There are a couple of parking scrapes but the milage is significantly lower than originally agreed almost half so I would expect one to offset the other and me to walk away with no charges? Hi John. Your agreement allows for a maximum mileage, but there is no provision for your mileage being less. They are also allowed to charge you for the parking scrapes if they are considered damage rather than normal wear and tear which they almost certainly will be. Hi Howard. We have an article all about it, and it is called voluntary termination.
Have a read! First and foremost, thank you for all the amazing advice you provide. I see lots of people asking, but very few thanking all te effort you put in responding back. I am about to start a new job where I have a 7. The car I want, has a price around 30k. We have savings to fund up to 10k deposit if required. I could get the car as a company car insured, serviced, etc which is one option im a high rate tax payer, base salary 85k or get into a HP or PCP. I currently drive a company car and find it quite comfortable, i dont have the hassle of worrying about it, nor the net salary ht is noticeable.
Hi Sudtai, thank you for your kind words. Bear in mind that any savings you put in up front will be gone, so you may prefer to spend less up front and pay more per month. If you are going to be using the car for business purposes, then you may find that contract hire lease is a better option — especially if you can claim any of the VAT. If it is simply personal use and commuting, then often a PCP works out to be a better bet. At the end of your 3 year period, it may be worth more than the settlement value which gives you a bit of equity towards your next car.
If you manage your own servicing and insurance, you can often save money over paying for this to be managed for you as part of a company car package. An Audi dealer will be able to give you a precise maximum for the car you are considering. The finance company will probably insist on an electronic transfer for anything more. You are probably better setting up the PCP to suit you best before you start, rather than trying to adjust it on the fly. Additional overpayments or mileage changes are best for changes in circumstance to allow you to maintain some control over your finances, rather than trying to minimise interest once the agreement has been started.
Thanks will look at the electronic payment option but want to do it as soon as the next payment option is available so i can get rid of the interest. You can settle the outstanding finance at any time, which will save you all of your outstanding interest and of course you still benefit from the deposit contribution. Obviously the sooner you do this, the more you save.
Even if you cancel the finance agreement within 14 days of it being activated, you will still get the deposit contribution. Is there ever a situation whereby the car is actually worth more than the GFV and therefore you receive equity back, or do you simply give the car back?
Hi Lolalou. You can possibly sell your car privately, and if you make more than your GMFV then you can keep the difference. Talk to your finance company first, as they may have terms and conditions if you want to sell the car eg — they may insist that the buyer pays them directly, rather than paying you and you paying them. If you are returning the car to the finance company, then you do not benefit if the car is worth more than the GMFV — you just give it back. If you simply return the car to the finance company, you do not benefit from any equity; you are handing back the car in lieu of the balloon payment.
If you decide to sell the car otherwise — either privately or by part-exchanging on another vehicle — then you are entitled to keep any equity over and above the GMFV. Hi stuart i have a car on pcp but im forced into bankcrupcy can they take my car off me? I can still make the payments?? Regards sam. Hi Sam. If you are still making payments then there should be no problem.
If you find that you are struggling with the payments, then contact the finance company immediately to try and work something out rather than missing payments and forcing them to take action against you. Due to change in circumstances I will go over my contracted milage and be charged 9p a mile! The company wont adjust my contract what do I do as I could end up owing thousands.
Hi Vicky. Also, if you are on a lease rather than a PCP, the finance company may well refuse to adjust your mileage. Hi, we have a car on PCP and are about to service it, the dealership wants double the cost of a first service at any other garage I. Hi Fiona. You will need to check your contract with the finance company about this. Many manufacturer finance companies do insist that the car is serviced by an Approved Service Centre ie — a dealership. This is because the GMFV at the end of the agreement is based on a full manufacturer service history — if you have had the car serviced by the dealer, it is worth more than if it has been serviced by KwikFit.
If you fail to have the car serviced by the dealer, the finance company can penalise you for hundreds or even thousands of pounds when you give the car back. Warranty-wise, it is a different story. You are not required to have the car serviced by the dealer. I have a personal contract hire agreement and only had the car for 8 weeks and it is being investigated for a fault which they cannot replicate at the moment, however i lost all faith in the vehicle now so wish to cancel the agreement — do you know if i am able to do this with no charge given that i have had the car for such little time?
Hi Imogen. Unfortunately the law is fairly unclear with regard to this. To be able to walk away from the car and your finance agreement, you have to show that the car is not fit for purpose, which is almost impossible. If you want to fight the manufacturer to replace the car with another one, you might have more luck. It will depend on what sort of fault you are talking about, and whether they can repair it properly. Cars develop faults, this is a normal thing. Just reading about PCP and found your blog. Very interesting! Kind Regards.
