PCP Settlement Advice
Discussion
Hello all, following the sudden engine failure on my Mazda 2 back in January I had to make an emergency car purchase using PCP. I’m not one for using finance normally but needed a car quickly and planned to pay off once I have the funds arranged.
So I now have the money sorted to pay off the balance and this is where it gets interesting as I’m having to pay back more on the settlement figure than taken out, if any of you could shed some light on this I would be greatful:
Car purchase price: £15600
Less deposit: £2000
Balance financed: £13600 at 9.9% over 48 months with a £6700 end payment.
Monthly payment £250
Total financed £18500
I have paid 2 months so far, so with the front loaded interest I was expecting a settlement of about £13400, however the figure I have just been given is £13,700. I have been assured by the finance company that this is correct and is caused by the front loading of interest, but I can’t get my head around why this number is bigger than what was taken out. Anyone have experience of of this?
So I now have the money sorted to pay off the balance and this is where it gets interesting as I’m having to pay back more on the settlement figure than taken out, if any of you could shed some light on this I would be greatful:
Car purchase price: £15600
Less deposit: £2000
Balance financed: £13600 at 9.9% over 48 months with a £6700 end payment.
Monthly payment £250
Total financed £18500
I have paid 2 months so far, so with the front loaded interest I was expecting a settlement of about £13400, however the figure I have just been given is £13,700. I have been assured by the finance company that this is correct and is caused by the front loading of interest, but I can’t get my head around why this number is bigger than what was taken out. Anyone have experience of of this?
bennno said:
MisterBigglesworth said:
Read the terms of the agreement you signed.
It will be a regulated agreement and the lender is entitled to charge 58 days interest as an early settlement charge.
As above, amortisation schedules means the proportion of interest to capital repaid is highest at the start of the agreement, and then declines as the balance is reduced, so the balance is always higher at the start of the agreement.
The figures will be correct. Finance agreements are FCA regulated and any settlements have to be in line with their rules on calculation of interest rebates.
100% correct answer, ignore others. regulated agreement = 58 days interest as early settlement.It will be a regulated agreement and the lender is entitled to charge 58 days interest as an early settlement charge.
As above, amortisation schedules means the proportion of interest to capital repaid is highest at the start of the agreement, and then declines as the balance is reduced, so the balance is always higher at the start of the agreement.
The figures will be correct. Finance agreements are FCA regulated and any settlements have to be in line with their rules on calculation of interest rebates.
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