PCP - early exit clarity for a numptie
Discussion
Hi guys, I'm struggling to get my head around this - realtime example below:
New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
240Cup said:
Hi guys, I'm struggling to get my head around this - realtime example below:
New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
As with any loan which has APR.New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
You will be paying more proportion of the APR at the beginning of the agreement in your monthly £670 instalments.
If you decide to leave the agreement early, you are perfectly entitled to do so without incurring the interest for the remainder of the agreement.
Whole point of PCP is from a marketing perspective is flexibility to change more regularly.
From the above, looks like you are borrowing 60k, work out how much of the loan you pay off after 1 year.
Take that number away from the 70k you think the car is worth, thats how much you'll get back
240Cup said:
Hi guys, I'm struggling to get my head around this - realtime example below:
New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
What do you mean by "exit"?New Car, £80K
Deposit, £20K
Agreement 48 months at 670.64
Mileage 6,000 pa
Balloon 46,424
Say I exit after a year and car is still worth £70K,
What has it effectively cost me, I think you get a significant rebate of the interest - is it 3 years less 1month 30 days or something under and FCA regulated agreement?
What if I exit after 3 months and car is still worth £80K?
I've never done a PCP before!
Thank you.
Do you want to:
- Sell the car
- Part-ex for something different
- Hand the car back to the finance company & walk away?
I'd sell it (potentially back to the dealer). It is an extra car, new Emira. Landing before Christmas if they can make the stars align at Hethel.
I don't know if I will love it and keep it forever or spend some time in it and exit. I not bothered about trying to sell it / flip it for overs as some are trying to do, I have had 8 Lotus so a big fan of the brand. What I don't want to do is catch a massive cold on it if I decide that it is not for me after a few months. So far the short test drive (heavilg regulated by Lotus) has told me very little about the car.
I don't know if I will love it and keep it forever or spend some time in it and exit. I not bothered about trying to sell it / flip it for overs as some are trying to do, I have had 8 Lotus so a big fan of the brand. What I don't want to do is catch a massive cold on it if I decide that it is not for me after a few months. So far the short test drive (heavilg regulated by Lotus) has told me very little about the car.
Try some figures in here: https://www.financecalcs.co.uk/calculators/settlem...
Ordinarily one would call the finance company up and ask them for the settlement figure, you can either pay that off with cash and keep the car, or you can sell the car and use the proceeds to pay off the remaining balance IF you are not in negative equity. The issue is that for the first couple of years the value of the car drops faster than the rate you are paying off the loan, so you're unlikely to be in positive equity until the last year or so of the term.
Alternatively, once 50% of the balance is paid off you can terminate the agreement, hand the car back and walk away with no liabilities or assets.
It's not ideal planning to be able to end the agreement early before you've even entered it, afterall it is a depreciating asset so that's unlikely to work out the way you want.
Alternatively, once 50% of the balance is paid off you can terminate the agreement, hand the car back and walk away with no liabilities or assets.
It's not ideal planning to be able to end the agreement early before you've even entered it, afterall it is a depreciating asset so that's unlikely to work out the way you want.
240Cup said:
Dunno what I am doing wrong in there as it always tells me I am owing more than I borrowed by about 20 grand at 100% apr....
I got this, for if you settle at 12 months:
There's two "month" (actually one of them is 28 days days but I forget the details) things but basically you have to give a month notice of settlement and the max penalty they can charge is another month.
240Cup said:
I'd sell it (potentially back to the dealer). It is an extra car, new Emira. Landing before Christmas if they can make the stars align at Hethel.
I don't know if I will love it and keep it forever or spend some time in it and exit. I not bothered about trying to sell it / flip it for overs as some are trying to do, I have had 8 Lotus so a big fan of the brand. What I don't want to do is catch a massive cold on it if I decide that it is not for me after a few months. So far the short test drive (heavilg regulated by Lotus) has told me very little about the car.
AFAIK in the example you are stating above, the PCP angle is irrelevant. The guaranteed future value only comes into play at the end of the term. If you exit early then it's a question of "how much can you get for the car" - it might still be £80K - in which case you'll have your deposit and a teeny weeny amount extra, or it might be £55K - in which case it will cost you £3K or 4K to get out of the deal.I don't know if I will love it and keep it forever or spend some time in it and exit. I not bothered about trying to sell it / flip it for overs as some are trying to do, I have had 8 Lotus so a big fan of the brand. What I don't want to do is catch a massive cold on it if I decide that it is not for me after a few months. So far the short test drive (heavilg regulated by Lotus) has told me very little about the car.
You're borrowing £60K, you're paying interest on that at x.x% apr - or possibly xx.x% apr. Your monthly payment is £670.64 which is both paying the interest on the full balance outstanding and paying the capital at an average of £283 / month (non-linear) over 48 months. Given that you're always paying interest on the balloon, the difference between the capital repayments at the beginning of the term c.f. the capital repayments at the end of the term is not as pronounced as it is with a mortgage, but it still needs to be considered.