Hi Bill. Hi Stuart love your blog. Seems I am gone wrong somewhere!!! Ta Derek. Hi Derek. Interest can be calculated differently depending on the type of finance agreement eg — HP vs. I want to buy a car worth The GFV is about If I pay a deposit of and take a loan of If in future I pay off the Can I pay off the at the end of term. Do I still need to pay the interest on the Hi Rahul.
Your monthly payments include interest on this full amount. However I wont be able to afford this and I would really like to own my car. Is there anyway of being able to change my car before the 3 year contract is up? Hi Nicola. Yes, you can change the car before the end of your current agreement. You need to settle the current agreement early and then start a new agreement on whatever you want to buy next. It is not unusual for people to want to change down to a cheaper or cheaper-to-run car.
I bought a brand new car in Dec However I am in the military and I am about to go away for 6 months. Is there any way around this? Hi Chris. You have only had the car 9 months out of a month agreement, and you initial depreciation is greater than your monthly payment. After a while your depreciation rate will slow down and you start to reel in your negative equity. Have a read of our article about settling a PCP early for a more detailed explanation.
Hi Stuart, I am planning on taking out a PCP agreement but am trying to find out how this agreement will effect the amount i can borrow on a mortgage. Or will they just look at the monthly payment and deduct that from my monthly disposable? One of the key tests is an affordability, so they are looking at your income against your expenditure.
Firstly someone reversed into the front of the car causing 2 small scratches by the number plate, then someone punched the passenger door and just yesterday someone hit the car drivers door and side panel. We are well under the 6, pa mileage. Hi Jim. My advice, despite what car dealers may tell you, is never assume your car will be worth more than its GMFV. In terms of claiming your GMFV, the finance company will be very strict regarding scratches, interior marks and service history. Hi there.
I have recently taken out a car with motorpoint on their boomerang finance option through black horse. Also if I was to trade the car in, could I trade the car in for something lower in value and from a different dealer would this mean my monthly payments or term would reduce? Hi Rach. As for changing the car to something cheaper elsewhere, yes you can but it will cost you a lot of money to do so. Your best bet for now would be to keep paying your car off, and if possible save some additional money to put in when you finally need or want to change it.
I have recently found out that the annual mileage the dealer quoted on the agreement is approxiamtely miles less than i would actually do a year. Is there anyway I can arrange for this to be changed? As I was never made aware of it at the point of sale and never would have agreed if I knew. Hi Jen. Contact the finance company and they should be able to be able to up your mileage allowance to match your driving. Bear in mind that this will increase your monthly payments to cover the increased depreciation and reduced GMFV based on the higher mileage.
They will probably be unsympathetic to your suggestion that the dealer did you not make you aware of the mileage, as it is your responsibility to read and understand all the details of the contract before signing it. I appreciate the only certain way is to request a personalised quote from a dealer but I tend to do a lot of research before buying a new car and it would be helpful to work it out for myself.
Hi Mark. These GMFV calculations are highly confidential and revised regularly. For e. Hi Charlie. Yes, you are absolutely correct. Hello Stuart, really great article. I have a question, I recently sustained some bodywork damage to my PCP car. I am expected to service my car at an approved dealership which is fine but with regards to having bodywork repairs, would I be expected to have that done by an approved dealer also? My insurers are insisting I use a garage on "their network" and I see no reference to having to use an approved dealer in my PCP paperwork….
Hi Davide. You are entitled to have the car repaired wherever you like. As long as the repair work is done to a good standard, there should be nothing preventing you from choosing any repairer. I received my delivery of my brand new car last Tuesday 9 days ago , but I no longer need it can it still return the car to the dealer?
No, there is no cooling off period for the car itself. It is now yours and you will need to sell it. There is a cooling off period for the finance if you financed the vehicle, but that is probably not going to help you as you will simply then have to pay the full value of the car before you sell it. They have said I can trade my car in for the new model and keep my monthly payments as they are. Am I likely to be billed after the cars been returned for any damage or excess mileage?
Also, financially will trading in at this point of the contract have much of a financial impact when we come to trade in next time? Hi clarolux. If it suits you to change now, then by all means listen to what they have to say. The potential upside of part-exchanging your car early is that you could avoid any excess mileage or repair costs. If the dealership has appraised your car and has offered you more than your finance settlement, then it may be a good time to change. Regardless, whether you change now or later should have no bearing on next time — you settle up on this agreement and start afresh on a new one.
But the dealer says that I cannot now change to PCP as the car would have to be de-registered. I still want the car. You could simply walk away from the lease and start again at an entirely different dealership on another car and they would lose out completely. I would suggest holding firm, not signing anything, not paying any money or providing any bank details for them to start direct debiting you until you get what you want.
