlement with VT? With a VT you return the car early and walk away. Early termination you pay off the agreement early and keep the vehicle. Many people do this to take advantage of dealer deposit contributions on new cars.
I can't think of any benefit of taking out a PCP with the intention to VT it. Please forgive the assumption, but are you confusing Early Settlement with VT? With a VT you return the car early and walk away. Early termination you pay off the agreement early and keep the vehicle. Many people do this to take advantage of dealer deposit contributions on new cars.
The only reason you would plan to VT is because you intend to do way more miles than you have agreed to get a lower monthly payment.
Surely the point of PCP is that you can never be in negative equity, you only ever owe the payments you have agreed to and can walk away at the end with no cost.
Assuming the OP is not planing to try and enter an agreement in bad faith. ITs quite simple to figure out at what point (roughly) you will be able to get out of the car without paying anything extra, usually when the settlement figure and PX values align.
Most PCPs are structured to give some equity towards the end of deal, as the dealer wants you to have something to put into the next one!
I think people get VT and ending early mixed up, there is a difference. There is a potential whole world of hurt waiting for people who have VT'd with large excess mileages.
Surely the point of PCP is that you can never be in negative equity, you only ever owe the payments you have agreed to and can walk away at the end with no cost.
Assuming the OP is not planing to try and enter an agreement in bad faith. ITs quite simple to figure out at what point (roughly) you will be able to get out of the car without paying anything extra, usually when the settlement figure and PX values align.
Most PCPs are structured to give some equity towards the end of deal, as the dealer wants you to have something to put into the next one!
I think people get VT and ending early mixed up, there is a difference. There is a potential whole world of hurt waiting for people who have VT'd with large excess mileages.
Edited by nikaiyo2 on Friday 19th July 11:51
Edited by nikaiyo2 on Friday 19th July 11:52
I had my F56 Cooper S on PCP..
Mine was structured to have a 1-month deposit, 47-monthly payments, and a large balloon at the end. I VT'd at around the 35-month mark with nothing owing (stayed under my pro-rata annual mileage allowance).
So it effectively worked as a lease, in terms of how I made my payments, but I got to option the car exactly how I wanted (which is usually quite costly on MINIs with the amount of options etc) - the cost of which was added to the total contract price rather than requiring to be completely paid off during the term as with a lease..
Mine was structured to have a 1-month deposit, 47-monthly payments, and a large balloon at the end. I VT'd at around the 35-month mark with nothing owing (stayed under my pro-rata annual mileage allowance).
So it effectively worked as a lease, in terms of how I made my payments, but I got to option the car exactly how I wanted (which is usually quite costly on MINIs with the amount of options etc) - the cost of which was added to the total contract price rather than requiring to be completely paid off during the term as with a lease..
On the matter of a large deposit...
A larger deposit will reduce the overall interest payable, but it may not be as much as you'd think - plus finance houses often (for PCP) limit the deposit to 30-40%.
A high deposit will bring forward a VT point, but it may be a matter of months again depending on the size of deposit.
I recommend using some online calculators to work out the various options, taking into account your priorities (e.g. term, monthly payment, whether you will use a VT etc). Compare these for standard borrowing and PCPs to give you some ideas. Depending on the parameters, there may not be a huge amount of difference between the options.
A larger deposit will reduce the overall interest payable, but it may not be as much as you'd think - plus finance houses often (for PCP) limit the deposit to 30-40%.
A high deposit will bring forward a VT point, but it may be a matter of months again depending on the size of deposit.
I recommend using some online calculators to work out the various options, taking into account your priorities (e.g. term, monthly payment, whether you will use a VT etc). Compare these for standard borrowing and PCPs to give you some ideas. Depending on the parameters, there may not be a huge amount of difference between the options.
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