So - ignore the PCP angle - you can sell the car to whoever you want - if they (or you) are prepared to clear the finance.
yeah that makes sense
First few payments are paying off majority interest and a little bit of capital and then it gradually goes the other way until the end of the 48 months.
My logic is if I buy the car for 80K and sell for 75K in the first few months my worst case liablity is the £5K depreication + a little bit of the interest from the payments that I would have made between purchase and sale. If it sticks at £80K, tiny loss, if it goes slightly over, small profit.
First few payments are paying off majority interest and a little bit of capital and then it gradually goes the other way until the end of the 48 months.
My logic is if I buy the car for 80K and sell for 75K in the first few months my worst case liablity is the £5K depreication + a little bit of the interest from the payments that I would have made between purchase and sale. If it sticks at £80K, tiny loss, if it goes slightly over, small profit.
240Cup said:
yeah that makes sense
First few payments are paying off majority interest and a little bit of capital and then it gradually goes the other way until the end of the 48 months.
My logic is if I buy the car for 80K and sell for 75K in the first few months my worst case liablity is the £5K depreication + a little bit of the interest from the payments that I would have made between purchase and sale. If it sticks at £80K, tiny loss, if it goes slightly over, small profit.
Theoretically that’s correct. First few payments are paying off majority interest and a little bit of capital and then it gradually goes the other way until the end of the 48 months.
My logic is if I buy the car for 80K and sell for 75K in the first few months my worst case liablity is the £5K depreication + a little bit of the interest from the payments that I would have made between purchase and sale. If it sticks at £80K, tiny loss, if it goes slightly over, small profit.
I was trying to read into PCP myself and the exits, but from what I read, I seemed to believe that you can only exit once you've paid 50% off of the amount including balloon?
Seems pretty hard tbh, and in terms of exiting via selling the vehicle, don't you still have to find a way to pay it off before fully selling it. I.e. you pay the full amount back to the finance company but then you receive it back via sale. I could be wrong but it sounds like you aren't in a position to pay back 80k before selling the vehicle, or maybe you are?
Maybe someone can better educate me too if I'm misunderstanding. I was looking at PCP on something much cheaper than this for a second car after not driving for a few years after my last one was written off, but have been suggested just to get something cheap outright like 2k or 3k max. The whole car finance thing seems pretty confusing and messy, and would have preferred bank loan option, but being self employed with a lower income, despite not really having much in outgoings, means a personal loan is basically impossible according to some sites.
Seems pretty hard tbh, and in terms of exiting via selling the vehicle, don't you still have to find a way to pay it off before fully selling it. I.e. you pay the full amount back to the finance company but then you receive it back via sale. I could be wrong but it sounds like you aren't in a position to pay back 80k before selling the vehicle, or maybe you are?
Maybe someone can better educate me too if I'm misunderstanding. I was looking at PCP on something much cheaper than this for a second car after not driving for a few years after my last one was written off, but have been suggested just to get something cheap outright like 2k or 3k max. The whole car finance thing seems pretty confusing and messy, and would have preferred bank loan option, but being self employed with a lower income, despite not really having much in outgoings, means a personal loan is basically impossible according to some sites.
Stallzy said:
I was trying to read into PCP myself and the exits, but from what I read, I seemed to believe that you can only exit once you've paid 50% off of the amount including balloon?
Seems pretty hard tbh, and in terms of exiting via selling the vehicle, don't you still have to find a way to pay it off before fully selling it. I.e. you pay the full amount back to the finance company but then you receive it back via sale. I could be wrong but it sounds like you aren't in a position to pay back 80k before selling the vehicle, or maybe you are?
The 50% thing is if you want to hand it back and walk away.Seems pretty hard tbh, and in terms of exiting via selling the vehicle, don't you still have to find a way to pay it off before fully selling it. I.e. you pay the full amount back to the finance company but then you receive it back via sale. I could be wrong but it sounds like you aren't in a position to pay back 80k before selling the vehicle, or maybe you are?
Easiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
Sheepshanks said:
The 50% thing is if you want to hand it back and walk away.
Easiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
Hmm, interesting. Not sure how much the trade would be willing to offer if it means they have to clear the finance on top of paying you off for the car, but it's not something I know too much aboutEasiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
Stallzy said:
Sheepshanks said:
The 50% thing is if you want to hand it back and walk away.
Easiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
Hmm, interesting. Not sure how much the trade would be willing to offer if it means they have to clear the finance on top of paying you off for the car, but it's not something I know too much aboutEasiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
DSLiverpool said:
Stallzy said:
Sheepshanks said:
The 50% thing is if you want to hand it back and walk away.
Easiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
Hmm, interesting. Not sure how much the trade would be willing to offer if it means they have to clear the finance on top of paying you off for the car, but it's not something I know too much aboutEasiest thing to do is sell it to the trade, WBAC or whatever (or PX it) and they'll take care of settling the finance.
You can sell it privately and get the buyer to settle the finance directly before he takes the car away but not every buyer will be keen to do that.
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