If you have already provided your bank details, I would cancel any standing orders which they have set up until it is resolved. Hi Nathan. Instead they will be trying to lure you into a new car on another PCP rather than refinancing your existing vehicle. Usually the cheapest way to finance the balloon amount is to take out a personal loan from a bank.
Ah, good point Paul. Well spotted and thank you. I copied and pasted the bit about refinancing the balloon from another comment. I'm surprised that no-one has noticed that before now, since it was nearly a year ago. I will correct my earlier reply, so apologies to anyone else if the rest of this conversation no longer makes sense…. Hello, If I am to exceed my annual agreed mileage will I have to pay anything extra at the end if I opt to buy the car?
If you plan to pay out the balloon at the end of the agreement and keep the car, then your mileage and condition and service history are irrelevant. The balloon is simply the amount you still owe the finance company to pay off the loan. It only matters if you want to give the car back. What about if you are planning on taking out PCP on another car — I want to get a new car at the end of my contract but I am going to be over my agreed mileage so am unsure if it's worth changing this and paying more or if it will matter when part exchanging for a new vehicle anyway?
Also does this matter when using a different dealership when they pay off your finance? Hi Abie. If you are part-exchanging the car, it will depend on the offer you get for your car. If it is more than the settlement figure, then the mileage is irrelevant and the dealer will settle the finance. If the part-exchange valuation is less than the settlement figure, you will either have to claim the GMFV and pay the excess mileage, or accept the part-exchange offer and pay the negative equity — whichever is cheaper.
Hello I have recently got a new job which gives me a company car but i also have a car on a finance agreement with Renault i need to cancel this as i have no need for it and its a waste of money each month. Hi Liam. It will depend on how long you have had the car for. Have a look at this article on settling your finance early , and this one on your voluntary termination rights to see if which applies to you.
Check the on-road price of the car and the financed amount — dealers are very sneaky about adding extras like GAP insurance in without you asking for them. I have an existing PCP with Citroen but I have changed job and I am now exceeding my mileage limit miles significantly. Can I readjust my mileage and therefore payment mid contract or do I need to look at a new deal altogether?
Hi Christian. Most manufacturer finance companies will allow you to amend your annual mileage allowance to cover the reduced GMFV at the end of the agreement. Give the finance company a call and they should be able to set it up for you; basically it will mean bumping up your monthly payments for the remainder of the term to cover the increased depareciation. I believe that this will save me some interest.
Hi Sally. Double check your numbers to make sure — bear in mind that you have already paid a lot of interest on your current agreement you basically pay back the interest first and then the principal afterwards , and if you take out a loan now, you are paying interest on top of that interest already paid. Compare two numbers: 1 the total you will pay on a loan now to cover your current settlement, and 2 the total you would pay from now on if you finish your month PCP and then take a loan assuming the same 4.
Regards Billy. Hi Billy. Have a read of this article , as it should answer your questions. Basically, yes you can pay the finance off within 14 days without paying any fees. Hi Stuart, Many thanks for a swift reply,I am really grateful for the advice received, regards Billy. Either way, I would be paying off the balance of the finance in full. Whilst I would naturally opt for the cheaper option, I was informed that, as the finance would be deemed to have never existed, I would lose a number of important rights under consumer protection law and it was even suggested that I would lose the warranty cover for the vehicle!
The finance company has been very cagey about how the charges in both cases are justified and have made a very unspecific reference to a provision in the finance agreement, evidence of which I have requested but not received. I would appreciate your guidance as to how I might best go about terminating the deal. Many thanks. There should be absolutely no charge if you cancel your finance agreement within the day cooling-off period as it is your legal right to do so.
Have a read of this article , which explains it for you. There is also no connection between warranty and finance, unless we are talking about a used car and an aftermarket warranty was provided as part of the finance deal. Thank you so much, Stuart, for your very speedy and helpful reply.
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It just so happens that I received the finance agreement in the post today. There is no clause indicating any loss of consumer rights or warranty cover, so it does rather sounds as though they are trying to pull a fast one. I will call them tomorrow and failing a satisfactory outcome threaten to make a complaint through the Financial Conduct Authority. Hopefully, this won't be necessary, but I'll keep you posted. Many thanks again for your help.
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With kind regards. It is your legal right to cancel the agreement within 14 days at no cost to you, end of story. Thank you so much for your help, Stuart. I am pleased to say that, after words with the finance company about issues of suitability, misleading information and complaints to the FOS, they conceded and allowed me to withdraw from the agreement at no charge. Although they admitted that, contrary to previous advice, I would still benefit from warranty protection on the car, they remained adamant that I would still be losing certain rights under the Consumer Credit Act and seemed to be talking about those rights I would have in the event of the car being not fit for purpose I wonder if this mirrors the same protections as you have in buying goods on a credit card?
