Cancelling PCP
Discussion
Hi all,
A little help if you would be so kind.
14 Months ago, my brother bought a new car on a 4 year PCP.
Unfortunately, he has now lost his job and wishes to hand the vehicle back, however, what we dont quite understand is that his finance agreement states that he can return the car after 50% of the agreement value has been paid. That is ok as he has enough 'spare' money to do this.
Therefore. does this mean that as its a 4 year contract he can hand the car back after 2 as he would have made the 50% payments or is this not how its calculated?
We did work out the 50% remaining would be approximately 2 years of payments although this does not work out exactly correct.
I hope that all makes sense and if one of you kind fellows could explain in simple terms if we are missing something, it would be most appreciated!
Cheers!
A little help if you would be so kind.
14 Months ago, my brother bought a new car on a 4 year PCP.
Unfortunately, he has now lost his job and wishes to hand the vehicle back, however, what we dont quite understand is that his finance agreement states that he can return the car after 50% of the agreement value has been paid. That is ok as he has enough 'spare' money to do this.
Therefore. does this mean that as its a 4 year contract he can hand the car back after 2 as he would have made the 50% payments or is this not how its calculated?
We did work out the 50% remaining would be approximately 2 years of payments although this does not work out exactly correct.
I hope that all makes sense and if one of you kind fellows could explain in simple terms if we are missing something, it would be most appreciated!
Cheers!
Magic919 said:
It's money, not time.
Ah ok, thats what i was beginning to wonder.I guess the reason it does not work out equally is because of the way the interest is applied?
He seems to remember the salesman told him he could hand it back after two years and walk away without owing anything.
Obviously not the case here.
On the agreement, it lists the amount to be financed, then its lists 'Total Charge For Credit, and then its lists under "Constituent Parts" 'HP Charges/Interest".
When he received his statement from the first years payments, the Opening Balance on the account is the amount to be financed and Total charge for credit added together, but does not including HP/Interest.
How come this is not included in the Opening Balance & closing balance?
Sorry for all the questions, but, as he has never used PCP before and neither have I, we are struggling to understand how it is all calculated.
Thanks again!
jason s4 said:
I guess the reason it does not work out equally is because of the way the interest is applied?
He seems to remember the salesman told him he could hand it back after two years and walk away without owing anything.
It doesn't work out like that because with a PCP, the GFV is always oustanding.He seems to remember the salesman told him he could hand it back after two years and walk away without owing anything.
I'm not sure how it would work on on a 4yr deal as the GFV would be lower than on a 3yr deal, but on a typical 3yr deal you don't reach the half-paid point until very near the end of deal. In this way PCPs very neatly avoid the early temination laws that apply to HP.
The salesman may well have said he could hand it back at 2yrs - on one of the Mercedes forums there's a guy who works in the financial sector and he was told the same thing (18mths in his case) and he was most dismayed to find it wasn't true and that he didn't fully understand what he'd got into.
It all depends on the deposit, rate of intrest and the baloon figure. For example buy a £25K car on a PCP over 4 years with a £2500 deposit, 7%APR and a 50% GFV and it will take you about 44 months to pay back 50% of the agreement. If the deposit increases and the GFV decreases then this will be sooner. To get to the 36 (50%) month figure using the same deal you would have to put down £6500 deposit and have a GFV of 30%.
Jason,
If you phone the company administrating the PCP agreement, they'll give you a settlement figure. When this settlement figure is less than or equal to 50% of the total, as detailed above, you'll be able to hand the car back. There might be a few small charges that skew this figure, but broadly that should be it.
If you phone the company administrating the PCP agreement, they'll give you a settlement figure. When this settlement figure is less than or equal to 50% of the total, as detailed above, you'll be able to hand the car back. There might be a few small charges that skew this figure, but broadly that should be it.
Go to the dealer and ask them how much they will give for the car.
They can pay the finance company directly and any surplus paid to the owner of the car.
Will cost some, but will be cheaper than paying half and handing it back - unless you're happy to hang on to the car until the halfway point (financially) is reached.
I traded in my car 8m into a 4yr PCP and got another one doing as above.
They can pay the finance company directly and any surplus paid to the owner of the car.
Will cost some, but will be cheaper than paying half and handing it back - unless you're happy to hang on to the car until the halfway point (financially) is reached.
I traded in my car 8m into a 4yr PCP and got another one doing as above.
Mattt said:
Will the settlement figure take account of the fact that interest is not accrued in future months, i.e. it's not just monthly payment x remaining months?
Yes. You can also make part payments at any time, and they will take into account the interest that will not need to be paid.Mattt said:
Will the settlement figure take account of the fact that interest is not accrued in future months, i.e. it's not just monthly payment x remaining months?
It does indeed. I don't mean this in a rude way at all - genuinely - but they refer to it as a settlement figure specifically because it's the cost to you to settle right now 
iphonedyou said:
It does indeed. I don't mean this in a rude way at all - genuinely - but they refer to it as a settlement figure specifically because it's the cost to you to settle right now
Well, the lack of interest charged is only because of laws brought in with the Consumer Credit Act which limits the penalty for early settlement to a month's interest, which is a tiny amount.If this was a personal lease, then often there's no ability to terminate early - all the payments have to be made.
iphonedyou said:
Mattt said:
Will the settlement figure take account of the fact that interest is not accrued in future months, i.e. it's not just monthly payment x remaining months?
It does indeed. I don't mean this in a rude way at all - genuinely - but they refer to it as a settlement figure specifically because it's the cost to you to settle right now a quick update.
He spoke to the finance company today and yes as others have said, its 50% of the agreement and not half the term.
So, he got a settlement figure which is less than the outstanding amount, due to the interest that wont be applied.
Result. However, they have said the best way to settle it and without penalty, is to contact a dealer who would be happy to buy it and they would then settle the finance direct, with money either way if needed.
I suppose that is a bonus of these agreements where you have the option to pay chunks off or settle early if you want.
Thanks again everyone.
He spoke to the finance company today and yes as others have said, its 50% of the agreement and not half the term.
So, he got a settlement figure which is less than the outstanding amount, due to the interest that wont be applied.
Result. However, they have said the best way to settle it and without penalty, is to contact a dealer who would be happy to buy it and they would then settle the finance direct, with money either way if needed.
I suppose that is a bonus of these agreements where you have the option to pay chunks off or settle early if you want.
Thanks again everyone.
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