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Car Finance explained : how the PCP works
Tagged: Arnold Clark, Audi, pcp, Santander
This topic contains 319 replies, has 3 voices, and was last updated by ClarkClisp 3 months, 1 week ago.
Many people are unclear about the PCP (Personal Contract Purchase), which is offered by nearly every car manufacturer in the UK. The Car Expert explains how it works.
This article is by far the most popular one at The Car Expert, and has generated this forum thread which is by far the longest and most popular one in the TCE Forum. If you have questions about how a PCP works, read this article and ask your questions in this forum thread.
The best place to get more information is at the link above, where you can add your comments and questions for Stuart to answer. The article has been freshly updated in 2016 with even more information to assist you with a personal contract purchase. As of May 2016, we won't really be supporting this forum thread, as it duplicates what's on the other page. However, we won't be deleting the thread, so you can still read through other people's issues and see if that helps.
Su douglas
Can the registered owner of a pcp car be changed once it is set up or does it have to remain in the same name for three years
No, if the owner of the car wishes to sell it, the finance has to be settled. The car is held as security by the finance company, so the keeper is not allowed to sell the vehicle unless the finance has been paid off.
Thanks for the info Stu. however, i'd like to see more of the potential negative aspects to PCP…Surely they are only really suitable for people who do not own a car (with a resale value). Take my situation for example. I'd quite like a new BMW 3 series…specced up it's about £40-5k. My current car is owned without finance and is worth say £15k. If i went down the PCP route, it would mean using some of my current car's value as a deposit, but with interest rates as low as they are, there's no point banking the spare cash from the sale of my current car. so, if i used all of the value as a deposit, the problem i would then have is that after 3 years, i wouldn't have any equity to speak of apart from the potential difference between value and GFV…cheers for any feedback!
Almost any car you will ever own will be a depreciating asset, so it is constantly losing money. Your car may be worth £15K today, but in a year's time it may only be worth £12K, which would mean it has still cost you £250/month in depreciation. The difference is that you have already paid for that up-front rather than paying for it now.
Ultimately, the value of any finance agreement is how much it is costing you over and above the face value of the product (ie – interest and fees), and how that cost is spread to suit your cashflow. I am not advocating any particular method of paying for a car, but the reality is that most buyers are cashflow-oriented and a PCP usually suits cashflow better than an HP or a bank loan.
I am currently coming to the end of a pcp on an Audi A3 through Audi Solutions. I don't want another Audi for my next car, so am I right in thinking that I could take it into any dealership (e.g Kia) and they could sort out my final finance payment and then use whatever equity is in the car as a deposit? I would just appreciate some advice on how to still benefit from the equity from the car if I choose to hand it back at the end of the pcp.
Hi MrsB. If you have equity in the car (ie – your car's value is greater than the settlement figure), then any dealer will be able to settle your finance and you can use the equity on your next vehicle.
If your car's value is less than the settlement value and you are wanting to claim your guaranteed value from Audi Finance, then you will need to contact Audi Finance and they will be able to advise how you go about this (the car will probably need to go back to an Audi dealer).
Hi there,
Just a quick question. Last Saturday I took out a new PCP deal, after having my current one for almost 3 out of the 4 year deal. I am happy with the settlement deal etc.
I agreed to take out another PCP deal on the same car from the same dealer. I signed paper work to order the car and to find finance. After a week of deep thought and looking in a lot more detail at other deals, I feel I may have rushed in.
Is there any way I could cancel the deal on the new car?
I haven't paid any deposit- nor did i leave the dealership with any paper work!
Any advice greatly appreciated! The sooner the better as I feel any time I have is running out!!
Thank you :)
To clarify for us, you said that you have "signed paperwork to order the car and find finance".
My understanding, therefore, is that you have ordered a car but not taken delivery? And that you have probably not signed the finance contract (you would have to have paperwork in the form of a contract for finance; a dealer cannot withhold this from you).
If you have not taken delivery of the new car, then you can simply cancel the order. You may lose your deposit, but it's probably cheaper than taking on a monthly commitment you can't afford. The PCP finance agreement won't commence until after you have taken delivery (usually the first payment is taken from your account one month after delivery), and you can cancel the agreement within one month of delivery. However, if you have taken delivery of the car and want to cancel the finance, you then have to find another way of paying for the car.
There is usually a "cooling off period" when it comes to signing finance agreements as part of consumer law. I'm not sure if it applies to PCP deals, but can't see why it wouldn't.
It seems extremely odd to me to have left with no paperwork at all. I'd ring the dealer and just tell them you're cancelling and see what their response is. If you're set on the new car, tell them what you've seen elsewhere and tell them they must beat that deal to get your business. As you've not yet paid a deposit, I don't see that there's anything to lose.
Any progress on how you got on, jodbou?
I have followed this thread with interest as I am in the position that I have kept a car too long (2005 Volvo XC70 SElux) and am being stung with crazy repair bills, hence looking to replace it. I find myself in the situation of not being able to afford what I would like on HP, but can use the existing car as a deposit – probably worth about 4.5-5K and was considering PCP against an Audi A4 Allroad, low mileage, 2013, £28K over 3 years. Is there likely to be enough equity in the car in 3 years to at least be standing still relative to the postion that I am in now ie. would I have 4.5-5K as a deposit to put down against the next one in 3 years time? Getting a rough costing on PCP to base calculations on from anyone is like pulling blood out of a stone!!
You are definitely (well, 99.9% definitely) not going to have anything like £4,000 of equity in your car at the end of the PCP agreement.
The simplest way I have found to explain PCP vs HP lately is this:
Let's say that the car costs £30K to buy now, and that in 3 years' time it will be worth £15K.
With a 3-year HP, you pay off £30K + interest, and at the end you own the car, which is now worth £15K. So when you want to part-exchange the car, you have spent £30K + interest and are getting £15K back, so the net result is that you have spent £15K + the interest.
With a PCP, the manufacturer guarantees the final figure, so instead of paying off £30K (plus interest) and getting £15K back, you are only paying off £15K (plus interest) in the first place and getting nothing back. The net result is basically the same, but the way that you have got there is quite different.
If, in 3 years' time, the car is worth more than £15K, then you will get a bit more back. With a PCP, it is fairly normal to be slightly in front but not usually by very much.
Hope that helps,
Thanks for that.
Now given the above, is there any advantage in putting in a big(ger) deposit or does that only reduce the monthly payments ie. over the piece you will pay more or less the same and you will not have a deposit for the next one? I have a block in my head of what happens to the £4000 deposit I put down on this car if I go for another one after this PCP runs it's 3 year duration. Will that still be residual in the car that is handed back or is it gone an I would have to find another £4k for the next one from elsewhere? If it is not residual, as I see it that would make it more difficult to replace like with like the next time?
The £4,000 you put down as deposit is gone. Wave goodbye.
A higher deposit means lower monthly payments. A lower deposit means higher monthly payments. You are starting at the same car price and ending up at the same final value. It's just a matter of how much you pay up front and how much you borrow.
Can anyone please explain termination rights on a PCP agreement? In the terms of my agreement it states that providing you have paid at least 50% of the purchase price, you can terminate the contract without penalty. I have been advised that this is the case but by taking this step, it can affect your credit rating for any future credit contracts, but I can not find any reference to this in the terms. Is this true?
Mrs P
I have just taken out a pcp deal with skoda solutions. I have been suckered into the smartguard and gap cover thing before I could recover my wits! I probably can't get out of the smart guard thing now, however I know I could get cheaper gap cover independently.
My question is,as I've only paid part of my deposit and have signed an agreement or purchase form , when I go in to sign more forms (? Finance and insurance,)could I cancel the gap cover as I haven't yet taken the car and also pay outright for the smartguard so as I don't pay interest on that? Do you think that they would recalculate the pcp?
Many thanks
Hi Mrs P,
With regards to the GAP insurance, you should have 14 days or 30 days to cancel it if you don't want to take it.
As for the paint & fabric protection (Smartguard), you may still be able to cancel that if they have not yet applied it to the vehicle.
If you have yet not signed the finance contract, then you still have the freedom to adjust your terms or even not take the Skoda finance offer if you don't want to. Based on your description above, it sounds like they have submitted a finance application but you have not yet actually signed the finance agreement. So really you still have absolute freedom as to how you pay for your new car.
Joyce Smith
If I took out a pcp and then say in 12months time I lost my job or became ill and could not make the payments, what would happen….would they re possess the car??
Hi Joyce. As with any similar type of finance, there are penalties for non-payment. This usually starts with late fees, and eventually progresses to the ultimate action of the finance company repossessing the car. However, this only happens in extreme situations.
If you happen to lose your job or become ill during the course of the agreement, your best bet is to contact the finance company straight away. There is usually a way to make your way through without them declaring you to have defaulted on your finance and marking down your credit rating. They don't want to have to go down the path of collections and repossessions any more than you do.
Alternatively, you can sell the car and use the money to help settle the outstanding finance. However, it may be that the price you sell it for doesn't cover the finance settlement, so you may still have a shortfall to pay off.
Finally, if you have paid off more than 50% of the total amount payable (which is not the same thing as the amount borrowed), then you can exercise your termination rights, where you can hand back the car and cancel the agreement. Once again, best bet is to call the finance company to discuss your options.
My husband and I have a weird situation, can you help. We ordered and took delivery of a new A3 last May (2013). When we collected from the dealership we were given one set of keys (with promise of second set in the post – never arrived), a brief overview of the car as usual and were allowed to just drive off. We weren't asked to sign anything, receipt of collection or PCP arrangement.
A few weeks later when the V5 didn't arrive I checked who the car was registered to with the DVLA and it was still registered to Audi (or rather unregistered as it was new). We have never received the V5 and cannot tax the car this May. We have contacted Audi HQ a number of times to resolve and finally sent a mail to ask how we return the car last Sep but have still had no reply. We have paid nothing other than the original order fee. Is the car ours? I know that after a certain period of time some goods then become yours, does this work for cars does anyone know? Can we just take it back to any dealership and wash our hands of it? We are extremely concerned what our insurance situation is and the car requires servicing shortly so would like to resolve asap.
Any help gratefully received! :)
That sounds truly bizarre. You have had the car for 8 or 9 months, yet have only paid the original deposit, don't have a V5 (although the car is taxed in Audi's name), and you don't have a spare key.
You are not the registered keeper of the car and you haven't paid for it. You have not signed a finance agreement. It sounds like they have simply loaned you a vehicle while yours was on its way – except that it is supposed to be yours. The dealership is the first point of contact, but I'm surprised that Audi UK have not responded to your letter.
Basically, it's not your car. You should be able to take it back to the dealership at any time and simply give the key back. I presume you have tried to make contact with the sales executive who sold you the car, the finance manager and/or the sales manager?
I have a 3 year pcp deal with Citroen, and I do not intend to keep the car at the end of this period.
The car recently went in for a service (at Citroen) and they advised me that the front two tyres need replacing and that it would cost £200+ per tyre…
I looked around and found the exact tyres needed for my car for half the price quoted, and that was for BOTH!! I was wondering if I HAD to buy the tyres with Citroen or if I could buy the ones I found and get my boyfriend (a mechanic) to fit them?
Hi Gill. You can certainly buy tyres wherever you like; you are not required to buy them from the Citröen dealership. As you have already found, you can shop around and usually find tyres much cheaper than various other sources.
In terms of whether your boyfriend can fit them, that would depend on him having the relevant training and equipment to fit tyres and balance wheels. Usually wheel balancing requires sophisticated specialist equipment to ensure that your wheel does not vibrate horribly (and dangerously) when fitted to your car.
Hi, I recently bought a new astra 63 plate from vauxhall through their 0% finance offer. I collected the car in January and have done approx 700 miles. Since then I have stared a new job and been offered a company car. What are my options in regards to giving back the Astra. Thanks in advance.
Your only option is to settle the finance agreement. You can sell your car and pay back the finance company, but it is likely that the settlement figure will be higher than the car's value. If this is the case, you would still have to pay back any shortfall. It is usually costly to settle any finance agreement very early, as the car depreciates much faster than the finance repayments in the early stages of the agreement. Call the finance company and discuss your situation with them.
I'm looking at getting an A3 on PCP and it looks comparable with doing on a bank loan (slightly worse interest rate) based on 7k deposit for a 25k car. Would I lose the value of my deposit if I were to need to terminate the PCP deal in the first few months?
The car costs £25K new. You are putting in £7K and therefore financing approximately £18K. Your total repayment on the finance will be, say, £21K. If you settle after 6 months, you will have only repaid a fairly small amount, so your settlement will be something like £20K.
If the car is worth £21K in 6 months time, you will have to pay £20K to settle your finance, and have £1K left over. So you will have lost £6K of your original £7K deposit.
The above numbers are all examples, but it illustrates that, yes, you will probably lose most of your deposit. Depending on what the car is worth and what the settlement figure is, you may even have to pay more money to settle the finance if there is any shortfall.
Any finance agreement is designed to run over its entire course. Settling early is certainly possible, but not usually optimal.
I will be paying the final payment of my 3-year SEAT PCP in 10 days time, and plan to hand it back, as I have arranged a lease on a new model via an online Lease company. SEAT have responded to the postcard I completed which indicated I was taking this option, telling me that they will also be deducting the £60 "option to purchase fee". This confuses me, because I am not purchasing the vehicle. They also state they may withdraw the offer to hand back the vehicle if they are not satisfied with the Independent inspection. What does all this mean?
Normally, you don't have to pay the final "option to purchase fee" if you are not buying the car at the end of the agreement. Check your contract T&Cs, and call the finance company to ask them about it.
Usually, your guaranteed minimum future value (GMFV) is based; on a) not exceeding your agreed mileage, b) full manufacturer service history, and c) no damage or repair costs. They will check these details before taking your car back, and if you have not complied then they reserve the right not to pay you the full GMFV for the vehicle.
I ordered a new Audi in February on PCP and managed to achieve a very favourable discount from the dealership. The car is not due for delivery until June.
In the last few days I've seen that the APR on offer has reduced from approx 6.5% to 4.8%, which makes a notable difference to the payments. Can I re-negotiate the terms to get the 4.8% APR or do you think I'm likely to lose my original discount (approx 16%).
Hi Mr.T,
Have you actually signed the finance contracts? I wouldn't have thought so, if the car is not due to arrive until June. If not, then you have simply been approved for finance and are not actually committed to taking their finance offer. Does your vehicle order stipulate that the level of discount is contingent on taking the original finance offer from Audi Finance? It normally won't.