It all seems far-fetched to me and, so long as I have the warranty protection, that is really all I am fussed about. You should feel very proud about the amount of valuable guidance and support you have given people like me — you're a true legend! Hi I have very poor credit rating how do I go about getting PCP because I need a car badly and have been turned down finance there last week does the PCP do credit checks.
Unfortunately if your credit rating is very poor, you will almost certainly be unable to get finance for a PCP from the major finance companies. Your best bet is to try to borrow a smaller amount on a personal loan from your bank, and buy a cheap used car. Make sure it is easily within your budget, and successfully repaying this loan will help to rebuild your credit rating.
Hi, I am currently about 32 months into a 60 month HP deal on my car….. I have been told I can change my car which would be nice, but means I have to part-ex my current car which will pay off the outstanding finance and then financing the new car on PCP. The monthly costs would be roughly the same…. Hi Ed. Your financial position on your current car will only get better as you pay more and more of the finance off, so there is no urgency to change the car your net deposit for your next car will only increase as each month goes by , so you should ideally wait until you really want or need to change the car before making your move.
I have rang the dealership to see if they would match this and they said they had already ordered car and it was last thing at night and he will have a look in morning.
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I am very worried now that I can not cancel and will lose my money. Also checked bank and they said payment had been made 15mins after I called to try and hold the deal……funny that!!! Have a read of this:. The dealer is not obliged to match the other price, as you have already agreed a price with them. Hi Abbie. Have a read of our car finance glossary , and check out articles such as this one about changing your mind after purchasing and settling your car finance early. Hi Helen.
It will show on your credit record, and its effect on your property borrowing power will depend on how much you are looking to spend. Finance companies look at your total payment commitments compared to your earnings to decide how much they will lend you. I have a pcp plan that ends with balloon payment in five months. I want to extend the monthly payments for another year with a balloon payment at end.
Will the car finance allow this if my credit fie is damaged since, although my car and priority payments have always been paid on time. Many manufacturer finance companies will no longer allow you to refinance the PCP balloon, meaning you would have to go to your bank or other financial institution to borrow money to pay off the finance company for the balloon amount. If the finance company does allow you to re-finance the balloon, it is usually to pay the whole balloon off rather than extending the PCP term by another year.
If the finance company does allow you to refinance in any way, they will probably look at it as a new application and therefore reassess your credit rating. Whether or not they take into consideration your good payment history is probably an individual matter. However, I need to have a car for work, so my dad has agreed that he would take on a PCP on my behalf new or existing. How can I make the most of this situation? Hi James. I paid for 3 annual services upfront, so still have 2 in credit.
The dealer has called me to offer an upgrade to the model which has marginally better spec at the same monthly and final payment. My initial benefit thoughts are; new car with new boots and plates, new 5 yr warranty and no 3rd yr MOT to consider. I will have an extra 18 mths before the final payment becomes due so my money stays in the bank earning interest. I have an appointment with the dealer on Tuesday 10th Feb to discuss the issue.
Could you possibly offer some advice please before I go in. Hi David. It is rare to have that much equity in a car at the end of its term. This will give you an idea of what the actual offer on the new car is, because the original dealer is quite probably factoring your part-exchange into the equation. Get a settlement figure from Toyota Finance, and when you go into the dealer on Tuesday make sure you get a clear idea of what they are offering you for the part-exchange so you understand your exact financial position on your current car.
Then have them explain the exact offer on the new car, and compare it to the quote you got from the other dealer. Finally, find out whether the services can be transferred over to your new car. If not, then you have paid for two services which you will lose. It is very common for dealers to try and convince existing customers to upgrade mid-term. Hello, Ive recently bought a car on pcp, only had for a month, I am not happy with the car, can I change it? I would like something more expensive, please help! Hi Alex. Changing your car now will almost certainly be massively expensive.
Have a read of our article on settling a PCP early , as well as our article on depreciation. Best advice is to hold onto it for as long as possible and learn to enjoy it. My dealer has said in April I can hand the car back to the dealer and end the agreement, the car is in excellent condition and less mileage than I opted for. Hi Dave. As for handing the car back, read our article on Voluntary Terminations.
PCP car finance can seem very confusing
If so, then the price to buy the car in cash may be higher. PCP virgin here with a few questions. My biggest concern with PCP is the risk of dents and scratches as I just know the car will end up getting them where I live. If it is, then happy days. If not, you would give the car back to the finance company as detailed just above.
As I havent found a suitable job! I was wondering after my 3 years with pcp could I go on to a hp and pay off the remaining balance over so many years? If so should I say o the advisor at the start of the pcp contract? Hi Rachael. Most finance companies will allow you to increase your mileage if necessary, but check before you take delivery of the car.
