This assumes that you have made all the monthly payments due, that you have respected the mileage limit, that you have not damaged the car (beyond normal wear and tear) and that you have maintained the vehicle as specified in your financing contract. 3. Take a new PCP agreement. If the actual value of the car at the end of the contract is worth more than the GMFV, you can return the car to refund the outstanding amount and use the excess amount as a down payment for a new financing contract. However, you may need to stay with the same dealer if you choose to do so. Instead of paying back the large amount of the balloon at the end of a PCP, you have the option to return the car after making all your monthly payments. The financial company will then sell the car at auction, hoping to make enough money to cover the ball. You can definitely look between dealers to see if you can get a better deal on your parts exchange. Think about your total cost of changing cars, as it doesn`t make sense to get an extra £1,000 for your old car if they charge you an extra £2,000 for your new car. If you want to keep the car for the duration and you just want to return it at the end, you can do it.
Alternatively, once you have repaid half of the total amount to be paid, you can voluntarily terminate the contract and return the car, although this only happens towards the end of a PCP contract anyway. Manufacturers will often contact you well before the end of your contract to try to fool you into a new contract. While some of these offers may seem appealing, keep in mind that the merchant wants to make a sale. Hi Ian. It depends on the value of your car compared to its final balloon payment. Hi Helen. There are several financial advice and charity websites that can give you advice on your best option once you`ve given them all the details of your particular situation, but there`s a good chance you`ll have to return the car – even if it means you can`t get another one. The dealer makes an offer to purchase your car, and the amount they offer will largely depend on what they plan to do with it. If it is only sent to the auction, the dealer will check the trade publications for reviews and possibly check the most recent auction prices. If they think they could sell the car themselves, they will look at what they think they can sell and what the cost would be associated with preparing the car for sale. Don`t prepare yourself or prepare for payment: Planning for the end of your PCP period may not be at the top of your weekend wish list, but it`s likely to be time well spent.
At the end of a PCP transaction, you have three main options. Your first is to pay the last balloon payment and own the car. Second, you could leave with nothing more to pay. Finally, you can trade in the car and use positive equity to finance the deposit of your next vehicle. I didn`t know my car was on pcp, I can`t afford to pay what`s left, my credit has dropped since I`ve been with one escrow act, so I can`t get a loan for another, what can I do Hello, you gave 3 options on your website, but there is no fourth option. Termination of the contract if you have paid more than 50% of the value of the loan agreement amount. You return the car and leave and if you take reasonable precautions, you don`t pay anything else. Can`t it affect your creditworthiness differently than the company with which you have this financing? You need to take a look at the terms of your contract so you know what you will be charged if you exceed the mileage limits. For a realistic estimate of your mileage, check your maintenance records or you can find out with your odometer. The GFV only applies at the end of a PCP.
Depending on your situation, you may be able to return the car prematurely without waiting for the deal to end. For more information, see our guide to voluntary termination of a PCP. Any good car dealership should be able to handle the financing on your behalf and sign another financing agreement for your next model. The problem is that you probably don`t have several thousand pounds in your checking account when the finance company tries to take the last payment. The payment bounces back and suddenly you are late with your loan (probably also with default fees from your bank). Keep in mind that interest is calculated on the total amount you owe, including the lump sum payment, and not just on your monthly payments. Interest rates vary depending on creditworthiness and differ from provider to provider. Hi Pete. If you return the car to the financial company or pay the payment of the balloon to keep the car, it makes no difference. However, if you partially replace the car at a dealership, the dealer may evaluate the car with a little more money because the mileage is lower. This means there`s a way to have more fairness (the gap between what the dealer offers you and your financial bill number) that you can use for your next car.
Hi Peter. It`s not up to us to tell you if you`re doing the right thing or the wrong thing – all we can do is explain how everything works so you can make the best decision that suits your needs. A PCP is a specific type of financing similar to a standard hire purchase agreement (HP). Many of the legal rules that apply to HP also apply to PCPs, for example, the third rule and the half rule. However, the main difference is that you pay less of the amount due during a PCP agreement than with HP, which means that you still owe a significant amount at the end of a PCP agreement. .