You should be able to benefit from the lower APR, but the level of discount may be linked to the new offer. Each quarter, manufacturer finance companies will amend their offers in terms of APRs and deposit contributions. It may be that Audi Finance have reduced their interest rate, but also reduced the deposit contribution (aka discount) that goes with it. Also check in the fine print that the new offer applies to the type of vehicle you have ordered, and that it is able to be applied retrospectively. Sometimes there is a clause saying "only for vehicles order from date X to date Y", so earlier orders may not benefit.
If there are no problems in Audi Finance's fine print on the updated offer, then you should be able to get the lower interest rate and keep your discount. The dealer may initially resist, but they also probably won't want to lose an order if you decide to go to another Audi dealer who will happily offer you the lower rate.
Thanks Stuart.
I signed an order form and yes I was accepted for the finance based on a set of terms they/I laid out, but it was not the actual finance agreement.
I've managed to speak with the dealer today and they have honoured the new offer, which has involved an extra manufacturer deposit contribution and the reduced APR. It's resulted in a £3.5k reduction in the deposit required to achieve the same monthly payment. Not bad to say the least!
The original discount has remained as well as the 'dealer contribution'. So all in all a win, win.
Excellent – all contributions to The Car Expert Christmas party fund gratefully accepted ;)
Enjoy your new car!
I am 2 years into a 4 year PCP. I have obtained a settlement figure from the finance company of £6576. The dealership are offering £5576 part ex for the car. Obviously i dont want negative equity so I want to sell the car privately to finance the settlement payment. Am I allowed to do this?? I know Id get £6500-6700 for the car as Ive seen ads for the same car online for this amount and more. thanks in advance for your help!
Yes, you should be allowed to do this, but you will need to tell your finance company that you are planning to do so. They may have requirements for how they are paid when you sell the car privately. Give them a call.
Is it possible to secure PCP from a finance company to then go and purchase a car that is being privately sold?
Or does it have to be done through a dealer?
Hi Mark. Normally, independent finance companies don't offer PCPs – it's usually only manufacturers' finance arms. So it's highly unlikely you'll be able to find a finance company which will offer a PCP on a privately purchased vehicle.
PCP or HP
Hi Stuart,
Thanks for explaining thing so far. Our situation looks like this hence why we are considering a PCP: My wife is a f/t student and I am the only earner. We have to change our car and the HP monthly payments are not feasible for us and by the time the balloon payment comes my wife would have finished studies and started working for a while. We also intend on keeping the car once its settled. I take it like any depreciating purchase we would still have to take the depreciation hit whether we took a PCP or paid chase outright at the start?
Based on the above would you still say a PCP was suitable or is there another option? The lower the deposit AND monthly payments, the better.
Tim H
Hi Stuart,
Our situation is we want to buy a car to keep and I am the only person working as wifey is a student. At the end of the PCP my wife would have being working and so we are looking at the best option of a low deposit and low monthly payments and happy with a high balloon figure.
Is there any other option or not? I assume as we are keeping the car this seems best?
Hi Tim. A PCP is certainly a good option to help you have a more expensive car with less up-front deposit and lower monthly payments.
Relatively few people end up buying the car out at the end of the agreement. You may well find that, assuming all has gone well and your wife is earning a full-time wage as well as you, you decide to part-exchange the car on something else instead. If you do intend to pay out the balloon and keep the car, consider the financial implications. If you are re-financing the balloon, you are paying interest on top of interest already paid (your original PCP agreement contains interest for the full value of the finance amount, not just interest on the amount you pay back).
Cathleen Aherne
Hi. I have a Citroen C1 on a PCP deal & at the end I plan on giving them the car back & walking away. Hypothetically, what would happen if I gave them the car back & it isn't in the condition they expect it to be? It is my only worry with the end of the deal. Thank you.
Hi Cathleen. Your guaranteed value at the end of the agreement is based on three things: 1) mileage (with specified penalty for every mile over the agreed number); 2) service history – most PCP agreement stipulate that you have to have the car service on time, every time, and by the manufacturer's official dealerships; and 3) condition – they will charge you for kerbed wheels, scratches, dents, scuffs, etc. You can avert some or all of these charges by having any repairs done before you give the car back, as long as they are done to a high standard so that the damage is no longer noticeable.
Hope this helps, stuart.
Any information or advice on the following would be greatly appreciated.
I purchased a new Kia Rio in May 2012 using PCP over 36 months. So I am currently two years into my three years term.
I had a message left on my answerphone from the kia dealer today saying that their finance company flagged up that I have a good bit of equity in the car which could be used towards getting a new car for the roughly the same monthly repayments that I'm currently paying.
Although I am yet to call them back, I am just wondering why they are ringing me at this stage to discuss new cars when I still have a year left in my contract? Is it simply because they would be able to sell my current car on at a higher price now? Also, I'm aware that at the end of my 3 year term my car will be valued and whatever the valuation exceeds the gfmv by can be used towards a deposit for my next car…..however, if they're telling me that there is enough equity in my current car to consider getting a new one now with similar monthly repayments, what are they basing this on? Two years into a 3 year contract, how do you think they are likely to have valued the car and calculated what they are willing to offer as a deposit towards a new car? Just want to be sure that I'm not overlooking anything before I call them back. Although I do intend to get a new car when my 3 years are up,do you think it would be beneficial for me to upgrade my car now after just two years if they are offering to do so? Or at least what should I be looking out for in this situation? Any advice or info would be greatly appreciated. Don't want to overlook anything before I commit to something like this.
Thanks in advance
Hi Andrew,
This is a common tactic by dealers and manufacturers (as well as mobile phone carriers and anyone else who deals with contracts in an open market), to encourage you to renew early rather than wait until the end of your agreement and look around to see what better deals may be available elsewhere.
The chances of you really having significant equity in your Kia with a year still to run are probably very slim, so what they are probably doing is offering additional money somewhere behind the scenes to tempt you into another new Kia.
Also beware the old line of "similar monthly payments", as that doesn't necessarily mean what you think it means. It may mean that with a bigger deposit this time, and over a longer term, and with a lower mileage, and on a lower-spec or much cheaper car, you can keep your monthly payments the same if you upgrade to a new car now…
Alternatively, it could be entirely genuine and you could be offered a genuinely good deal with no strings attached. But if it sounds too good to be true, it usually is.
Cheers for the quick and informative response Stuart. I assumed that this was probably the case. I av no intention of coughing up a large deposit tbh. Perhaps I'll just call them back & see what they have to offer but certainly won't be rushing into anything. No harm in listening to what they av to say.
I'm 1 year into a 3 year PCP on a VW Up! I now would like to upgrade to a Polo or Golf. Is this possible? Thank you.
Howdy. Yes, you can settle your finance agreement now, but be aware that your settlement amount may be higher than the value of your up!, which means you may have to pay the finance company to clear the finance amount before you can worry about replacing the car.
hi Stuart
can you help me I used to be a director in a ltd company along with 3 others we had 2 vans on a bank loan. I left in 08, and left total control to the others. I have been contacted by a debt collector chasing outstanding money for the vans. I did sign all paper work etc as guarantor. the company ceased trading in 2009/2010. only one of the vans got reposed and sold at auction. also on the credit agreement the registrations are different to the ones on the vans. am I liable for this dept.
Hi Garry. You will need to get specific legal advice on this one, as it's not an area I can advise on. Best of luck.
Hi, I've been considering a new car for my wife and I to drive but not decided on make & model yet, and pcp might look like the route I want to go, our annual mileage has always been very low, current car 52 plate focus 1.8 deisel is 40.000 miles over 8 years. All other cars I have ever owned were bought cash so pcp is a new method for me.
If I sign all the usual documentation finance agreements and part way through the repayments something should happen to me that I could no longer or no longer wish to drive would it be easy enough to transfer the car, registration and payments into my wife's name (with her agreement of course).
You can't transfer the deal into another person's name, but you can always change the account that the direct debit is taken from.
Most finance agreements will require the car's registration and insurance to be in the same name and address as the finance agreement (which is that of the purchaser and main driver of the vehicle), and to stay that way for the life of the agreement. Otherwise, this is known as an Accommodation Deal, and it breaches their Terms & Conditions.
If you no longer want the car, you can settle a PCP early and wind up the agreement, but you can't pass on the deal to anyone else.
Jo B
Hi, I ordered a car on the 29 June to get a 0% finance deal. however their order system was down so I signed a form to allow them to apply for the finance and left with no paperwork. The next day I rang them to ask them to add the additional 2 year warranty so they said they'd add it and ring back once processed. They rang the same day, in time for the 0% deal but said the total order was an extra £895. I said that I wanted Seat's £269 offer of 2 years extra warranty not their own over priced warranty. Anyway, they said they'd get back to me to see if I could have this. I must point out that I wasn't offered any info. On the 29th about options. Come the next day, the 1st July and Seat are continuing with 0% finance but now with 3 years free servicing. I contacted them and they said they'd ask Seat about that. I haven't paid a deposit, can I cancel if they won't honour the new offer and simply re-order with another dealer?
Hi Jo. If you haven't paid a deposit or signed a finance agreement, they can't hold you to anything. Ask them to honour the new SEAT offer, and if they won't then simply walk away and go to another SEAT dealership.
Jo B
Hi Stuart
An update. My new dealer who I ordered the car with have told me that Seat informed them that the first dealer has put the order through. I have resent the cancellation email to them with no acknowledgement from them. It was the same email address that I was communicating with them. I feel Stoneacre are being very sneaky. Any advice?
Meant thanks, Jo
Hi Jo. What docs have you signed and what money have you paid to whom?
Jo B
Hi Stuart, I signed a consent form giving permission to do a credit check for the finance. I didn't give them a deposit. In my opinion I've made no firm agreement to purchase. I have paid a deposit with the second dealer.
Thanks, Jo
Jo B
Hi Stuart,
Thanks very much for you reply, very helpful and you have put my mind at rest. They're getting back to me on Tuesday but if I see another dealer while I'm in Surrey this weekend, I know now I could make a deal. Thanks again.
I bought a Fiat 500l pre reg in Feb this year on PCP and due to various changes in my circumstances I can no longer afford the repayments. Can I hand the car back? Or could you advise me what might be my best option?
Hi Nicky. No, you won't be able be simply give the car back, but you can settle your PCP early. Unfortunately it will probably cost you some money to do so, but it may well be better than trying to continue making payments on a car you can't afford. Get in touch with the finance company and they will be able to run through the process for you.
Thank you!
Traditionally when buying a car from a dealer (or any seller) I'd haggle over the price of the car or the Part Exchange valuation. Is my bargaining position worse if iIhead down the PCP route?
Is my bargaining position worse if iIhead down the PCP route?
Not necessarily. If you are buying a new car, there is often a 'deposit contribution', which is manufacturer jargon for 'discount', which you are entitled to. However, there is usually more money available to be had if the circumstances are right. The dealer is getting paid for the car, regardless of whether it's you or the finance company putting the pounds into their account. Plus, the finance company pays the dealer a commission on all finance sold, so they'll be making money from you there too. So yes, haggle away.
I accepted a PCP deal on saturday and signed the finance contract with a deposit of £1000. The dealer mentioned that they will deliver the car later this week. However having a second thought for the past 48 hrs, it looks like an expensive option and i would rather cah purchase the vehicle. Is this possible? Can i ask the dealer to consider this option? is it possible for me to renegotiate the total price of the car given the fact that i am cash purchasing from them? Please advise as soon as possible. Your help is much appreciated. Thanks.
Hi Anand. You can certainly cancel your finance contract and pay cash for the vehicle, and this can be done for up to 14 days after taking delivery. However, you are better off doing this immediately and ave both yourself and the dealer a bit of hassle.
You have signed two separate agreements – a contract for the vehicle and a contract for the finance agreement. You are legally allowed to cancel the finance agreement, but that doesn't change your contract for the car. There is virtually no chance that the dealership will be inclined to renegotiate the price of the vehicle.
Thanks Stuart. So, i won't be able to negotiate the car price any further down.
What if i want to walk away from the deal? what are my legal obligations and any penalties that i may have to pay? Please advise.
Unlike the finance agreement, there is no cooling-off period for buying a car. If you cancel, the dealership will almost certainly want to retain the deposit you have put down unless you can show circumstances which mean you are unable to complete the purchase.
Hi, I have found that to buy I new ford I can get a much better deal with PCP than buying outright. I was told that i could put down a third as deposit, agree to pcp for the rest . Then when the car is delivered I can pay off the outstanding balance to end PCP and would only get penalty charge plus admin cost of total £40.
I have the money to payfor car but my credit rating is probably not good enough to get the PCP my parents are willing to do it for me. Would my dad be able to say he was buying the car for me so he signs PCP for car in my name?
Thanks in advance for any help x
Hi Marie.
1) You should be able to cancel your PCP within 14 days at no cost to you whatsoever. This is your legal right. There should be no admin fees or penalty charges. After 14 days, you may be subject to these costs.
2) No-one else can take out car finance for you. This is called an Accommodation Deal and the finance company won't allow it. You can read about it here:
Hi, I am unemployed but have some savings and was wondering what the options for purchase would be (I don't really want to use savings)? Would it be impossible to get finance without a job? Thanks.
Thanks Stuart. I suppose i just assumed that with the car as collateral they wouldn't be too fussy about employment status as they could always get the car back if it came to it. Looks like i'll have to go for a cheaper used car and hope those premium bonds come up!
I part exchanged a car to take out a new car on finance. I have paid a deposit and signed an order form. After some thought I now feel they have undervalued my part exchange. Is it possible to cancel my order and renegotiate. Or is it too late?
Hi Olivia. It's a bit late now. You have signed a contract to buy a car and for the dealer to buy your car. The dealer is under no obligation to renegotiate the price for either their car or yours.
You have the legal right to cancel your finance agreement up to 14 days from it being activated, but there is no cooling off period for a vehicle contract. You can certainly ask, or even threaten to cancel your order altogether, but you don't have any legal right to walk away so they can retain your deposit or try and enforce the contract if they want to.
Hi, i went to test drive a used mercedes a class yesterday and was basically pressured by 2 sales people into signing the forms to order a new unregistered one after being promised free servicing benefits etc, despite me saying its over 8k more than i wanted to spend. I didnt worry too much as i was told there would be a 7 day cooling off period.
Today i have been told by a colleague that i was right to go for a nearly new as opposed to unresigered car due to the discounts etc and called another merc dealership to enquire (the first one refused to discuss used and pushed me into new). They immediately phoned the first sales guy and told him i was enquiring about a used car, and he rang and told me id got him in trouble with his manager and i cant mess him about as hes sent the car for preparation (which i doubt as it is sat in their compound unregistered still)
I have also been told that he lied to me about a 7day cooling off period. Now i am panicking that i cant back out of it!!