If you think you would prefer an HP, you are better off doing that now. I ended up owing HMRC almost 10k which has meant maxing out on my cc. Or at least so I thought. I could potentially continue with the PCP but at a tad bit of a stretch. Can I part-exchange the car for a second hand HP car — probably with MB or Volkswagen — and get a favourable deal that would sort out the finance owing and then cover the deposit at a competitor? My current car is a used D MS which came with some optional extras and still has the warranty.
It is in good nick. Not that there is anything in my pocket off-course. Hi Tindo. If not, you can pay the difference to bring you up to the VT amount and then VT the car. If you want to part-exchange the car for something else, they obviously need to be giving you at least the value of the BMW settlement. Check car buying sites like webuyanycar. They will want to sell you a car, and it will just depend on how the numbers stack up.
Thanks for that. The MB site valued it even lower. Interestingly selling it privately gave an estimate k above the finance owing. Thanks again. Check out our article on part-exchange prices for a bit more explanation. I don't really want to borrow money. Hi Edward. This is because they are probably making at least as munch on the finance commission as they are on the sale of the car. PCP certainly seems like an easy way of getting a far more expensive vehicle that otherwise one would not get.
For me, over and above the cost of financing, the negatives are the fact the initial payment erroneously called a "deposit" is most likely lost and also at the end of the PCP period and there is scope for big arguments on the state of the vehicle on what is normal wear and tear and what is damage.
Seems to me that these days being an outright cash buyer no longer one the advantages as in the past. Hello, I am considering taking out a car under PCP. Your articles and comments here are very interesting. However, I am slightly baffled about what happens if I return the vehicle at the end of the period say 36 months and I am over my agreed mileage? But then again, I also read excess mileage charges — what is the interaction between excess mileage at the end of a contract and just handing the car back when the expected value is lower than originally expected?
Many thanks Peter. Hi Peter. If you go over your agreed mileage and then want to hand the car back to claim your Guaranteed Minimum Future Value, you will certainly be billed for it — even if your car is absolutely immaculate. It is nothing to do with the dealership, it is the finance company who will charge you. I am looking for purchase a new Audi A1 from a main dealer, originally going to finance through a low apr personal loan very good credit rating but now the dealer has introduced me to pcp.
So we have gone over the figures has i have never purchased a vehicle this way before. I pointed out the apr was higher than a personal loan but they said you cannot compare directly with a loan as thry work difrently. Now my main question as this is totally new to me is the gfv or ballon payment which is on a vehicle. The salesman has told me that the A1 have strong res value and likely to get more than gvf when i put the car in 3 years time, the dealer currently has 3 year old vehicles same spec for on the forecourt, far more than the gfv, so my question is how do they determine the price in 3 years over and above the gfv.
If they are selling for 13k after 3 years with same mileage i will be doing i would expect 10k plus when i put it in, but what if they offer just the gfv making them over 4k. Are there rules around this? I could pay the ballon but then i have paid more interest than if i had set up hp from day 1, so the plan is to take another car in 3 years. For your circumstances, the PCP is only worth considering if you know you are going to change the car at the end of the agreement.
The dealer is partially right in that the two products work differently, but at the end of the day the APR tells you how much interest you are paying on the amount you are financing. The golden rule when taking a PCP is to always assume that you will not get any equity at the end of the agreement. The only guaranteed number is the GMFV, and that has strings attached to it in terms of condition, mileage and service history.
Have a read of this article about part-exchange prices , and why they are usually disappointing. Have a read of this article about deposit contributions and cooling-off periods. Always remember that the dealer wants you to buy their finance and insurances, and other add-ons because they make a LOT of money by selling it — often more than they do on the car. Keep that in mind, and you will be well armed to judge things for yourself. The website also states I get 10, miles per year which is perfect for me.
Thanks :. Hi Mike. The PCP quote should show exactly what your annual mileage allowance is. Hi Stuart, could you offer some advice? I am looking at my PCP which comes to an end later this year. The car has been damaged following someone bumping it while parking at work. Is this a decent offer given the situation or would I be better off waiting?
Are they any advantages to waiting? Hi Abby. If your damage is that significant, is it not worth getting it fixed under your car insurance policy? If your car is damaged, you are going to be charged by the finance company at the end of the agreement if you try to hand it back. You should also check and see what the latest VW up! They may be better, or they may be worse. Just wanted to say that this is not only a fantastic article but also an excellent comments section. The effort and diligence you put into the site is astonishing and your willingness to understand and respond to each an every question is impressive.
