PCP finance question

[stewieyan]

Never had pcp, sorry for a stupid question.
For those who had pcp, can you return the car earlier (e.g. 1 year down the line vs 3 year contract)? In such cases do they calculate the correct market value and pay you back any difference?

[Twinfan]

In general one year is usually not enough to get you into positive equity, so to get out you'd probably need to pay the finance company to walk away.

[Porsche911R]

stewieyan said:

pay you back any difference?

I think you will be paying them in the thousands.

[TDT]

once you've taken a PCP, you usually need to pay at least 50% in order to get out early and just hand the car back. You will not get any money back.

Obviously if your car goes up in market value - you can sell it, pay off the finance and any profit would be yours... you can do this at any time if the market is in your favour.

[Holgate86]

TDT said:

once you've taken a PCP, you usually need to pay at least 50% in order to get out early and just hand the car back. You will not get any money back.

Obviously if your car goes up in market value - you can sell it, pay off the finance and any profit would be yours... you can do this at any time if the market is in your favour.

+1, that's how it works, usually 50%, can also affect your credit rating too.

H86

[Deep Thought]

stewieyan said:

Never had pcp, sorry for a stupid question.
For those who had pcp, can you return the car earlier (e.g. 1 year down the line vs 3 year contract)? In such cases do they calculate the correct market value and pay you back any difference?

As per the other comments, you're likely to be in a lot of negative equity one year in (unless you put in a massive deposit).

They'd look at what you still owed on the finance agreement, send the car to auction and sell it there, see what the difference is and bill you for it.

[roadsmash]

stewieyan said:

Never had pcp, sorry for a stupid question.
For those who had pcp, can you return the car earlier (e.g. 1 year down the line vs 3 year contract)? In such cases do they calculate the correct market value and pay you back any difference?

All PCP finance is, is a loan where the value of the car at the end of the contract (typically 3 years) is calculated at the start of the agreement, and this value is deferred until the end (balloon payment / optional final payment).

The balloon payment, along with the initial deposit, interest, and any fees, make up part of the total amount payable.

As such, if you hand the car back after just 1 year, there is a high chance that you will owe more than the car is worth.

I.e. it will be you paying them the difference, not the other way round!

[dibblecorse]

Holgate86 said:

+1, that's how it works, usually 50%, can also affect your credit rating too.

H86

A VT (voluntary termination) does not in any way effect your credit rating as its a piece of consumer protection, and to the OP, when people say 50% thats not 50% of your payments, its 50% of the agreement value so is deposit, plus payments, plus balloon payment divided by 2 in its simplest form, which is why usually after 2 years you are still under water with the agreement.

[Deep Thought]

Holgate86 said:

TDT said:

once you've taken a PCP, you usually need to pay at least 50% in order to get out early and just hand the car back. You will not get any money back.

Obviously if your car goes up in market value - you can sell it, pay off the finance and any profit would be yours... you can do this at any time if the market is in your favour.

+1, that's how it works, usually 50%, can also affect your credit rating too.

H86

To be precise - you can Voluntary Terminate the car at any time, but they can "only" pursue you for 50% of the total finance cost.

So you can VT before you've paid 50% but there would be big bill to pay.

[stewieyan]

I mean let’s say the car is 100k with 20k deposit 3 year pcp.
If after a year you repay e.g. 3.6k and the car market value as per Porsche valuation is 92k, will you be able to hand it back for whatever reason and get:
92k - (100k - 20k - 3.6k) = 16.4k?
Or am I massively misunderstanding what the salesperson told me

[roadsmash]

Deep Thought said:

Holgate86 said:

TDT said:

once you've taken a PCP, you usually need to pay at least 50% in order to get out early and just hand the car back. You will not get any money back.

Obviously if your car goes up in market value - you can sell it, pay off the finance and any profit would be yours... you can do this at any time if the market is in your favour.

+1, that's how it works, usually 50%, can also affect your credit rating too.

H86

To be precise - you can Voluntary Terminate the car at any time, but they can "only" pursue you for 50% of the total finance cost.

So you can VT before you've paid 50% but there would be big bill to pay.

Indeed, to reiterate... 50% of the total amount payable, not just 50% of the monthly payments (something borrowers often get confused).

[roadsmash]

stewieyan said:

I mean let’s say the car is 100k with 20k deposit 3 year pcp.
If after a year you repay e.g. 3.6k and the car market value as per Porsche valuation is 92k, will you be able to hand it back for whatever reason and get:
92k - (100k - 20k - 3.6k) = 16.4k?
Or am I massively misunderstanding what the salesperson told me

In this scenario, you cannot “hand it back” to them... you would need the dealer to buy it back off you at an agreed price of £92k, and they are not obliged to buy it off you.