In addition to this, the figure they gave me as part ex on my old car i am worried about. I told them that the stratches on the car would be repaired first as i have cover on it, but have now been told im not covered for this type. Does this mean that not only am i compelled to buy this new car, but they can reduce my part ex price knowing i have no choice?!? :-(
I also have not paid any deposit to them as yet..
Hi Louise. Are you financing your new car or paying cash? If you are financing, you have a 14-day period to cancel the finance once it has been activated, but that won't have happened yet so there is nothing to cancel.
There is no legal cooling-off period for a vehicle contract. However, if you have not paid any deposit and you have not handed over your part-exchange, then there is nothing they can really do to force you to take the vehicle and nothing they can hold in terms of refusing to refund your deposit. Therefore, you can be confident in cancelling your order.
Do so in writing (e-mail is fine), and I would contact the dealership and ask for the sales manager's name/e-mail so you can address your e-mail to him/her.
Hi, I am wondering if you can give me some advice please? I purchased a second hand car on pcp with a dealership. The salesman did not explain to me that the first payment would be double the amount of the monthly payments so obviously I got a shock when the paperwork came through! I accept that it was my responsibility to check the paperwork before I signed but he did not verbally tell me and I was on my lunch break from work when I returned to the garage to sign the documents… He had 2 opportunities to tell me. Long story short, after some battle and the manager telling me that he thinks I was "too excited about buying the car that I mustn't have heard him tell me the cost of the first payment" baring in mind I had family with me and they confirmed that he didn't tell me. So they gave me 50 pounds in petrol as a good will gesture.
After having the car for a couple of weeks I noticed a fault on the battery and th air conditioning smelt horrendous (they clearly hadn't checked these before selling the car) so I took it back, they charged the battery and cleaned out the air con. The next month the fault on the battery appeared again I took it to the garage they had it half a day and called me to say they couldn't fix it again and that it needed to go to the manufacturer as it is under warranty. This wasted my time and wasted my mileage as it is capped!! So, I took it to the Honda garage and they had it most of the day and charged the battery and said that there is a fault that they do not have a solution for and that it will happen again!! Therefor this means I will have to take the car back to the garage every month (as this is the frequency this has been happening) lose half a day of work and use mileage to get this fault fixed! Can I get out of this agreement? Or at least part exchange for a different car?
Hi, i purchased a car worth 29k by paying cash outright. The dealer has sold me the Smart, Key, tyre and Gap Insurance all packaged to GBP 1600. I did challenge him that if i am not purchasing by finance, why would i need the return to invoice GAP insurance. But he repatedly mentioned that that it will be helpful in the event of claim to claim the value of the car. Is that correct? I do have some time to cancel the agreement with the insurance company and demand a refund. Please advise. Thanks.
Can I get out of this agreement? Or at least part exchange for a different car?
Hi Sarahp. If you want to get out of the agreement, you best bet would be the Sale of Goods Act if Honda will agree that the car is not fit for purpose and unfit for sale. This gets complex, especially if you have had the car for a few months now, and it's not an area we really cover as there's only very general advice that we could give without seeing the car and understanding the full scenario. It's certainly not very easy, especially if you are dealing with an independent garage rather than a franchised Honda dealer. Had you bought the car from a Honda dealer, you could at least try and complain to Honda HQ, however they are not going to be interested if you bought a car from another dealer.
Try going to a specialist auto electrician, as they might be able to find a solution that solves your problem. The Honda techs will tend to follow the Honda manual to the letter, and if it's not in the manual then they can't fix it. An auto electrician might be better (and probably cheaper).
…if i am not purchasing by finance, why would i need the return to invoice GAP insurance. But he repatedly mentioned that that it will be helpful in the event of claim to claim the value of the car. Is that correct?
Hi Anand. Yes, he is correct. You paid £29K for this car, but (for example) if you have it stolen or written off in 2 years' time, your insurance company may well only give you £18K or so for the car. GAP insurance should pay you an additional £11K on top of that to bring you back to £29K, the invoice price of the car.
My wife and I have just purchased a Citroen DS3 last month and arranged for the car to be delivered on 30 July 2014. We requested the car to be held at the dealership until 31 August 2014 for pick up (they also held the signed documents and agreements) The purchase was done on PCP with deposit partially paid and we were supposed to give the remainder of the deposit on pick up. We have received the tax disc, V5C, and finance agreement terms in the post.
Now I have a problem that I have recently gotten a new job during this time which will start in September. My current company wants to claw back fuel allowance, and some benefits from my final pay out which will put me in a tight financial situation for the month of September This means I would not be able to afford even the first payment which is due 8 days from now.
I want to cancel the sale and opt out of the agreement as I don't see this situation getting any better over time as I may have to pay my current company back in installments. I bought this car with confidence in the fact that I would be having this new job.
As the car hasn't been technically delivered to me (hasn't left the dealership), would I be naive in thinking the most cost that I could incur is losing my deposit? Or am I in an even more serious problem where I would have to fork out over £17K for this car as a result?
It's a very technical situation. Also The car spec was already on order from Citroen when we purchased it.
Hi Izzy. If you have received the registration documents then the car is already yours. If you now cancel the finance agreement, which would probably have been activated on the day that the car was registered, you will owe the full balance for the cost of the vehicle.
Hi, we are looking at a PCP but currently have outstanding finance on our car. Any advice on how we navigate through paying off the finance? Would this be something we would have to handle privately? Many thanks
Hi, we are looking at a PCP but currently have outstanding finance on our car. Any advice on how we navigate through paying off the finance? Would this be something we would have to handle privately? Many thanks
If you are part-exchanging your car, the dealer you are selling the car to will settle the outstanding finance and take that amount off your car's value. So if you have a car that's worth £10K but you owe £8K in finance, the dealer will pay off the £8K to the finance company and give you £2K for yours towards your next car. You can settle it directly yourself if you prefer, but it makes little difference in the end.
Hi Stuart
I recently went to purchase a new vehicle & paid £250 deposit to "hold" the vehicle. I did not sign any finance agreement but just an order form. I was informed the following morning that finance had been approved but I no longer wished to purchase the vehicle as I had found a much better offer. I called them up & explained the situation & asked for my deposit back but they refused saying they had already registered & taxed the vehicle in my name even tho I hadn't signed any other paperwork. Am I entitled to getting my deposit back & also any further implications for me as I have now sorted out a new car elsewhere?
Kind regards
Hi Chris. If you wanted to "hold" the vehicle, why did you sign an order form? An order form is a contract to say that you are buying the car, unless there is a caveat written onto it to say that the order is subject to anything (viewing in person, test drive, independent inspection, etc.).
And how did the dealership get finance approved if you didn't give them your residential, employment, marital status, salary and bank details?
It would be unlikely that the dealer would register/tax the vehicle until it had been paid for by the finance company, which wouldn't happen if you hadn't signed a finance agreement, so they are either stupid or lying.
Bottom line is that you are not entitled to your £250 back unless they have breached the terms of the vehicle order form, but you haven't signed a finance agreement so there's nothing else they can do.
Hi Stuart
Thanks for your response. I did give details to the dealership to do a finance check but this had not gone through until the following morning when I decided I did not want the car.
I was wondering as they are claiming they have taxed & registered the vehicle as mine, technically have I entered the cooling off period where I have the right to cancel the offer and thus receive my money back?
Kind regards
technically have I entered the cooling off period where I have the right to cancel the offer and thus receive my money back?
There's no such thing as a cooling-off period for a vehicle contract, unlike a finance contract. I'm currently writing a blog on this very topic; stay tuned. Should be up live later tonight.
Here we have a detailed explanation of what your rights are when you cancel a vehicle order.
Thanks again Stuart a very good and interesting article which does clear a lot if things up.
The only thing I can think of tho that was different on the order form to the car was the mileage which on the order form was over 1000 miles less that what the car had actually done. Can anything be done about this due to it technically not being correct on the order form?
Normally it wouldn't be cause to cancel the order. It would potentially be cause for renegotiating the price with the dealer, but it would depend on whether we are arguing 1,000 miles vs. 2,000 miles (significant), or 95,000 miles vs. 96,000 miles (insignificant).
It's 9271 on form but in car it's 10436
Hi I am 3 months into a 48 month pcp with close motor finance. I have been given a company car following a promotion. How do I negotiate handing the car back to the dealer and offsetting the balance?
Hi Jim. We have an article all about settling your PCP early. It won't be as simple as handing it back; it will probably cost you quite a lot of money.
Greg P
Hi Stuart,
I have received a PCP quote from Mercedes and I can't understand why the interest repayments are so high.
I would be financing £19500 over 4 years at 6.1% APR. Payments are £188.85 per month. The interest over this period is £3989.80. Leaving a balloon of £14,150.
Having put these figures into several loan interest calculators, I can not see how they are charging nearly £4k interest, which is actually 44% of each monthly payment. I would have thought that it should be less than £2k. Can you explain what I am missing please?
Rob Jackson
I'm just about to sign up to a 3 year PCP with Toyota Finance on a Rav 4 based on 14,000 miles per year. If I find I do 17,000 in the first year could I re-negotiate with them to increase the total mileage to 51,000 over the 3 year duration, or suffer the penalty of 9,000 excess miles at the end of the lease?
Rob Jackson
I'm just about to sign up to a 3 year PCP with Toyota Finance on a Rav 4 based on 14,000 miles per year. If I find I do 17,000 in the first year could I re-negotiate with them to increase the total mileage to 51,000 over the 3 year duration, or suffer the penalty of 9,000 excess miles at the end of the lease?
Rob JacksonQuote
Hi Rob. Yes, usually you can call the finance company and ask them to increase your annual mileage. Your monthly payment goes up, because your GMFV is going down and you have to cover that difference. This is usually a better option than paying the penalty charge at the end of the agreement because you are well over your agreed mileage.
I have received a PCP quote from Mercedes and I can't understand why the interest repayments are so high.
I would be financing £19500 over 4 years at 6.1% APR. Payments are £188.85 per month. The interest over this period is £3989.80. Leaving a balloon of £14,150.
Greg PQuote
Hi Greg. What is the actual price of the vehicle and what is your deposit? You say that you are financing £19,500 – does this include the balloon/GMFV amount? Because you are paying interest on that.
The main reason it seems so high is because you are borrowing over 4 years. Like a credit card, the longer you take to pay off your borrowing, the more interest you pay. Compound interest means that the repayment gets exponentially larger the longer the term of the agreement – if you borrowed the sae amount over 2 years, your monthly payment would be much higher but the total interest payable would be much less.
Greg P
The price of the vehicle is £30500, the deposit is £11k.
Yes the £19500 includes the GMFV. I understand that I am financing the full £19500. But £3989 interest seems very high on this amount, certainly more than 6.1%.
Hi Stuart,
My query is not so dissimilar to Greg P's. I'm about to go into a PCP contract with VW for a car whose initial cost is £25K, deposit of £7K and the GMFV of £10k, for 4 years. On the order form I've noticed the amount due from the finance company is 18K (to the dealer), i.e. 25K – 7K, which also seems to be the amount of credit on which I will be paying an interest. Should the amount to be financed not be (25k-7k-10k) i.e. 8K?
I hope I've understood this wrong but the dealer may be getting more than one bite of the cherry here as he is receiving the full amount of the vehicle i.e. deposit from me + amount from finance company, plus the interest on 18k over 4 years, plus either car or gmfv at the end!!
Your take on this would be much appreciated.
I'm about to go into a PCP contract with VW for a car whose initial cost is £25K, deposit of £7K and the GMFV of £10k, for 4 years. On the order form I've noticed the amount due from the finance company is 18K (to the dealer), i.e. 25K – 7K, which also seems to be the amount of credit on which I will be paying an interest. Should the amount to be financed not be (25k-7k-10k) i.e. 8K?
Hi Nav. You are financing £18K (price of car less initial deposit). Instead of getting £25K from you, the dealer is getting £7K from you and £18K from the finance company.
The finance company is getting the interest, and you are repaying £18K plus interest & fees. This is your monthly payments + either the balloon payment or the car. If you part-exchange the vehicle later on, the dealer taking the car has to pay off the GMFV or settlement figure.
Hi Stuart,
Looking at purchasing a new car. OTR price is 28.3k however they are offering a discount of 2150 GBP from dealer and an additional 2150 GBP if you take the finance (Total discount of 4300 GBP).
I was looking at putting down 8k deposit which would leave a balance of 14k for financing.
The interest rate is 7.2% which is quite high considering you can get a personal loan for around 4%.
To take advantage of the addition 2150 GBP contribution in the offer, can I take the finance and then cancel within 14 days & pay it off using a personal loan!? Would there likely be any penalty charges or marks on my credit rating should I do this!? Perhaps even have to return the 2150 GBP contribution for cancelling.
Many thanks
Hi there,
Quick question – I ordered a new car through Alphabet lease 6 months ago via my work. I am now leaving my company on the 12th, and have transferred the agreement to a private one (passed all checks etc. and Alphabet have confirmed this).
However, I am now being told the delivery may be delayed even further.
As I have yet to take delivery, my understanding is that the contract is not finalised – if this is the case, can I cancel it? Seriously fed up of waiting and being messed about by Alphabet!
Thanks :)
Hi FarleyUK. As far as I can guess based on your description, the contract would not have been finalised so you should be able to cancel and walk away with no loss. Not a lot they can do about it if/when the car ever arrives.
Hi Stuart,
We've been offered two PCP deals for a LR Evoque. Both require a deposit of £7K, mileage 8K PA.
The first is making a contribution of £1K towards the cost and the total to finance is £35,756, 47 monthly repayments of £449.23 with gfv (ballon) on LR freedom deal 6.9% of £20,943 V's deal 2, 48 mints £461.99 with gfv of £18,780.25 – so what's the best deal?
Our plan is to get a new car after the 48 months are up as we want to change the car every 4 years. We are being informed there "should be equity in the car for reasonable deposit on a new car".
Hi Jane. You say that Deal 1 is for 47 months with a GMFV of £20,943, and Deal 2 is for 48 months with a GMFV of £18,780.25. That makes no sense if it is for the same car with the same mileage – the extra month in Deal 2 shouldn't affect the GMFV by over £2,000 (it should make hardly any difference at all). The GMFV is determined by the specification, age and mileage of the car and it is not something that can be altered – it is fixed by the finance company.