Congratulations on a great blog. Would love to meet you for a pint if you are based in London and talk cars. I have recently purchased a car using PCP, I am slightly worried about mileage. For example on two years time I walk in to a dealership and they price my car up, get the settlement figure from the finance company and take it from there? Hi Marc.
As usual, the dealer is trying to suit their needs rather than yours. Have a read of our article on settling a PCP early for more info. The Mercedes PCP tends to have a low monthly payment with a high balloon payment, whereas BMW have a higher monthly payment with a lower balloon payment. I suspect that depreciation after 4 years would be similar on both cars so why the difference and which would be the better deal?
Hi Terry. As soon as a model is replaced, values of the old model drop noticeably. Thanks Stuart. That makes sense, although both models are due a face-lift. The series this year soon and the Mercedes some time next year. I am going to be asking the question of both dealerships and see what their position is. BMW and Mercedes-Benz both tend to work on 7-year product cycles. The 3 Series was launched in and should be facelifted this year, which would probably mean an all-new car in or thereabouts. The C-Class was all-new last year, so will be due a facelift in and an all-new replacement in Thanks for some really great advice on here!
I am still a bit confused about something though. It seems like a PCP is exactly the same thing as a lease in practical terms: low monthly payment in exchange for both a mileage limitation, with the option to buy out the car at the end. Hi Matt. There are some legal differences a PCP gives you the right to Voluntarily Terminate ; a PCP is an ownership agreement whereby you buy the car unless you choose to return it, whereas a lease is simply a pure rental , and a PCP is generally more flexible if circumstances change.
Have a read of this article which compares a PCP with contract hire lease. There are two articles you should read — one about settling your PCP early , and one about voluntary termination. Hi Annabel. This is not normally possible, even though you are related. This will be particularly problematic as you do not live at the same address as your dad. Hi Barbara. It sounds unlikely that you would be approved for credit on the basis of what you have described.
Thank you for getting back to me. I thought I wouldn't get credit I just needed confirmation on that. I can afford the car that is no problem as i have my own business that i am at from 6 days a week and i also work hrs a week with an evening job I only have a late payment as it completely went out of my mind its only a home catalogue. Im so busy I just forgot to pay it. But thank you I am trying to rebuild my credit that's why i got the catalogue. If I get my score up to fair what s the likely outcome for car finance?.
Every application has to pass basic credit score and affordability tests, and each case is usually assessed individually based on all the information that you and the dealership provide the finance company. This is done by the finance company at their head office, rather than at the dealership.
The dealer simply submits all the information provided and has no influence on the decision. Dear Paul, Excellent advice from what I read. We have a very unusual scenario. Expensive car 47k from main dealership on PCP 36 months. Car had non functioning heating system. They would collect the car, bring it back saying to wait 6 weeks for ordered part from Germany, recollect, deliver 3 days later not fixed.
This went on for 2 years and 9 months when after 7 such cycles we finally have heating. The mileage on the car today is only 3k. As you can imagine the car was not drivable in the north west without ability to demist etc. We now have to pay 20k to buy the car as we want to keep it now that the heating is sorted. We want to take legal action for compensation for luck of use, not as described etc. If the finance company is the owner, can we take legal action against the deslership?
Any advice is appreciated. The only fault of the dealer would be if they had repeatedly incorrectly installed perfectly good equipment which resulted in it not working. PCP deals on new cars seem to be a lot better deal than on used say 4 year old cars, the APR seems a lot higer on used eg Nissan To me it seems a bit of a con to buy used on a ridiculous rate. Also there are sites where you can order a car online new and used seem a lot cheaper than going to main dealer, Has anyone experienced a main dealer matching an online site monthly payments for like for like car?
I know most people never pay the asking price but in a chicken and egg situation whereby want to make sure i can afford the payments before going to testdrive and liking the car! I just want to save time and money so any advice would be appreciated. Sorry for the long post! Hi Lou. The manufacturers will always do better deals on new cars because they want you to buy a new car, rather than one they built and sold four years ago.
Used car finance rates are usually unsubsidised, which means that the new car might cost twice the price of the uesed car, but the monthly payments might be a lot less than twice those on the used car. The lower APRs usually mean there is much less margin for the dealer, so less or no room to negotiate the rate. On a used car, there is every chance you can negotiate with the dealer on the APR. The dealer has a margin on the finance just as they have a margin on the car.
On used cars, there is every chance that a bank will offer you a personal loan at a much lower APR. Bear in mind that a personal loan is unsecured, so if you fail to keep up your repayments the bank can come after you and your personal assets. Hi Stuart please can you help I am hoping you are able to give me a solution to my problem!