If they did agree to buy it off you, they would then clear the finance and give you back any equity remaining in the car once all the debt, interest, and any fees are paid.

Your deposit makes up part of the total amount payable so you wouldn’t get this back.

Edited by roadsmash on Wednesday 9th December 16:07

[Twinfan]

roadsmash said:

stewieyan said:

I mean let’s say the car is 100k with 20k deposit 3 year pcp.
If after a year you repay e.g. 3.6k and the car market value as per Porsche valuation is 92k, will you be able to hand it back for whatever reason and get:
92k - (100k - 20k - 3.6k) = 16.4k?
Or am I massively misunderstanding what the salesperson told me

In this scenario, you cannot “hand it back” to them... you would need the dealer to buy it back off you at an agreed price of £92k, and they are not obliged to buy it off you.

If they did agree to buy it off you, they would then clear the finance and give you back any equity remaining in the car once all the debt and any fees are paid.

Your deposit makes up part of the total amount payable so you wouldn’t get this back.

You're also missing off the interest over 12 months on borrowing £80k.

1 year will cost you £3.6k monthlies, plus £8k in depreciation plus the interest and early repayment fees of the finance. So that's £11,600 plus interest.

Edited by Twinfan on Wednesday 9th December 16:09

[roadsmash]

Twinfan said:

You're also missing off the interest over 12 months on borrowing £80k...

It could of course be 0% interest but yes you are right. Thanks. Now edited my post.

[Twinfan]

roadsmash said:

Thanks. Now edited my post.

It was aimed at the OP, and I've updated my post too

[roadsmash]

OP, bottom line, if you’re using PCP as a way to only keep the car for 1 year to have some fun before getting rid of it... be very, very careful, and be prepared to dig deep into your own pocket to get out of it.

Buying a performance car, cash or finance, isn’t cheap. There isn’t a magical way of doing so that costs you nothing.

[nw942]

Put the numbers into this and you can see the total cost and cost of interest:

https://www.thecalculatorsite.com/finance/calculat...

There is a 'Show Repayment Schedule' button that will allow you to work out your position at any point in time during the term.

[pete.g]

Twinfan said:

stewieyan said:

I mean let’s say the car is 100k with 20k deposit 3 year pcp.
If after a year you repay e.g. 3.6k and the car market value as per Porsche valuation is 92k, will you be able to hand it back for whatever reason and get:
92k - (100k - 20k - 3.6k) = 16.4k?
Or am I massively misunderstanding what the salesperson told me

You're missing off the interest over 12 months on borrowing £80k...

The salesperson may not be deliberately misleading you, but remember what his or her job is. Once you've signed the agreement, it's another sale towards that month's target.

If you want a new Porsche for a fixed period and then want to be able to hand it back, lease one for that period. It won't be cheap, but your costs are fixed and you're not at the mercy of the market.

Very few trade offers on a 100k car after 12 months will be anywhere near £92k - you might be shocked at how low an OPC can bid, especially if they know you need to get out of the car quickly.

I don't borrow to buy anything any more, but the last two times I did I got a personal loan with as low an APR as possible to cover the cost, so that at least the car would be mine from the outset, as the loan was not secured against it. This also gives you a truer picture of how much you're actually paying to own the car.

My one experience with PCP was OK, as I put in a 33% deposit and set the final payment at 30%, and then kept the car for another 5 years. If you chop and change a lot, you'll pay a lot in interest and never really own the car.

[Deep Thought]

stewieyan said:

I mean let’s say the car is 100k with 20k deposit 3 year pcp.
If after a year you repay e.g. 3.6k and the car market value as per Porsche valuation is 92k, will you be able to hand it back for whatever reason and get:
92k - (100k - 20k - 3.6k) = 16.4k?
Or am I massively misunderstanding what the salesperson told me

Broadly speaking, thats roughly right. Probably some interest charges in there, maybe you wont get what you expect for the car a year down the line, probably likely to cost you £20K+ to drive the car for a year.

Factor in insurance, fuelling, service maybe, road tax, maybe another £3000.

Could be £25K all in you'd need to budget.

Is that palatable to you?

[Porsche911R]

roadsmash said:

OP, bottom line, if you’re using PCP as a way to only keep the car for 1 year to have some fun before getting rid of it... be very, very careful, and be prepared to dig deep into your own pocket to get out of it.

Buying a performance car, cash or finance, isn’t cheap. There isn’t a magical way of doing so that costs you nothing.

Cash costs you nothing, you buy it you own it, nothing else to pay and sell it when you wish for market value be it higher or lower.

may people bought GT4's in 2015 for cash and getting out 4 years later at cost. a free car !! , the 718 Spyder you get money back after 1 year use, Porsche pay you to own it.

that's why the demand is so high, you CAN buy performance cars for free !!! if you are one of the 400 selected people