My guess is that one of them is not actually a PCP in that the balloon payment is not guaranteed. Either that or the calculations are based on two different cars (or different mileages). Deal 1 shows you paying less money each month with a higher balloon, whereas Deal 2 shows you paying more money per month with a lower balloon. A PCP shouldn't work this way.
And always assume that you won't actually get any equity at the end. If you do, it's a bonus. Having dealt with hundreds of part-exchanges from different manufacturers over the years, it is relatively rare to have a "reasonable" equity. Usually you break even or have a very small equity, assuming that your car meets the GMFV criteria. Do not bank on having equity, regardless of what the smooth-talking Land Rover salesman tells you.
Hi Stuart,
Thank you so very much for your advice and so late at night.
Your advice has been truly helpful, I think that leasing may be a preferable option for us as deposit will be lower, will inc maintenance pack and we will still leave about 4K in the bank. Just need to try and obtain a good minty deal now ☺
You're very welcome, but feel free to tell all of your friends and family to visit the site, click on the ads, etc. :)
Leasing vs PCP is a bit like choosing plane tickets, and the super cheap fare deals vs. the more flexible deals. One (the lease) is potentially a bit cheaper but not very flexible, so if your plans change then you're stuck. The other (the PCP) might be more expensive but gives extra security. It all depends on what the price difference is and whether you feel it's worth it.
Every brand and finance company is different, so what works best for Land Rover might be different for another brand. Best of luck.
David Grant
My girfriend went through PCP and just acquired a lease through ford and a dealer in England(she lives in Scotland) would provide the vehice. She has had several delays however finally got the contract signed and posted it to the dealer and it arrived today. She has now been told that before a delivery date can be agreed they must wait for the 14 day cooling off period to pass. She was told originaly by Tyson Cooper that the car would be delivered between 7-11 days after the order was put through but now after getting ALL the paperwork complete, must wait an extra 14 days before she has even been given a delivery date, a date which could be a further week or 2 later on. Not to mention she wont even have had sight of the car she is entering in to an agreement for before the cooling off period is finished. Surely this can't be right?
Hi David. This sounds very wrong – the cooling off period can only commence once the customer has taken delivery of the vehicle. Have a read here on why dealers don't like distance selling (because of the cooling off period), but you have to actually have the vehicle for the cooling off period to have any meaning.
David Grant
Hi Stuart, thanks for the reply. This is what I thought, I was quite alarmed that they insisted the cooling off peiod must take place before the vehicle had been delivered. In my eyes it would appear that the dealer has 2 options. Either deliver the car just now and the 14 day cooling off period will apply from the date of delivery, or deliver the car after their "14 day cooling off period" with a further 14 days being allowed as a cooling off period after delivery. Would this be right?
There is only one legal cooling off period for distance selling, and it doesn't start until the buyer takes delivery of the goods. What you have now is a supplier refusing to deliver the goods which have (presumably) been paid for. You should be able to tell the dealer to deliver the car immediately if they have it in their possession. You then have 14 days to cancel the order.
The only problem there is that the finance agreement will have started from the date that the finance company paid for the car, which means the 14-day cooling off period for the finance agreement may expire before you get the car. I would suggest contacting the finance company (Ford Credit, probably, unless the dealer used another provider) and explaining the situation to them.
Hi Stuart
I'm about to take up a PCP plan with VW for a polo sel.
I'm looking to put £3K down along with the offer of £1K finance contribution to bring down the monthly payments.
My question is can the APR of 7.1% be negotiated down? Was also looking at a yaris as offering 0% but prefer the polo.
Also I'm looking at numerous extras and was curious if I could haggle on these also?
Hi Chris. There is usually a margin in the interest rate that can be negotiated, but it depends on the overall offer. Sometimes manufacturers/dealers will cut their vehicle margins to get lower payments, sometimes they will cut their finance margins, sometimes a bit of both. In your examples, it is entirely possible that VW are giving you a bigger discount on the car but not reducing the interest rate, but Toyota are forgoing finance profit but not discounting the car by as much. You can't really compare apples with oranges, so just because Toyota are offering 0% doesn't mean VW should be able to do the same.
I'd concentrate on what you are spending (deposit/monthly and term), and let the dealer work out the best way to get it for you. It doesn't really matter to you whether they cut their profit on the car or the finance. You can negotiate on any extras – everything they are selling has a profit margin. Work out exactly what you want and what you are prepared to pay per month on the whole package, and stick to your guns. If you try and negotiate on 3 different things, you are more likely to get yourself tangled up in confusion and probably end up worse off.
Thanks Stuart
Been doing some online research and found orange wheels.com are offering a great deal for the car and options I'm looking for just under 3k saving so I will go into my local dealer and see if they can match it with a set of mats :)
Rather give my local garage the chance but if not I will get from orange wheels nominated vw garage
Spend as much time as you can shopping around and going through the respective offers line by line. Dealers and broker are both very good at trying to slip you an older model, or slightly lower spec vehicle, and hoping you won't notice (or won't find out until it's too late). If an online broker is advertising a deal that's £3000 better than a dealer, that's a big difference and there may well be a reason why.
Spend as much time as you can shopping around and going through the respective offers line by line. Dealers and broker are both very good at trying to slip you an older model, or slightly lower spec vehicle, and hoping you won't notice (or won't find out until it's too late). If an online broker is advertising a deal that's £3000 better than a dealer, that's a big difference and there may well be a reason why.
Will check it out.
Orangewheels.co.uk should be fine as they arrange the car direct through the vw dealership that you will collect the car from and vw do all the finance etc.
A friend got his fiesta through them and was very pleased with the service.
Anyone else used them?.
Hi Stuart
Regarding an earlier post by me on 31st August, today I received a V5 for the car although I said I didn't want the car. Is it a case of just sending the v5 back to DVLA saying I am not the keeper or should I expect anything else from the dealership? I don't want to be held responsible for this car when I told them I didn't want it but they went ahead & registered it in my name anyway
Kind regards
Hi Stuart,
Just a post in regards to an earlier post of mine on 31st August. I have just received the v5 through for the vehicle I said I didn't want and had cancelled the order. Technically the car is mine & registered to me but before that they said I wouldn't get my £250 back. As its now registered to me can I demand the £250 back in exchange for sending back the v5? Technically, am I right they can't sell the car until they have the v5 back & thus this pits me in a good position?
Kind regards
I'd say your best bet is to contact the DVLA and explain that you haven't purchased the car. The car is registered to you (the Keeper) but you are not the Owner as you haven't paid for it. UK law is a bit rubbish in this regard. You also need to sort your issues out with the dealer. You signed a contract for a car and then chose not to honour it, which legally you don't have the right to do.
What it also means is that anyone could be driving the car around right now and racking up speeding fines, parking fines, congestion charge fines, etc. which will all come directly to you. If the car was involved in some kind of hit-and-run scenario, you are the registered keeper. You will then have to go through the hassle of explaining your situation to the police or courts to avoid prosecution.
You're probably not going to get your £250 back, but you need to resolve your issue with the dealership, because you're somewhat exposed at the moment.
Emma Godfrey
I'm looking to change my car as my current car is due its first year MOT. I have received my settlement for the third year into my fourth year plan.
The settlement is more than what my car is worth. By about £300/£400. I'm looking to get another car on PCP. (Audi A1) So am I right in thinking, Audi would pay the settlement fee, then any additional monies overdue will go onto my monthly repayments to Audi? Also, will I still have to pay a deposit on the new car as I haven't got any deposit to give from my previous?
I'm going in to see Audi today, but was hoping to get some advice before I go.
Thank you
Hi Emma. Your current position is called "negative equity", which means that your car's value is less than what you owe the finance company. So to get out of your current car, you would have to give it back plus the extra £300/400 to settle your outstanding finance amount. That concludes your current finance agreement and you are free to do whatever you want next time. You can't add this on to your next finance agreement, as the finance company will not allow you to finance the negative equity.
If you want to start another agreement, you will need to come up with another deposit. Given that you will already have to pay up to £400 to get out of your current car, it will limit your options somewhat. If your car is running well, it is probably cheaper for you to get the MOT test done, keep the car for another year and change it then. You won't have to worry about any negative equity, and it is possible that your car will be worth more than the settlement by then (positive equity), meaning you may have some money left over after you settle the finance to help with the deposit on your next car.
Audi will obviously want you to change your car now, but that's because it suits them rather than you.
Emma Godfrey
Thank you,
Looks like I will keeping my car for another year then!
Appreciate your help.
I applied for PCP and was refused due to not being on the ellectrol and was told I cannot have it in my wife's names as this would be an accommodation deal and was not allowed.
Since then u have revived a company car now am I right in thinking that if and when my wife will upgrade her car the finance companies will refuse her purely because they may think the car is for me or a accommodation or will they see it is for her
Please help as I don't want my wife to be embarrassing
Hi Mohammed. You are correct that your wife cannot take out finance for your car – we have an article all about accommodation deals here.
However, if you now have a company car and your wife decides to buy a different car on finance for herself in the future, that shouldn't be a problem. If she tried to finance the same make and model, at the same price and for a similar finance setup (deposit, term, agreement) with the same finance company, it could well be flagged as a possible accommodation deal, but it would be unlikely to be rejected if you can show that it is not for you but is genuinely for her.
Hi There, I wonder if you can help.
In March 2011 I took delivery of a brand new car that I bought on PCP through an online car finance company, where the finance was ultimately held by Network. Along with the car came the V5 in my name. A couple of months later I had a letter from the DVLA fining me for not telling them I'd sold the car, which I hadn't (and still haven't). Having called the DVLA, they advised that Network had claimed they owned the vehicle, and that "thats a new thing that finance companies hold the V5". Since then, Network arrange the car tax, send me the disc and charge me extra once a year for the tax.
I didn't think any more of it until I've started looking for a new car and looking to use the current one as a trade in knowing I have equity in it. Dealers have run HPI checks, agree that the finance is showing as PCP, but that the car has had 2 previous owners, so three in total. I have owned the car since new, but it seems to be impacting the value the dealers can offer me, and seems to relate back to the V5 issue.
Can you tell me:
1) Is it right that the finance company hold the V5 on PCP?
2) is there anything I can do to correct the ownership records?
Thanks in advance
Hi Vicky. It is certainly not normal for a finance company to hold the V5 in a PCP agreement, and I've not heard of one doing that before. Certainly with contract hire (leasing), the finance company holds the V5 because you are simply renting the car, but a PCP is an ownership (mortgage) agreement, so you should be holding the V5. You can run your own HPI check, which costs about £20 but will show you exactly when a change of ownership has taken place and exactly what type of finance agreement is in place.
I also don't know how the car could have 3 owners (you and the finance company makes two, so who is the third?).
I would ask the DVLA how they could have approved the change in keeper without you signing the V5 over to the finance company. Unfortunately the DVLA is about the most useless organisation in the world, so if they have made a mistake they will never own up to it.
It all sounds quite strange, but unfortunately you are a bit stuck between a rock and a hard place, with what sounds like a dodgy finance company on one side and the general incompetence of the DVLA on the other.
Hi there,
I've got my head around most of the details around PCP!
Just a a bit of advice to help settle my mind.
I have a bank loan amount that needs paying off before I can consider the PCP. I could sell the car privately, pay the outstanding loan off and use the rest against a PCP. I did wonder if car dealerships would actually give me cash in hand to pay the loan off if I part exchanged instead? Is that a possibility?
Other question was as I'm not bothered about owning the car at the end then leasing seems the more practical avenue but looking on websites it still looks like I have to put up a similar priced deposit upfront as a PCP plan? Am I missing the point?
Thanks in advance
Hi Paul. Yes, it is possible that a dealer will give you a cheque (probably not cash) for your car, or a portion of it, to settle your loan. For a dealer, a car is equivalent to its cash value so they are usually accommodating.
If you're not claiming VAT, a PCP and a lease (Personal Contract Hire or PCH) should be roughly the same in terms of upfront and monthly cost. They are working on the same basis – what is the price of the car now and what will it be worth at the end of the term?
Hi Stuart
We are looking at the options of a new car on PCP but with me not being a driver and my wife knowing little more than how to drive a car – very well I may add! – we are a little bamboozled by all the jargon and T&C's. So, I was hoping you may be able to answer some questions for us in order to assist us in making the final decision as it's money for a new car that is stopping us buying a new car as we can't afford that route.
So, questions:
1. My wife works P/T and would not be able to get the finance on her name whereas I am F/T and would have no problem. Are we able to take out a PCP on my name even though she would be the driver on the vehicle?
Assuming the answer to the above is yes:
2. We have a VW Golf we think is worth £800-1000. Are we able to use that as a deposit on the PCP? More importantly, at the end of the 3 year plan, assuming we wanted another car on PCP, would we have to pay another deposit on the next plan? A friend of my wife has always used PCP as she can't afford the maintenance costs on an owned car and she says when she takes out a new plan every 3 years, she doesn't have to pay a deposit each time.
3. Finally, I'm seeing things on different sites saying that you may have a final settlement to pay at the end. Can you just give the current vehicle back to settle that amount?
Sorry to be so long-winded but we are kind of lost here as it's a new area for us.
Many thanks
Hi Darren. Have a read of this article regarding PCP finance as it covers most of your questions, but to answer them specifically:
1) depends on the finance company. Technically the finance must be in the name of the main driver, but in the case of marriage some finance companies are more flexible.
2) Yes, you can use your current car as deposit for whatever its value is.
3) At the end of the agreement, you can soimply give the car back in lieu of the final settlement, assuming you have complied with the requirements of the finance agreement (mileage, servicing, condition). If the car is worth more than the final value owing, you can part-exchange it any any dealer and use the equity as deposit on your next PCP agreement. But don't count on this happening. If there is no equity (ie – car is worth same or less as your outstanding finance) then you will need another deposit next time around. Your wife's friend may be in a position each time where she doesn't need to put any cash deposit into each agreement, but that is unusual.
I have just signed a customer vehicle order with Mercedes detailing the cost of my new a class including GAP insurance which I didn't initially ask for. The salesman explained that most people have it, etc, etc, so I agreed. I have tonight realised I'm possibly paying £400 over the odds as it is far cheaper online. I have paid a £2000 deposit, even though the car is not going to be available until December. May I cancel the GAP insurance with them even though I've signed the contract and paid a deposit? I'm very worried that I've been misled in terms of the cost and that they've encouraged me to pay a large deposit in order to avoid me cancelling the insurance.