I have just taken a new job where I am doing a lot more annual miles. I have spoken to LEX and they have told me there is no way I can alter the agreement at all which means I am going to be really stung at 22p per mile at the end of the term. Any advise would be really appreciated. Thanks Laura. Hi Laura. I don't believe they offer a PCP, although they do have a contract purchase option aimed at small businesses.
If you are using your vehicle for personal use more than business use, a business finance option is not usually the best choice. If the vehicle is being used for business purposes, you should be able to claim your mileage as a business expense, but you will need to speak to your accountant. Your contract should have all the details regarding settling the finance early if you do not wish to continue with the vehicle, however you will need to be prepared to lose money since you are still early in your agreement. Hi Maciej. There are almost always costs associated with settling your PCP early.
Have a read of the linked article for more information. Stuart thank you so much for the article. It was very helpful. I do have a few further questions to fully understand how PCP works in practical terms. This is somewhat counterintuitive so I wanted to confirm that this is in fact true. In other words, under what circumstances, if any, would a customer and finance company choose a settlement amount that is different from the GMV.
Or put it differently under what circumstances would a finance company guarantee a value that is different from the settlement amount, which amount presumably equals sales price — depreciation. Is this determined on a case by case basis or does every model have a depreciation schedule that finance companies cannot stray from? As an example, lets say the GMV on the car is 10K.
How do I and the dealer agree on what the actual value of the car is? Is there an objective source that sets forth prices for used cars with certain mileage and condition or will there have to be another negotiation process with the dealer? I suspect that this is where dealers have the informational advantage and may force customers to agree to values that are as close to the GMV as possible. Would you agree? Hi Aram. The GMFV is determined by a depreciation formula based on the model, specification, mileage and options.
It is not varied on a case-by-case basis, so if you had two absolutely identical cars on two identical PCP agreements, their GMFVs would always be identical. The valuation of the car at the end of the agreement is simply whatever the buyer is prepared to pay — whether it be a dealer part-exchanging it, a private buyer or an auction value. Dealers will be guided by market values according to industry guides like CAP and Glass's Guide, but you are welcome to negotiate as much as you can for the car.
Stuart…thank you. This certainly clears things up. I do have three more follow up questions if you don't mind:. So it appears that the "equity" transaction is not a guarantee under the PCP arrangement since the party granting equity the dealer is not obligated to do so since it is not a party to the PCP arrangement.
Would the finance entity step in and grant some form of rebate towards a purchase of a new vehicle same brand of course? I want to assess what other customers are finding beneficial based on statistics. Your car is worth whatever someone will pay for it — so market value. Their valuation will depend on what they think they can sell the car for — have a read of this article about part-exchange values , and this one about how to get a better price on your part-exchange. But most manufacturers are pushing PCP finance because it suits them, not because it's a wonderful deal for the customer.
Car finance: how to make sure you get the best deal
Hi Stuart. Just a quick question. I'm looking to take out a new Audi on A pcp. I've got a fair credit score, what kind of chance do you think I have? Credit score is one component of the application criteria, but Audi Finance will take several other factors into consideration as well, such your income vs.
Hi Stuart…great article! We are looking to upgrade our faithful Kia Sorrento tow car. We tend to buy nearly new cars…look after them and keep them! The problem is that aren't many near new Sorrento's around! Our car has only done only 72K miles, and many 3 year plus are already reaching this sort of mileage. Kia prices have soared over the last 5 years, and are no longer the budget brand they used to be. To be fair…the cars have improved immensely, especially the 'All New Sorrento'.
PCP (Personal Contract Purchase) car deals explained: advantages and disadvantages | Auto Express
We need a 4WD to get us off muddy fields, and our current car has been amazing! This seems an awful amount of money to spend! Our local Kia dealer suggests PCP 4. They assure us that this by far the best way to do it…I bet they do! I'm attracted by the lower monthly payments, and low deposit.
We are thinking of term ownership here, due to Kia's 7 year warranty. Our mileage is quite low 7, miles per year. Would you advise this sort of deal, or hold out for the right second hand car and go down the personal loan finance road. Thank you in advance. Hi Lulu. Yes, even if you stay with the same finance company, it is an entirely new contract and credit check. The credit check is one part of the overall process, although it is important. If you are making a new application with the same finance company, obviously they will be able to see that your payment history has been exemplary, so they will take that into consideration as part of the overall application.
However, all finance companies have rules which they are required to stick to, so it will depend on the overall circumstancees of your credit history and your new finance application. Once talking with senior memebers of my family, it was clear that i had acted out of haste. I revisited the dealership on the Thurs and advised them of my request to cancel, the salesman dealing with my transaction advised that this would not be possible and that i am now liable for the car- somewhat became very rude. The remainder was due to be paid upon collection of the car.
