PCP Question

[jonwm]

Hi all

Not sure if this is the right place to ask, I've always leased or had company cars so not clued up on PCP.

Parents (in there 70s) had a PCP 3 years ago, an MG ZS, all good, its due to end in 3 months, the original dealer who sold it them have now closed, they rang Santander to see what they needed to do and were told they needed to sell the car through motorway or another way and if it doesn't make the guaranteed final value then they have to make up the difference.

They are a little worried, I thought at the end of a PCP you could just give it back, they are looking at another MG and the other local dealer has said they have to give them the difference in cash of the amount under.

Does this sound right?

[HTP99]

Well yes a PCP you can just return it, if the car is worth less than the balloon then that is the finance companies problem, unless the end user has gone over their mileage, also any damage or missed services and/or items will be charged to the customer.

I wonder if it is a loan with a balloon payment which isn't guaranteed, I seem to recall seeing these a few years ago, I think Fiat offered them for a while.

You would need to dig out the finance agreement paperwork to make more sense of it.

[paul_c123]

jonwm said:

Does this sound right?

It sounds absolutely 100% wrong. Either they were seriously misled by the person they phoned; or they took out some other kind of finance. The whole point of a PCP deal is the future value is guaranteed, so there is always the option of paying that amount to the financer (to become the owner) or handing the vehicle back. And it is not the responsibility of the keeper (they are not the owner....) to sell the vehicle and make up a shortfall. In fact, they wouldn't be able to sell it because they don't own it.

There is the option of selling it if they can get over the GFV - during that sale they would then settle the finance and keep the difference.

They need to refer to the finance agreement to see what occurs if the original dealer no longer exists, and their agreement was to return it to that dealer. There will be some kind of contingency, ie an alternate dealer or collection. Santander definitely still exist after all.

[ADJimbo]

Could your parents and the funder be talking at cross purposes and each party are mistaken as to the others intentions?

For example, the funder thinks that your parents may wish to retain the vehicle, and have advised them to get a Motorway valuation to assess this as an option, whereas your parents may have taken that to mean they are responsible for the disposal of the vehicle through Motorway, and bridging the financial shortfall to the final payment?

I have never seen a PCP agreement where the funder expects the borrower to dispose of the vehicle themselves.

[jonwm]

Thanks guys, I thought the same, they don't live local but I'm going over there this weekend to see them so will have a look at the paperwork.
My dad said that on the paperwork its says on the paperwork its PCP. I just wanted to make sure I was on the right path.

[CMTMB]

It's either completely wrong information, or they don't have PCP.

[mcflurry]

I'd expect the lender to send a letter detailing their options closer to the end date.
Toyota sent me one around 6 weeks before PCP date saying they could either arrange to take the car back, refinance the balance or take the balloon payment in full.
If the current value is higher than the balloon payment then another option is to use the deposit to go around the PCP merry go round again..

[Mandat]

mcflurry said:

If the current value is higher than the balloon payment then another option is to use the deposit to go around the PCP merry go round again..

You don't need to take out another PCP if you don't want. You can just as easily part-ex the car for a new / used car & pay the balance via cash, bank loan, HP, etc.

[Jag_NE]

Is there a chance they misunderstood what Santander said to them?

IF it is a PCP, Santanders statement doesnt make any sense at all.

Personally I'd get them to call Santander and ask your parents to give you the phone once security is passed as this doesnt make sense at all.

[the-norseman]

Usually you have 3 options;
1- pay the balloon payment and you then own the car
2- trade it in
3- hand it back

4th option, is to do option 1 but re-finance it.

[Familymad]

Are all PCP’s a guaranteed final value (GFV) deal? I know some didn’t used to be and you could end upside down at the end and have to pay to walk away. The car was worth less than the final balloon payment.

[Mark V GTD]

Pretty much all of them are ,yes. I have had dozens over the years and they all have a hand back clause (subject to mileage/condition). Thats one of the advantages of going down the PCP route. My current one is on a Honda E:ny1 and that will definitely be worth less than the final balloon and will be handed back (and I can take comfort in that for the duration of the agreement).

[Matt_T]

Am I correct that with a PCP, the V5 is held by the driver/customer but the legal owner is the lender/finance company?

So can you (legally?) sell it if you wanted to?

[Mandat]

Matt_T said:

Am I correct that with a PCP, the V5 is held by the driver/customer but the legal owner is the lender/finance company?

So can you (legally?) sell it if you wanted to?

HP & PCP are purchase products, i.e. you are buying the car. Until the loan is paid off, the finance company have a lein, which is a legal claim over the car. The contract will say that the finance company hold ownership until the lein is settled, but the buyer is the de facto owner.

[paul_c123]

Matt_T said:

Am I correct that with a PCP, the V5 is held by the driver/customer but the legal owner is the lender/finance company?

So can you (legally?) sell it if you wanted to?

Only either the true owner can sell it; or the true owner can grant permission for another to sell it on their behalf. In the case of PCP, there is normally a clause that allows the keeper to sell the car and settle the finance in full, in one multi-part transaction.

[the-norseman]

Matt_T said:

Am I correct that with a PCP, the V5 is held by the driver/customer but the legal owner is the lender/finance company?

So can you (legally?) sell it if you wanted to?

I've sold a few PCP cars over the years, you just declare to the buyer that it has outstanding, and then settle infront of the buyer.