They currently have a service offer running where you receive 3 years free servicing, however they said they can't guarantee I will receive this unless the car arrives by the end of December. They are almost certain it will arrive early-mid December but will not be able to give me the free servicing offer if it arrives after December. Is this normal? Also there is no mention of this on the contract. Please advise.
Any advice gratefully received.
Hi Louise. You can certainly cancel the GAP insurance if you like, even up to 14-30 days (check the policy) after delivery. The reason that "most people have it" (they don't) is that salespeople talk/coerce customers into taking it. This is because the dealership and sales staff all make money off GAP – it is blatant self-interest rather than your interest.
As for the servicing offer, this is not unusual. This offer is coordinated by the manufacturer, not the dealer, and is aimed at helping to shift existing stock rather than forward order stock, and to boost sales numbers before the end of the year. The idea is that you buy the cars they have available now rather than ordering one which won't arrive for months, because they want your money sooner rather than later. If your car is registered after 31 December, they are not obliged to give you the service plan.
It should be noted on the contract. If the contract says "free service plan" with no caveats, then you can hold them to it. However, usually the contract makes no mention of it whatsoever.
Hi Stuart
I have entered into a PCP contract with Audi to purchase a car. I ordered the car mid August on the understanding there was a gear box supply problem and the car would not be delivered until mid-December 2014. Following several updates from Audi, I became a bit suspicious and did some homework, finding out that a new model was going to be produced. I visited Audi and discussed the matter with them, they acknowledged the fact that they too had just found out there was a new model and they were waiting for the pricing structure. Audi have now informed me that the car has gone up in price and the residual value has gone down, meaning they want to change the deal by charging more money; also they are unable to deliver the car in the original time scales.
I believe I have a water tight contract and should stand my ground. Advice please
Hi Gary. Any new car contract has a schedule of terms and conditions to cover this sort of eventuality, to protect both you and the dealer in the event that things change (which they do from time to time). It should be on the reverse side of your vehicle contract.
In a nutshell, if the price goes down and/or the specification level is improved, you are entitled to benefit from the reduced price or better spec (unless you want to insist on paying the higher price, but I've never met anyone who wanted to!).
Your situation is the reverse – the price has gone up and/or specification has gone down. This is clearly beyond the control of the dealership and the manufacturer reserves the right to change their pricing and specification without notice. The dealer and manufacturer can choose to honour the original contract pricing (if possible), or alternatively you are entitled to cancel and walk away with a refund for any deposit already paid. Obviously if that model is no longer going to be produced, they can't be compelled to supply a car. As such the contract is voided and they will have to do their best to tempt you into another car.
They are not liable to compensate you in any way for the change in spec, as it is something that happens regularly and is part of the automotive industry.
My wife wishes to use her termination rights on her HP agreement. She is dealing with Black Horse but the car is now registered in my name (spouse) will this affect her right to terminate the agreement. We have paid the required amount to terminate. Should we first send the V5 back to DVLA and put the vehicle back in her name ?
Hi Andrew. In practical terms, it should make no difference whatsoever. The finance documentation would show the car's VIN and registration number which have not changed (so they are getting the same car back!), I presume that the funds have always been paid from the same bank account and I also presume that you both live at the same address, so there is no good reason why they should cause any problem.
That said, it would depend on whether changing the vehicle's registration into another keeper's name is a breach of your HP contract and whether this allows them to reject the termination. It shouldn't do, but it might depend on whether they want to be difficult. Hopefully not.
Many thanks for the reply. I guess we'll have to see how awkward Black Horse want to be. Like you say they are getting the same car back in tip top condition.
Thank you for your advice Stuart which is much appreciated. After a night of no sleep and mulling over everything that was said at the dealership, I requested a refund of my deposit. I felt a few things just didn't add up in terms of the pricing I was given and ending up with a lower spec car than I wanted on a PCP over 4 years rather than 3. Today I have paid a £500 deposit for the actual car I wanted (mercedes a class AMG Sport) bought via Orangewheels.com for a lower monthly price than the a class sport, over 3 years, and will be with me by 1st November. I'm a very happy lady today. Thanks again.
Hi Louise. Very happy to hear that you've got yourself a better deal and have more confidence in the whole process. I hope you enjoy your new car!
May is ask, would you recommend I get GAP insurance and SMART insurance which is apparently where they come out to your house to repair any dings, scratches etc, bearing in mind that I will probably continue to change my car every 3 years on a pcp plan? Is it necessary to give back an absolutely perfect car? What are the implications of giving back a car, after the 3 year period, with a few marks on it? (Not that I intend to, but just in case)
Thanks ever so much – you're such a great help!
Hi again Louise; happy to help, just remember to tell all your friends about the site, share it on social media and click on all of our adverts ;)
GAP insurance is readily available all over the internet, so if you feel that it's worth it I would suggest searching online for alternative providers. Mercedes-Benz GAP Insurance is not the cheapest in the world, so you can probably find it cheaper elsewhere. As with any insurance, make sure you are getting like-for-like coverage. Another quote may be cheaper for very good reason. I'm not personally a big supporter of GAP insurance but some people swear by it.
The Minor Damage or SMART insurance is becoming more popular, especially for customers with a PCP. Usually it doesn't cover bonnet, roof, boot or wheels, which are all areas that are most likely to get minor damage, so it is mainly of benefit for vertical panels (doors, wings, bumpers). It's value largely depends on how well you look after your vehicle, and where it spends most of its time. If it gets parked in supermarket or train station car parks every day, it's probably worth it. If it tends to live an easier life, probably not.
My partner has recently ordered what he thought was an Audi A3 Saloon through Audi Chelmsford and signed the order form & paid a deposit after sitting with the guy for around 4 hours.
However, since we have gone through the paperwork we have realised that the order form states the car ordered as a Audi A3 HATCHBACK. Both the deposit receipt and the demands & needs forms state clearly that it's an Audi A3 SALOON, they also took us for a test-drive in an Audi A3 Saloon as we made it clear that is what we desired.
It has been just a week since signing the order form and we have not taken delivery of the car yet, we have called them and informed them of this error. They said that they will get back to us regarding what happens next.
Can you please advise to what you think we should do?
Kindest regards
Hi Sophie. I would keep hassling them, simply to guarantee that the correct car turns up. The deposit receipt and Demands & Needs statement are completely separate documents and not linked to the actual order of the vehicle in Audi's systems. Obviously you can simply refuse to accept the vehicle if it arrives and is a hatchback, but rather than let it get to that point I'd be on the phone at them until you get a corrected order form and reassurance that the right car will be arriving.
Marcus Rockey
Thanks for this excellent and informative article. It is no wonder it's so popular.
I am reading the article through now, about a third of the way through.
One point to pick up so far is in regard to servicing. If the finance company/manufacturer stipulate that servicing must be undertaken by a main dealer this costs considerably more. Therefore it's imporant that those thinking about PCP consider the additional costs here.
Your average workshop will charge lets say £40 an hour labour plus parts which may be non genuine but of good quality such as Bosch.
You can exspect a main dealer labour charge of £80 and above plus the VAT of course.
Add the genuine parts and the servicing is considerable more.
My point is that reduced monthly payments through the PCP shedule may be better off in the short term but you need to consider the cost over the whole term of borrowing.
Let's say you take the popular 36 month plan. You will need to service that car every 12/18 months,depending on mileage.
That is a minimum of two main services from the supplying dealer. The difference between their service cost and your average local garages needs to be drawn into your budgeting as there is a significant difference betweent the two.
No doubt, if you neglect to service the car at the main dealers or just don't get the car serviced, you'll be breaching the terms of the contract.
Marcus Rockey
The Used Car Guy.
Michael K
We have recently moved abroad for work purposes, (permanent move), and as the move was a sudden one and basically rushed I am trying to finalise the VT of one of our cars with Mini Finance. We bought a Mini in January 2012 on a 4 year PCP deal, (however the agreement states "Hire Purchase" – not sure if there is much of a difference), which had a 6K balloon payment at the end of the term should we wish to purchase the vehicle outright.
Obviously if we had stayed in the UK we would have waited until the term was almost up then handed the vehicle back, and avoided the balloon payment.
I have been in contact with Mini Finance to discuss a VT, however they are sticking to including the optional balloon payment within the VT cost. Are they able to do this? Surely the balloon payment is optional and they cannot include this within any VT cost calculations? To my mind we are more than half way through the term, and have made more than half the payments we would make to Mini Finance, however when you add in the balloon payment the amount payable under the agreement increases drastically.
I have not found any information on this, and I am hoping you can shed some light on this.
Hi Michael. Have a read of this article, as it should help: Car finance: Voluntary termination of a PCP or HP.
To VT the car, you have to pay (or have already paid) at least 50% of the total amount owed, which includes the balloon.
PS: a PCP is a form of Hire Purchase, which is why your paperwork describes your agreement as an HP.
Hi. I have been in discussion with a dealer regarding a new city car and after haggling on the price, I agreed on the right price and paid £200 to hold the vehicle on Sunday 26th October, requesting the docs to be sent through same day. The discussions and deposit were all handled via telephone. Since paying the deposit I emailed the dealer multiple times requesting the finance docs and quote which came through on Thursday. During this time I had interviewed and accepted a job which does not require me to need a car. We have not yet signed the finance agreement or any other forms for the dealer.
The car and finance quote were obtained, by me, in my girlfriends name (she is main driver on my car so I was to be the main driver of this one) who has had no dealings with the dealer aside to tell them we may not want the vehicle via telephone on Monday. As far as I'm concerned I have paid the deposit on the basis that she can agree to the finance agreement and no action should have been taken by the dealer until she has sent back signed forms.
When she rang the dealer they advised that the car is already registered and everything has been made in her name. She hasn't signed anything to allow them to do this and from the DVLA website it is evident that the dealer registered the car on the 31/10/14.
What is your take on this? It seems to me that what the dealer has done is un-lawful. I've spent the night trawling all the information I can but would welcome your take & opinion on this situation, my right to cancel & to a refunded deposit.
They are in the wrong but then so are you. You cannot have a vehicle order in one person's name and the finance agreement in another person's name (see this article here). Making a finance application on behalf of someone else is categorised as fraud, which means you should not be doing it and they should not be allowing you to do it. All documents for a vehicle should be in the main driver's name.
As I see it, you (and not your girlfriend) have paid a deposit for a car, so the dealer was right to take it off sale. You don't have the right to your deposit back (see here). If they choose not to refund your money then all you can do is have a fight with them and hope they will eventually give it back to make you go away. They were wrong to register the vehicle, which they would have done in a rush to hit their numbers by the end of the month, especially since it was registered to someone who had not signed a contract and had no finance in place. They now have a used car on their hands, since we are now past the point where the registration can be cancelled.
Christian E
I am part way through a 3 year PCP with Citroen and my mileage is exceeding the original plan due to a change in job role. Can I renegotiate the annual mileage allowance or do I need a new deal?
Hi Christian. My apologies, my previous reply seems to have disappeared. Yes, most finance companies will allow you to amend your annual mileage allowance. If you call the finance company and advise them of your new expected mileage, they will bump your payments up to cover the increased depreciation.
Hi there, I'm about to start my second PCP with Audi and am just awaiting delivery of my car. I have an e-mail from the company I went through which clearly states the initial payment (deposit) will be taken 15 days after delivery of the car which worked out great as I have equity in mine which I was going to use (selling to a different dealer) they have now said today that it is an error and that because it is a PCP it HAS to be paid before I can take delivery of the car. A. Is this legally true and B. Because I have an e-mail stating 15 days after delivery can I hold them to this??
Hi Paul. The only thing legally binding will be the finance agreement (contract). They can say whatever they want in an email but you can't hold them to it. You can use it as an excuse to cancel your order, as what they are offering is not what was promised in writing.
It's certainly not normal for your initial payment/deposit to be taken 15 days after delivery, so I'm not sure why they were offering that in the first place. I'm guessing that you haven't financed the car through Audi Finance?
I have been enquiring about a new vehicle and can pay cash for it. However, the dealer has recommended that I take out a PCP which will enable me to get a contribution of £4,000(made up of £2,500 manufacturer and £1,500 dealer) but after completion of the first payment to cancel the agreement and pay in full thus saving me £4,000 on the cost of the car. Can this be so simple?
Hi TJ. Yes, but you don't need to wait to make your first payment. Have a read of this: What is a deposit contribution?
Thank you for your help.
James B
Hello there & thank you for a really informative site – I will click on some ads and share with my friends: some advice if you please?
I'm 12 months into a 36 month PCP agreement (my first) – enjoying the car, driving approximate mileage and keeping it serviced/shiny, however, I feel that I will probably want a change of manufacturer: if I have built up any equity at all, is it possible to transfer this to use as/towards a deposit at another company?
It makes sense in my mind but I'm not entirely sure it is possible, and I don't understand the process in layman's terms!
Any advice would be really appreciated, thanks!
Hi James. Yes you can certainly can. The equity is yours, and is the difference between what your car is worth to whoever is buying it (same dealer, different dealer, private buyer, etc) and what you owe the finance company. So if you are offered £20K as a part-exchange and you owe the finance company £18K then you will have £2k of equity. It doesn't matter who is buying your car. The dealer will usually settle the finance for you and put the equity towards your new car.
Hi, I am just coming to the end of my PCP with Citreon and they have given me some quotes for replacing the car with a new one. On the quote there is "Total Interest" £1,342.00 and "Total Credit Charge" for the same amount and both are added to the final amount. Could you explain this please. Thanks.
Hi Gill. Check with the dealer who supplied you with the quote, as they should be able to explain every single number on the quotation. If they are charging fees of £1,342, that seems high. Usually there will be an acceptance fee at the start of <£200, and a final fee at the end of about £100, so I don't know where the other £1,000+ of charges are coming from. Curious also that it is exactly the same amount as the interest. Could be a typo, or it could be someone trying to slip a fast one past you. In any case, keep asking questions until they have answered every question to your absolute satisfaction - that's their job. Don't be pressured into anything, and get a quote from another dealer for comparison if you're not comfortable.
Hi Stuart,
I think my question is similar to one asked before but I couldn't find your answer.
Looking at purchasing a new car, would prefer to pay cash but I get a far better deal via PCP as the dealer is making a substantial contribution.
I was looking at putting down 4k deposit which would leave a balance of approx. 16k for financing.
To take advantage of the contribution in the offer, can I take the finance and then cancel within 14 days & pay it off cash? Would there likely be any penalty charges or marks on my credit rating should I do this? Perhaps even have to return the dealer contribution for cancelling.
I have also seen a copy of the Finance T&Cs which states that the Financier "may delay paying the dealer until my right to withdraw from the agreement has ended", does that mean I cannot pay off in the 14 day cooling off period.