I challenges the salesman who then advised that i should write to sales manager and inform her of my request which i did immediately after leaving the dealership. I am yet waiting a resposnse. Please can you advise me if there is anyway of me to cancel this purchase? Hi Sobi. Legally, the salesman is correct. You can cancel the PCP you have a day cooling-off period for that , but if you signed a contract on the dealership premises and were of sound mind at the time, you can be held to it. Cancelling the PCP simply means you will be invoiced for the full price of the car.
There is no cooling-off period in the purchase of a car on the dealership premises. For more information, have a read of this article about changing your mind after you have bought a car. You have acted correctly in advising the sales manager in writing of your intention to cancel the order, however, you are reliant on the dealership agreeing to cancel the purchase.
This was presumably a vehicle contract, and you should have been given a copy. You seem to be unhappy with the way that the dealer has treated you, but on what grounds do you think you should be able to cancel your order? Can you provide a definitive answer to the question of whether I am obliged to use a main Mercedes Benz dealership for servicing in order to remain within the terms of my PCP arrangement with MB Finance. I have seen a number of blogs, which contradict each other but one blog in particular sites EU anti competition law as a reason as to why they cannot insist on dealership servicing as long as it is done with MB genuine parts and to the required standard.
Short answer is yes, you have to use Mercedes-Benz servicing if you want to hand the car back and claim your GMFV at the end of your agreement. This is because the valuation they guarantee for your car is based on a full manufacturer service history. If the car has not been serviced by Mercedes-Benz, its value will be reduced although the finance companies do tend to exaggerate this to suit their purposes. If you get to the end of the PCP and your car is worth less than the GMFV, you give it back to the finance company rather than part-exchanging it.
Have a read of this article about servicing and warranty requirements for more information. Hi Stuart, my mileage is far higher than the agreed mileage in the PCP contract so I am trying to decide what to do after my monthly payments are up. Either to keep the car by re-financing or take out a new PCP deal, will the excess mileage hamper this?
If you part-exchange the car or sell it privately, it may be that even with the high mileage that the car is still worth more than the settlement figure. So if you are refinance, you are paying interest on money that you have already paid interest on, plus the rates are normally quite high. Explore all your options becire making a decision; it may be a case of what is the least expensive option.
Hi I have a merc on pcp, initially it was for my husband and agreed mileage of 40k a year but then he changed jobs and had a new car The final bal is due in November of I would assume the car will be worth more as that value was worked out with the car having done in excess of k miles when it has in fact done 55k I don't want the car so will be changing it , so will pay the and then can I sell it privately or to something like we buy any car?
Confused as to what to do Thanks. Hi Jane. Yes, you can pay out the settlement figure and then do whatever you like with the vehicle. If you want to part-exchange it on another car, the dealer will settle your finance for you as part of the part-exchange process. If there is any equity, then you can use that towards your next car. I am trying to weigh up my options for when my PCP is ending next year and have a few questions regarding high mileage.
Due to my job being relocated my mileage is much higher than it was agreed on the initial contract. I wish to know what options are open to me. Handing back the car is out of the question due to the massive mileage ive clocked up. I hope im making sense to you, basically can I part exchange my current car on pcp when its finished no matter what the mileage? If you part-exchange the car, the chances are that you would have some negative equity but likely less than the penalty from your mileage.
You can usually call the finance company and ask them to bump up the mileage allowance. This would increase your monthly payment but would cover off the excess mileage cost. The only problem is that this is best done before your mileage starts going up rather than a long time afterwards. If your mileage is already well over the contract amount, you will probably have to pay a significant amount more each month to cover the increased mileage.
Lenders are traditionally conservative when estimating the GMFV, so the car is often worth more than predicted — although this trend is less common than it once was. If the car is worth more than the GMFV, you can put any excess payments you have made towards its deprecation into a new vehicle. Manufacturers push PCP, so interest rates are often low, but they also set mileage limits with an excess mileage charge applied if you exceed them, usually at a pence-per-mile rate. While that's good practice anyway, if the car is damaged and you return it at the end of the PCP deal, the dealer can mark down its value.
If you want to take ownership of the car at the end of the term, PCP will often prove more expensive than hire purchase finance deals, but if you want to hand the car back or trade in for an all new model, as most PCP customers do, it's a good option. Click the links below or on the top left of this page to get full guides on each of the key car finance options….
View the discussion thread. VAT number Sign up for our daily newsletter Newsletter. User menu. Choose a model. More like this Opinion. PCP deals can be broken into three chunks: 1. An initial deposit. Monthly payments. Final payment. Related keywords: Car news. For more breaking car news and reviews, subscribe to Auto Express - available as a weekly magazine and on your iPad. Most read 1. News Exclusive: Mayor of London urges motorists to lobby for national diesel scrappage scheme 2.
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