Thanks for any advice you can give.
Hi Stuart,
I recently purchased a new mini with Styner – on the 17th Jan we went through all the required paperwork for my current car and the new one. The part ex was confirmed for my current car and finance approval accepted, deposit paid. I was quoted the monthly costs with the 3k deposit that i chose to add.
I was due to collect the vehicle today but was called by the dealership 12 hours prior to say that their was a issue with the finance and they have stated that they would only approve the same monthly amount that I'm currently paying.
I visited the dealership today and they are unsure why this has happened and hasn't experienced it previously, myself i tried to contact mini finance and they refused to give me any information, when visiting the dealership they again tried and refused to give the manager information – The vehicle has actually been registered to myself along with the TAX.
is this a common thing as i find it odd that it was approved on the 17th and was given monthly quotes but then denied at a later date.
Ive now got to wait till monday for a financial manager to get in touch.
Hi Adam. It sounds like the finance application was provisionally approved (possibly automatically without any human involvement), but when the finance company got all the information and it was reviewed manually, they were uncomfortable with the amount being financed relative to your earning and any other borrowings. This happens occasionally, although not realising this until the day of delivery is almost certainly due to poor management by the dealer rather than the finance company.
It is also possible that the dealer has entered incorrect information into the finance application system (usually accidentally, but it can be deliberate to 'encourage' an approval for a higher amount) and the error has been detected, which has caused the finance company to reject the application.
You should certainly have the right to walk away from the whole thing, with a full refund of your deposit. The finance was not approved as per the application, and they can't force you to take the car via any other finance process. If the dealer loses out financially because they had already taxed the car (so it's now a used car), that's not your problem.
The finance company is not under any legal obligation to honour the terms of the original application. The contract hasn't been activated (you have to sign the actual finance contract, which you presumably haven't), so the finance company hasn't given the dealer any money and there is nothing binding between you and the finance company.
The dealer will quite probably try to talk you into putting in more deposit to bring your monthly payments down to the level that the finance company will approve. Don't go along with this if you are remotely uncomfortable about the idea, as it was presumably not what you wanted in the first place and you shouldn't agree to it now because you or they are desperate to get you into the new car.
Thats great, thanks for the advice.
Seems this thing is currently being drawn out across both mini and BWM – Seems involvement with the dealership, customer services and regional financial management still isn't helping the situation and I'm still none the clearer as to what has happened, or even going to happen at this point.
Although, comically i did receive both the V5 for the new car in the post and also a customer service survey, which I'm holding out on.
Once again thanks for the help
Have a pop deal that end October but I am going to cancel early have payed a deposit for a new car but don't know if I have been accepted for finance yet worried that if I return my old car that I have payed more than half the value that I don't get credit for new one the garage have not told me that I have been accepted for greadit yet but orderd car four months ago and will be here in 3 weeks time ?
Hi Keith. If you don't get approved for finance on your new car, you can cancel the contract and get your deposit back. It will the dealer's loss if they are left with a car because they ordered it without you being approved for finance. It is not normal practice for a dealership to order a car without the buyer being finance approved, so maybe you have been approved but they simply haven't confirmed it with you yet.
You should be able to simply call the dealership and ask them if you have been approved – and if they haven't submitted your application yet, then ask them to do so.
Once you have confirmation of your approval, you can go ahead and VT your current car. If you don't get approved, don't give it back!
Hello Stuart.
I'm hoping you can help me with some advice.
My mother had a car on pcp with Skoda Solutions / VW Finance until her unfortunate death back in September last year.
We have passed on all relevant information etc and are currently awaiting a letter with our current options. However, I have spoken to Skoda and have confirmed with them that we wish to do a VT. The executor of my mother's will has also been in touch with them, confirming my decision.
This was well over 2 weeks ago and neither of us has received any communication from Skoda as yet.
My main question is: rather than having to keep chasing the finance company (Skoda or VWFS), would I be able to just return the vehicle to the dealership it was purchased from?
Thanks in advance
Hi Mike. Sorry to hear of your mother's passing. It is likely that the executor of her estate will have to execute the VT. They simply have to write to Volkswagen Finance and inform them of their intention to VT the car (email is acceptable, but it needs to be in writing). They should then follow up with a phone call to arrange the collection of the car.
There is no point taking it to a dealership, as the dealers are independent franchises and the finance agreement is with Volkswagen Finance based in Milton Keynes – two separate entities. VW Finance may instruct you to take the car to a specific dealership, but they need to arrange that with the dealer first. If you try and drop the car off at the dealership of your own volition, they will politely (or otherwise) tell you where to go.
Unfortunately, the executor will have to keep chasing VWFS to see it through, as the finance company has no interest in making it easy for you and is unlikely to go out of their way to assist. Have a read of our article on voluntary terminations for more info.
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David reid
Hi I have a pcp agreement and wanted to clarify something. When I get to the end of the 4 year agreement and take the car to a dealer and find there is postie equity you use as a deposit and the dealer settles the existing finance, do they add the amount they've settled on to your new pcp?
Hi David. Your settlement is taken off what the dealer has given you for the car. Say you PX your car and they offer you £6,000, but your settlement is £5,000. Instead of giving you £6,000 for the car, they pay £5,000 to your finance company to settle your PCP on your behalf, which means you have £1,000 left (called equity or positive equity) to use as a deposit for your next car. Your old agreement is paid off and you are clear to start a new agreement.
Hi Stuart, many thanks so what your saying is I don't have the 5k the dealer has paid added to a new pop?
No, not at all. In the example above, you have a £6,000 car, but they are only giving you £1,000 for it. That's because the remaining £5,000 goes to settle the finance. That's it, all over, nothing more to pay.
I recently purchased (2 weeks ago) a 13 plate Renault Twingo on pcp… When I got the car home after 2 hours waiting at the dealership I took pictures of any chips found on the body work .
I have since noticed that on the back bumper the paint seems to have split near my boot now I know I haven't bumped my car… I can't Guarantee someone else hasn't there doesn't seem to be any other sings its been knocked is this my responsibility to fix? Do I even have to fix it?
Thanks kaelee
Hi kaelee. Unfortunately, once you leave the dealership you are responsible for any damage done to the car. If you've had the car for two weeks already, there's no way they're going to accept any suggestion that it was like it when you bought it.
If it is a flaw in the paintwork rather than damage, it may be covered under your new car warranty. However, if it is damage beyond normal wear & tear then you will need to have it repaired if you want to be able to claim your GMFV at the end of the PCP.
Keith Dodd
I have agreed to purchase a used Mercedes. My intention was to use P/X and cash to pay. I found myself persuaded into using PCP, my fault I accept. On reflection this does not sit easy with me and want to revert to my original plan. I have signed an agreement for the vehicle outlining the payments and terms. I have paid a deposit of £1000 by cc and and the rest of the initial payment will be deducted from the P/X , the balance being paid to me. I still want to purchase the vehicle at the agreed price but not by PCP. I have not taken delivery yet though that is likely to be imminent. Do I have any rights to cancel the pcp and revert to outright purchase.
Hi Keith. You have a 14-day cooling-off period for the finance (not for the purchase of the car). Have a read of this article which explains a bit more about cancelling a finance agreement.
Hi Stuart
I signed for a van contract hire with Renault back on 6/1/15. payed the deposit to get things moving, since I have been promised 3 different delivery dates, all which Renault failed, I have now told Renault that I simply don't want the van, through leaving voicemails and emails as no-one at Renault would return my calls. they are now saying I have to take the vehicle, because now its come in to their garage, they have finally gotten back to me!
where do I stand? as we are a limited company we had to go elsewhere to get a vehicle as they have been so late delivering the one previously ordered
Hi Paul. Your emails are going to be key, as they are your written evidence of cancellation. Complain to the general manager/dealer principal, and if that doesn't work, complain to Renault UK's head office.
I went in yesterday to purchase a Jaguar XF on PCP. I paid £500 deposit and gave 2 signatures, but received no paperwork. Within 12 hours I E-mailed to say I wanted to change my choice of alloys to something cheaper (look better) I rang within 24 hours and requested the same alteration. Was told too late the car is on its way to the showroom. (They suggested I may have my new car by the weekend, if its on its way it should be hear by tomorrow) I am furious with myself for not taking more care over the purchase and signatures, and more furious that they are suggesting its too late to change some wheels!?
At the moment I want to go in get my £500 back and go elsewhere. I am able to change my mind within 24/48 hours? Am I entitled to get my deposit back?
Any advice appreciated.
Hi Brian. If you have no paperwork, then what did you sign? If you don't have a valid vehicle order, then they have no right to keep your deposit. However, if you have signed a valid order form, then there is no cooling off period and you do not have the right to your deposit back. Have a read of this article about changing your mind after placing an order.
It's not at all surprising that it's too late to change the wheels – the car would have been built weeks ago (at least – the Jaguar XF is out of production now) and supplied with whichever wheels were ordered at the time. Dealers and manufacturers do not keep stockpiles of different wheels to swap over after production; everything is delivered to the factory from the suppliers just in time to be mounted to the car as it is built. You can buy another set of wheels for your car, but don't expect the dealer to want to buy the existing wheels off you (they won't have any use for them).
To get different wheels, you would need to buy a car that has those wheels fitted. However, that may then have different options fitted that you might not want (sunroof, different colour paintwork, etc.), so you may not be saving money anyway.
Hi Stuart,
I'm in the process of purchasing a new car, and will be using PCP.
Currently doing various calculations for different editions/scenarios, and wondered if you could explain something.
Take the ticket price to be £25k and the final value after three years is £10k.
If I negotiate the ticket price down to, say, £22k – does this also affect the final value fee, or should it remain at £10k? I presume the figure is based on the market value of that model of car after a particular number of years/miles. This, I could argue, would not be affected by the price I personally paid.
Bringing the final value fee down in sync would make the 'buy' option better at the end, but I'd have paid more in monthly payments over the years.
I'd be grateful for any help on this.
Many thanks,
Hi Rob. The residual value is calculated by the finance company, based on the predicted market value of that model and specification (and of course, your mileage). The deal you are able to negotiate on the purchase price will not affect the residual value.
Hi, I am currently 2 and a half years through my Toyota 3 year PCP deal. I have no idea about anything with cars and never realised this was a serious mistake till I asked a friend. I have not serviced my car since I got it and don't know what the repercussions will be. Any help or advice would be great!
Hi Mark. Having your car serviced on time and by an official service centre is a condition of all PCP agreements, although it's one that is often not well explained by dealers in the sales process.
If you want to claim the GMFV for your car at the end of the agreement, you will be penalised for each missed service. This is likely to run into hundreds, if not thousands, of pounds.
Hi, I am looking for a solution. I purchased a car in July 2014 on a PCP deal as I was doing a lot of mileage with my job and wanted something reliable. I put down a large deposit (£5,000) which included a part ex on my existing car. I also signed the deal set at 18,000 miles per annum. Just before Christmas, out of the blue I got made redundant. I was also however, the non executive director of a small company that I had invested in, and have now joined them full time to develop the business. My circumstances have changed totally, and the car just sits on the drive not being used, it is a total waste of money every month. I would like to purchase a car through the business for tax reasons, can I swap my PCP deal to the business? can I get the mileage reduced on my current deal and reduce the monthly payments? Can I end the deal in any way, i.e. explain the situation to the finance company and sell the car? I am in a situation due to the large deposit where I may just be in positive equity. What is the best solution to reduce the burden of this vehicle on me which I could really do without, or get it into the business ?
Hi Kate. We have an article all about settling your PCP early. You (or your business) can pay the outstanding amount and end the agreement now. This will also save you a large chunk of interest since you won't see the agreement out to its end.
You can then choose to keep or sell the car as you like.
Hi Stuart, great site.
A vehicle, bought new on a 4 year manufacturers PCP deal develops a very expensive fault @ 40 months which renders it unusable.
The manufacturers standard warranty is 3 years
What happens next?
Hi James. Unfortunately, your finance agreement is not linked to your warranty. Any problem which develops after your warranty expires is your problem.
Hi Stuart,
Do you have any information regarding "equity" at the end of a PCP deal. I am often curious as to how much I'd have towards another PCP deal – I know not to expect 3-4K, but is there any sort of average equity amount – Some friends I have spoke with that have part ex'd there car at the end of their PCP have reported that offers are normally around £1500-£1700 – Any information or general experiences??
Hi Craig. There's not really an average equity result as such – more and more these days, the end result is that the car is worth about the same as the settlement figure, with very little positive or negative equity.
It really depends on how the residual value for that model has changed over the course of the PCP agreement. If the finance agreement was a bit pessimistic, it may be that the car is worth more than they expected. If they were too optimistic, the car's value could be worth a lot less than they predicted.
katy davitt
Hi Stuart,
I was wandering if you can give me any information.
I recently got in touch with a mercedes lease dealer,who i gave work and bank details etc to see if I qualify to lease the car.
I was approved, but decided to go through mercedes themselves.
I informed them that i didnt no longer want to order a car.
They thanked me 2 weeks ago,.saying if i changed my mind then get bavk in touch.
Now they have emailed saying mercddes want to charge me a fee which would work out like a monyhly payment, do i still want to cancel. Is this right ? I have gone with mercedes
Hi Katy.
It will depend on what the contract that you signed says. If you signed an agreement which instructs you to pay a cancellation fee, then you have to pay it.
Max Manlay
I am trying to finance a vehicle through Audi Finance and got turned down (even though I am in a secure job & have a good credit history)
I think it's due to the fact I've been self employed within the last 3 years.
Is it possible for me to get accepted if i provide a valuable guarantor?
Hi Max. If the finance company has already declined your application, they are unlikely to reconsider it with a guarantor. Usually if that is an option, the dealer would have already suggested it.
These days, more and more finance companies are only using guarantors for young first-time buyers, and only if the guarantor is a parent/guardian. You can certainly discuss the matter with the Business Manager at the dealership, but I would be surprised if they accepted a guarantor.
We are buying a new Skoda fabia and intended to pay cash, with trade in. However, the dealer has an offer with Skoda solutions of 42 months at 0% interest and £500 contribution to deposit. The car price is also competitive.I have been wary of these schemes, but this seems hard to refuse.
We do a very low mileage…basing this on 5000 annually… and expect this to be our last car.
Have I overlooked any snags?
Hi Allule,
The dealer should be able to give you a complete written breakdown of the finance quotation, so you can see ultimately what the financial implications are.
Škoda Solutions is a PCP finance agreement, which means you will have a low monthly payment for 42 months and then a lump sum of several thousand pounds at the end. In total it may not cost you any more than paying cash now, but it depends on how you want to manage your cashflow.
Remember that the reason they are pushing the finance angle is for their benefit, not yours. They pick up a healthy commission on selling finance which is why they are very keen for you to take it. If the finance offer suits you, then great. But don't be swayed just because a salesperson recommends it.
What you can also do is sign up for the finance to claim the £500 deposit contribution, then cancel the finance within 14 days (which is your legal right). You should get to keep the benefit of the £500 discount without having to take the finance.
We are currently 2 years into our 3 year pcp with seat. The PCP is in my partners name. I have been in today and we are looking at swapping for a new seat car. my partner has a good credit score but since taking the initial pcp he has a few red markers for late payments on a catalogue account, nothing serious and there is only a balance of £70 outstanding, which isnt overdue. Will seat redo the credit check even though we have paid them for 2 years and never missed a payment? If they do, is it likely to be declined?
Yes, it will be a fresh application and a new review of your circumstances.
Finance companies have varying policies of what they will and won't accept, and the credit check forms one part of the overall application. If you have paid your car finance on time every time and are looking at a new agreement from the same finance company (presumably Volkswagen Financial Services), they may look at it more favourably than another company might.
Dear Stuart,
I have signed PCP contract from Lookers on 1 year old car.
They managed to convinced me to buy Tyre and Alloy insurance, Scratch protection and stargard for Mercedes. They offered buy 2 get 1 free. (£399+£399 and £399 free)
I can't cancel stargard as they might have applied to the car by now. But would like to cancel Tyre insurance. Is there any possibility to get tyre money back? Do I need to contact Lookers for cancellation or direct insurance people?
Hi Havya. You should certainly be able to cancel the tyre & wheel insurance and scratch protection insurance, as they should have a 14-day cooling-off period (sometimes 30 days). You should be able to get the dealer to cancel it if you have not taken delivery of the car. If they are being difficult, then you can contact the relevant insurers directly.
The StarGard may or may not have been applied already, but if you simply ask the salesman if it has been, they will almost certainly answer "yes" even if it's not true, to stop you cancelling it. It's usually only applied just before delivery when the car is being valeted, so if you're not picking up in the next day or so then it probably hasn't been done yet. I would suggest simply telling them that you no longer want the StarGard and threaten to cancel the deal if they refuse. It may or may not work, but it will slightly improve your chances…
Hi Stuart,
Im sure its been answered before so apologies. My wife has a Corsa with GMAC UK on a PCP deal. She's had it 1 year on 25th July, but the first payment went out on 1st September 2015. I will be getting a company car and we wont need the Corsa any longer so need to terminate it in August / September time. The total outstanding is 9,796.14 with 26 repayments left. How would the termination work is my first question and would it better to keep hold of it and wait until 1st Feb when we've made 50% of the payments / 18 months. Is that correct and how that would work as well. Just looking at all the options.
Hi Alistair. There are two articles here you should read:
1. How do I settle a PCP early?
2. Voluntary termination of a PCP or HP
Joe Francis
Hi Stuart,
I currently have a car on ToyotaAccess, which is a PCP deal with their own finance arm. I love it, very happy with the service and have no complaints.
However, I was recently invited to an open event with Toyota and agreed to a new PCP deal with a newer car, my current one would be handed back as part. In the meantime I have had a change of heart and wish to withdraw from the new agreement and keep using my current car and stick with the current PCP deal.
I have not yet notified them of my desire to do so because I want to clarify the termination and charges that may be levied. As things stand:
– have signed the agreement (19th Jun – so within 14 day cooling off period stated)
– have paid half the agreed deposit
– have not collected the new car or arranged a date to pick up
– have not paid the first monthly installment due under the new deal.
If I notify them in writing of my intent to withdraw, I expect I will lose my deposit paid, which I could stomach if binding. However, can they legally hold me to any other penalties?
many thanks in advance for your advice!
Hi Joe. Have a read of this article about changing your mind after buying a car for more information.
In summary, they may retain the deposit already paid, but there shouldn't be any further penalties.
Joe Francis
Hi Stuart,
thanks a lot for your first response.
I have just spoken with the sales rep at the dealership and they are telling me that, although I can withdraw from the finance agreement within the 14 day cooling off period, the cooling off period does not apply to the actual purchase of the car.
In short, I would still have to pay the full value of the car. The finance for my current car has already been settled and they have activated the finance for the new car which they say is now ready to be picked up at the weekend.
Is there any way out or is this now completely binding?
Hi again Joe. If you notofied them in writing that you wished to cancel the purchase, they would be hard-pressed to enforce the contract. They are correct in that the cooling-off period applies to the finance and not the car, but in practice it is virtually impossible for a dealer to enforce a vehicle sale if the customer doesn't want the car and refuses to pay for it.
They will have to take you to court to enforce the contract, which is expensive and risky. The court costs will be more than the profit margin, so they would have to win the case and have the court award them costs to make it worthwhile. If the court doesn't force you to pay for the car plus 100% of the dealer's costs, it won't be worth it. It's obviously a risk for you as well, as the court could well decide that you signed a perfectly valid contract and you should be expected to see it through.
You will be able to fight them, but you will definitely lose your deposit. You can cancel the finance agreement by contacting the finance company directly (contact details will be in your finance contract).
MJ Smith
Hi Stuart,
I have followed your posts for a while – thanks for providing great info. I have a quick query regarding upgrading. I'm only three months into a 42 month PCP on a Seat Ibiza. Would there be any costs involved if I wanted to upgrade now to a Seat Leon and a costlier PCP? My early settlement is just over £5k and current value according to What Car is just over 7k.
Thanks in advance :-)
Hi MJ. Be careful about assuming your part-exchange value based on any magazine guide – a better indication is to check out a car-buying site like webuyanycar.com or similar, as they are real buyers who will pay you real money rather than hypothetical guides. Even on a used car, the initial depreciation is fierce; read more in this article on our site about depreciation.
Because you are only 3 months into your current agreement, I assume that you have paid an initial upfront payment/deposit just a few months ago and will now have to do the same again (depending on the level of equity you have in your part-exchange).
Changing cars quickly is almost always costly, but you will have to go through a few steps of the process to find out exactly how costly and then work out whether it's worth it.
Mj Smith
Hi Stuart,
Thank you for you advice and insight. From what you've said in response to me and from reading your articles on PCP it would appear that I'd be throwing money away by jumping into a new contract after only so short a time.
Thanks again,
Great and extremely helpful website. Just a couple of quick questions, if I may:
I have an Alfa on PCP, and I'm 36 months into the 48 month term. I'm seriously thinking of a voluntary termination and getting something smaller/cheaper as I moved house and now do very few miles and £444 a month for a car I hardly use is a lot of money. I'm well over the 50% of total due, though, and all servicing is spot on.
1. I'm over mileage (I've done 36k in total, 3 years into an 8k a year contract). Can I check that with a VT the finance company has no right to chase or enforce an excess mileage charge?
2. Does a VT have any impact on my credit record, or even on taking out future PCPs? If I wanted to finance the next car on a PCP (paying my own – small – deposit) would the fact that I've done a VT on this count against me. And how about if I want to buy another Alfa at some time in the future? Will the dealer I'm buying from assist in the VT?
Thanks in advance
Hi Jon. Have a read of our article all about voluntary termination. In summary, you can't be charged for excess mileage – only damage or abnormal wear. VTing your car should also not affect your credit rating, but the same finance company may refuse to finance you again since you haven't fulfilled your contract.
If you are well over the 50% mark required for VT, it may be worth checking your car's value against your early settlement amount. It may be that you can sell the car, settle the finance and have some change.
Hello, I have applied for a car on Finance through PCP and I have been accepted. I only have a provisional which is in my maiden name and old address so I need to update it. My husband will be the main driver and will be insured on it until I pass my test. Is this a problem as the dealership advised there may be an issue with this.
Hi Carly. It depends what the dealer thinks the issue is. Are you saying that you won't be driving the car at all until you have passed your test?
Usually if you are married, the finance companies tend to be fairly relaxed. If they are concerned that it is an accommodation deal (ie – you are buying a car for someone else's use), they will not allow it, but that doesn't sound like the case in your situation.
Great site. One q I couldn't see the answer to –
What difference does a lower Apr make on a pcp deal?
E.g. what's the benefit of a 3% apr against £15k vs a 8% apr against £13k both of which end with a similar GFV and have near enough the same monthly payment along the same term length?
I would pay the same each month, how does the low apr help?
(Figures are for two different cars may not calculate exactly I'm guessing from memory :)
Hi Jim. Using the example above, the lower APR (interest + fees) on the first offer means that you are borrowing an extra £2,000 for no extra cost. In other words, your monthly payments are paying for more car and less profit for the finance company.
It means that if you prefer the £15K car, you are getting it for the same price as the £13K car.
I bought a Kia sportage 15 months ago on the 3 year plan then you have choice to give back at end or pay outstanding fee, we are currently struggling financially and thinking of our options as pay £262 a month on this, are we allowed to look at selling the car to pay off the outstanding balance and keep any profit made? or are we only leasing the car?
Hi Paul. You should be able to sell the car and use the proceeds to pay off the finance. Talk to the finance company to see if they have any requirements (some insist that the buyer pays them directly rather than paying you and you paying them), find out what your current settlement figure is, and you should be able to sell the car.
Bear in mind that the settlement figure may be higher than the value of the vehicle, so even after you sell it, you may still owe more money. Have a read of our article on settling your PCP finance early.
Hi there,
We have a Citroen C1 on finance and have compelted about 18 months of a 36 month contract – what are the basic rules on returning the car early? I was considering returning the car after 2 years and then taking out a new deal either through Citroen or another manufacturer – do I have to complete all 3 years before I can return the car or is returning it early (and getting my GFV) possible?
Hi John. You can change your car before the end of the term, but the car's minimum value is not guaranteed by the finance company. This means that if you owe them £10K and your car is only valued at £8K, you will have to pay the £2K shortfall (negative equity).
For more information, have a read of our article on settling your PCP early.
Thanks for that – so if I have £2k remaining to pay in the final year I will owe that still unless the equity wipes it out?
What if I go to a different manufacturer? Same deal?
Would a used dealer be wise?
Also why give GFV if it's not actually G?
Your settlement figure during the course of the agreement is a function of what you borrowed and how much you have repaid. This won't change regardless of where you go to buy your next car.
The variable is how much you are offered for your current car. If your car is worth more than what you owe, happy days. If it's worth less than what you owe, you have to cough up the difference. Sometimes another dealer will offer you more, sometimes there's not a lot in it. All the dealer is really interested in is what they will be able to sell it for (either on their own lot or down at the trade auctions).
The 'G' in Guaranteed Minimum Future Value only applies at the end of the agreement. The finance company guarantees that after 3 years, your car will be worth £X (assuming you comply with mileage, servicing and condition requirements). It doesn't apply if you don't see out the contract to its full duration.
Hi, I have a Toyota Aygo on a 3 year plan with Toyota which comes to its end in March 2016. We want to get a bigger car (through Toyota again) next year but I have a small dent to the passenger door which I haven't got around to sorting out yet. I had a quote for it earlier in the year but it was too expensive for us to pay for ourselves and I really don't want to go through our insurance if I can help it….would they accept the car back in it's current condition prior to the end of the 3 year plan in exchange for a new deal with a bigger car or would they expect me to pay for the damage and get it fixed etc first? Thanks!
Hi Clover. If you hand the car back to Toyota Finance, you will be charged whatever they like to repair the dent. You are probably better off getting it fixed yourself.
Richard Prior
Hi Stuart, I have just read your article on hoe the PCP works and the potential penalties for early settlement. I am intending to buy an Audi A5 Cabriolet and have been looking at deals on Brokers4Cars & CarWow. Through CarWow I have had offers from bone fide Audi dealerships which project the 'cheapest' cost (by some £3000) if I take out a PCP deal. I know it wont end up the cheapest necessarily because of the interest I would be paying over the term. However, what is to stop me putting down the maximum deposit (50% I think) on a PCP and then settling the figure immediately (say within a couple of weeks) to minimise any possible negative equity? Regards. Richard
Hi Richard. Yes, you can cancel a PCP within 14 days with no penalty. Have a read of this article about deposit contributions, which shows how you should be able to keep their finance incentives without having to keep the finance.
Hi Stuart
I think I saw the answer to my question several posts up but I'm hoping you can give me peace of mind. I signed an order form for an Audi A1, I intended to take out a pcp deal over 4 years. The finance company carried out their checks on me and I was approved for finance. I have now had a change of heart due to the attitude of the sales team at the garage and no longer wish to go ahead with the purchase, can I cancel the order? I have not signed any finance documents or agreements, just the order form.
Eliot Hibbert
Hi there,
I had a car with £5k negative equity.
I saw a second hand car that I liked and the dealer arranged for me to roll this over on to a PCP deal. I put no deposit down.
Is this normal for a PCP to be put into place at £26k when the car value was only £21k?
Hi Eliot. It's not normal these days for a finance company to allow you to finance any negative equity. Usually this has to be paid off separately to the new agreement.
The reason for this is that you will be inflating your negative equity on your new car – you are financing £26K for a £21K car that will very quickly become a £15K car while you will still owe more than the original selling price.
Even if they will allow it, I certainly wouldn't recommend it.
Eliot Hibbert
Thank you Stuart,
I thought it was a little odd at the time.
I have a situation where the car had unrecorded accident damage and the finance company has agreed to refund me the price of the car. However, they are asking me to remain liable for the negative equity which was rolled over. I was under the impression that the loan was attached to the car and was wondering what the FCA view of it might be. There does not appear to be much information on the rules of PCP! kind regards
Hi Stuart,
I took out a 3 year pcp deal on a VW polo around 6 months ago. £128p/m I already want to change my car and get PCP on a new car. What would be the most economical way to do this? E.g would i be able to go into a mercedes garage and add the remaining balance of the polo onto a new car.
I'm very unclear on this one but don't want to fork out lots of cash just to change vehicle.
Please Help!
Hi Stuart,
My two year lease on a Mercedes A Class is coming to an end. I have used 5000 miles less than the agreed milage for both years. Does this mean I have any lease equity in the car?
Thanks D
Hi Daniella. Sadly no, it doesn't work that way.
With a lease, you simply hand the car back at the end with no more than the agreed mileage – you get penalised for going over, but don't get rewarded for being under.
Darren Toal
Hi Stuart,
I'm currently 2 and half years in on a 4 year PCP agreement with Renault finance, I am looking to get a new car on PCP with Renault.. as there will be negative equity on my current car (2-3k approx), would I need to pay off this amount to start a new agreement on a new car?? I'm aware I can VT the agreement as I have paid half the agreement (as stated in the Renault paperwork).. any advice would be appreciated,
Hi Darren,
If you have repaid half of the Total Amount Payable, as indicated in your finance agreement, then you can VT the car. However, although it will not affect your credit rating, be aware that the same finance company (ie – Renault Finance) may not agree to finance you on another agreement if you do this.
For more information on voluntary termination, have a read of our article here: https://thecarexpert.co.uk/car-finance-voluntary-termination-pcp-hp/
For other information on settling your PCP early, have a read of this article: https://thecarexpert.co.uk/settle-a-pcp-early/
Chris Lunn
Great advice on the forum so far so many thanks!
Have a question though. Am close to signing a 4 year PCP on a Hyundai Tuscan but am seriously considering taking GAP insurance (non dealer supplied) as I'm concerned that should the car be written off that I would have to pay the finance company the cost of the whole deal (car replacement and interest owing). Is that correct or would it just be the price of a replacement (new or identical age mileage) that I would need to cover?
Hi Chris,
If your car is stolen or written off then your insurer will pay market value for the car. You can use this to pay off your finance balance. If the insurance payout does not cover your outstanding balance (eg – you get £10K from the insurer but your finance settlement is £12K), then you would have to pay the negative equity (ie – £2k) to the finance company.
If you take out GAP insurance, you need to make sure that it will cover any finance shortfall – most will but not all, so check carefully. If so, then (using the above example) your insurer still gives you £10K but the GAP insurance will cover the other £2K.
You are still left with nothing, so you would need to come up with another deposit for your next car finance contract.
Chris Lunn
Many thanks for your quick response. PCP is a completely different deal for me as have previously gone for the traditional method of buying a car either through savings or a bank loan where I ended up actually owning the car in the end. The fact that my trade in "disappears" as part of the PCP is still scaring me a fair bit bearing in mind I'm an archetypal "tight Yorkshireman"!
What has fascinated me is the differing ways two franchises from the same manufacturer have offered me cars. I'm looking at the recently launched Hyundai Tuscon 2.0 diesel 4wd.
Garage A quoted me on a car in their showroom unregistered for a deal based on 48 months and 14k miles a year. They offered me £7750 trade in/deposit for my Mazda CX7 and monthly payments of £311 with a GFVP/balloon of £9450. Sad to say I didn't really haggle and deal is based on sticker price of £28950 so would end up paying about £3700 in interest should we go the 4 years
Garage B have offered me their demo same model 3 months old with 1500 miles on the clock for £25500. Interestingly they offered me £7000 for my Mazda but split £5000 as the deposit and £2k as cashback! Monthly payments would be £325 for 14k miles per annum meaning just over £4000 in interest with a GFV of £8970.
By my simplistic maths the £2000 cash back is looking quite attractive as would then have some money that I could put away towards my next deposit but is it as simple as that and am I missing something obvious? I know that there's about £700 difference over the course of the deal based on the monthly payments but I still appear quids in and don't mind having an ex demo.
Hi Stuart,
I have a slightly different question which I don't think has been covered in any of the previous posts.
If the finance company gets its sums badly wrong and overestimates the value of the car at the end of the PCP, then obviously you would just hand it back because you have no equity in it. But, say you like the car, you clearly know its history and you are interested in buying it at the "right" price. Have you come across any instances where the finance company has been prepared to negotiate a reduced final payment to reflect market value ? Otherwise they would presumably suffer the same loss by taking it back and then reselling it through a dealership.
Hi Graham. I'm not aware of any finance companies who are prepared to offer to sell you the car for less than the GMFV. In most cases, returned cars go to an auction and will be sold to dealers, and I would imagine that the finance company would rather take its chances at auction than agree a reduced price with you.
Hi Stuart,
I went in to Ford dealership on friday, to begin my search for a new car. Cut a long story short i stupidly got carried away, and ended up signing up for a 3yr PCP deal on a 20 month old Focus, which i havent even seen as its at another branch. initially was looking at new model, but couldnt quite afford, and salesman persuaded me to go for this one.
Since i got home and read the documents etc, im really unhappy with the deal, mainly because ive seen better, newer cars on the same dealers website for same price, or cheaper. Do you think the dealer will entertain me changing the car, to another one from their dealership, at the same price ?
i realise im in a hole as ive signed the order form, and finance, but was wondering where i stand as i have not seen the vehicle yet and it wont be delivered to dealer until Thursday. Is there any arguments i could use in my favour ? or could i say that on seeing the car i dont like it.
I should be happy about getting new car, but am actually quite depressed about it, as im getting an older model car with hardly any warranty left, upholstery and colour i dont really like, and just feel like a fool for letting the salesmen persuade me to sign when i should have waited.
Any advice would be much appreciated, as im supposed to pick up the car on Thursday.
many thanks,
Hi Joe. Legally, you have committed yourself by signing the vehicle contract and finance agreement and (presumably) paying a deposit. There is no obligation for the dealer to agree to let you out of it.
Practically, you can cancel the finance agreement as it has a 14-day cooling-off period. This doesn't get you out of buying the car, however.
If you are prepared to buy a different car from the same dealership, as opposed to wanting to cancel altogether, they are more likely to be accommodating (ultimately, they want your money so would rather switch vehicles than lose a customer altogether).
Ultimately, it will depend on how well you can negotiate with the dealer to get a better outcome. If you choose to walk away, they will be able to keep your deposit.
Have a read of this article about changing your mind after you've bought a car.
Hi Stuart,
Many thanks for your quick reply, i cant seem to access the links on the page.
Yes i am willing to buy another car from the same dealership, at the same price, as ive seen much better examples on their website.
Im just wondering once i view the car, what would allow me to pull out of the deal ? ie if there was bodywork damage etc.
Im just worried that most of the other cars are Ford Approved, RAC cover , guaranteed mileage etc, and this one isnt, and fear that ive been sold a lemon, they wanted rid of.
i dont mind losing the deposit ( £100 ), to be honest right now id pay more to get out of the deal, but i realise ive signed the order and therefore committed myself. i just hope it doesnt turn out to be a costly lesson to learn, as this is the first time ive financed a car, and most ive ever spent.
Thanks Again,
Hi Joe. Sorry about that; we seem to have a technical gremlin at the moment – go to the search icon in the top menu and search for "bought a car and changed my mind".
In terms of what would allow you to pull out of the deal, it would depend on how the car compares to how it has been advertised and sold. If any of the details are incorrect, you can argue that the contract is not valid as the car is not as advertised/sold. If it is exactly as described, you can't use that as an excuse.
In practical terms, there's not much the dealer can do other than keep your £100 deposit if you decide to walk away. It's not worth the time and money to try and enforce a contract if the customer doesn't want the car and there's no great material loss to the dealership. Had you ordered a customised car at great expense, built especially to your requirements, it would be a different story. But a used Ford Focus is not worth the hassle. They'll probably keep your £100, curse you under their breath and move on.
Alternatively, they may threaten action against you, but they almost certainly won't follow through with it. If they tried to take you to court to enforce the contract, it's quite likely they would lose, and then they'd be even worse off.
Hi Stuart,
ive seen a much better car on their website which is ford approved with 2 full years left on warranty , breakdown cover, guaranteed mileage ( 5000 ),new shape and nicer colour, so im going to ask them if i can swap for that. The only thing it doesnt have is sat-nav, which i told him i didnt want or need anyway.
ill try and appeal to their better nature if they have one, but im sure they would prefer a happy customer, as ive told them i plan on renewing every 3 years, so would be crazy for them to lose a good potential customer.
Thanks for your advice, and ill let you know how i get on
My friend bought a new Alfa in July 2015 on pcp. He paid approx 6000 deposit and then monthly payment of approx 300 per month for three years. He died three months after the purchase. The car is too big for his widow to drive. Thoughts on her options please.
Hi Paul. The finance agreement is a debt that needs to be settled from the estate, like any other debt. She will need to sell the car and pay out what is owed. She should contact the finance company to find out what requirements they have in selling the vehicle (since it belongs to them, not to her).
Hi Stuart,
My finance situation has changed recently as my baby was born and apart from other baby costs the nursery takes 1k every single month :-/ I have to swap my BMW to a cheaper brand and I picked up a Skoda Superb which is actually better than most of BMW models and costs less than half of my current car.I phoned BMW Finance to be given setlement amount I need to pay off if I want to terminate the agreement.I went to Skoda hoping they will take my massive negative equity on their shoulders but they were not happy to do that.I thought that was it as 50% of my PCP original cost will be completed in 14 months from now but the salesman said that I got the right to terminate the contract with no setlement once I reach half TERM of the agreement which is in 4 months.I am just wondering it is true what the Skoda salesman said.Is it half the term or half the original cost?
Thank you for your advice Stuart
Hi Tom. To voluntarily terminate your BMW PCP, you need to pay off half of the Total Amount Payable. Because this includes the balloon amount, it normally happens quite close to the end of the term, not halfway through the term. For more information, read our article on voluntary termination.
Mitch hyde
We have had a pcp agreement for 13 months. All paid for and above board. We have never received a V5 form…. We are 1 month out of tax and just realised. When phoning the dealership they couldn't find the record! The DVLA say there is no registered keeper (We actually bought it pre registered to the dealership). So we pay for a car we don't own? We also paid for bridging insurance which I assume would be void? What do you recommend we do next? Where do we stand legally? Any answers much appreciated.
Hi Mitch. If you don't have a valid V5 registration book then your insurance, road tax and finance agreement are likely to be invalid if you ever have any problems. This needs to rectified ASAP.
In the short term, you need to go back to the dealer where you bought the car and urgently get the V5 sorted out. Take your documents (vehicle sale agreement, finance agreement) and demand to speak to the general manager/dealer principal if you don't get immediate results.
You should also contact the finance company, since it's actually their car. The only potential problem with that is that they may want to take the car back if they are concerned over the legitimacy of the agreement.
I would suggest visiting the forum at legalbeagles.info. It is an independent and impartial forum for legal and consumer advice, so their members will be able to give you advice on how to progress the matter.
(On the positive side, it's probably impossible for you to get a speed camera fine, since there's no registered keeper for them to send the fine to…)
Andy MacDonnell
I'm ten months into a 4 year PCP deal with Audi solutions on a new s3.
I've just had a text from Audi saying there is a high demand for used Audis with the same specification as mine and that this would have a positive effect on it's valuation.
This seems really early in the PCP contract to be contacting the customer. Is it possible that a nearly new vehicle with low miles would have a strong value at this stage?
Hi Andy. You are correct; it is very early in the contract to be contacting the customer to change their vehicle. Unfortunately, it is something that manufacturers and dealers are doing more and more, and the 'high demand for your PX' line is one that is regularly rolled out.
However, it is highly unlikely that changing your car 10 months into a 48-month PCP is going to be a good deal for you. For more information, have a read of our article about the early upgrade myth.
On Saturday we agreed and signed paperwork for a renault captur. We chose the model with 2 colours ,black body orange roof. Salesman advices could have a one with silver soft interior and exterior trims, already made we would get £500 off we also ordered before 1 April and price increase. After thought over weekend I decided I'd rather have orange trims. Sales man has said already on order but they could fit and supply trims for £1707. The optional soft trims come with our model so I expected to have £500 to pay to bring back to original price. I asked about cooling off period and salesman said the nature of the business there is no cooling off period and the car is due to be delivered to them on 14 April so to late to cancel. We didn't pay deposit but we did pay for a gap insurance.
Hi Angsimp. The dealer is correct; there is no cooling-off period on vehicle contracts unless the car is bought off-site (eg – phone or internet order).
Deals on cars in stock for this month will almost always be better than deals for cars on order for next month; it's always the way. The dealer has no reason to agree to cancel your order.
Hi there stuArt
Thanks for getting back to me. Disapointing but lesson learned.
I recently considered buying a new BMW 2 series and my local dealer is offering a deposit contribution of about £2600.
My curren car is in about £3600 negative equity as it will only be 3 years into a 4 year PCP in September.
I was going to put £1000 into the deal to clear the negative equity but the dealership has told me that only the full amount of a MANUFACTURER deposit contribution can go towards paying off negative equity. They told me that due to a VAT implication the full amount of a DEALERSHIP deposit contribution cannot be used to clear negative equity and so they would require £1400 from me.
Is this true or are they trying to fool me?
Thank you
Hi Chris. I'm not saying it's not true, but I've never heard of it before and I've worked for several dealers who have used dealer contributions to clear negative equity. There may be some policy in place at that particular dealership, but it seems unusual. Without knowing exactly what they have said and in what context, it's hard to accurately judge.
I'd get a quote from another BMW dealer and see if they tell you the same thing.
Emma Smith
Last year I got a 2 year old clio from a car dealership through PCP. The agreement was I pay for 4 years, I return it and trade it in for another car – usual deal. HOWEVER!! The car dealership has since closed down. I still pay Barclays the monthly payment, but I am feeling very insecure about being left with a car that I don't want – if fact so insecure I want to change the car in the next few months! Can I go to another dealership and do a part exchange or something now as the original dealership has closed down?
Hi Emma. You can go to any dealership for your next car; you are not locked into any particular dealer or brand. When the time comes, the dealer where you purchase your next car will be able to assist with settling your current PCP agreement. So there is no need to feel like you have to rush into changing your car if you are happy with it.
hello, i have had a hyundai for 10 months on a pcp, i was looking at trading it in for a different car, i know i have to pay the negative equity off in order to trade it in for a different car, but i have just got the log book out and noticed an illegal problem, the finance is in my wifes name, so expecting to see her name on the log book, i was surprised to see mine. I know of this to be illegal from the days of when I sat my saf etc exams, but how does this effect the pcp? the company who sold the car said "this is not possible and they wouldn't do that" but won't tell me what effect this has, thank you for any help with this matter
Hi Mark. You will need to contact the finance company rather than the dealer (who are always more likely to deny everything). The finance company may be happy enough to simply ask you to change the logbook into your wife's name.
The logbook should show clearly the date when the car was registered in your name, so you will be able to show that it was done when the vehicle was purchased – and was therefore the dealer's responsibility.
Hi Stuart,
I took out a BMW 1 series on a 4 year deal. I am looking to move and by doing so would dramatically reduce my milage (from 25k down to < 10k). As I am doing more miles than normal, this is reflected in the payments as the car would be worth less at the end of the agreement.
Is there potential to renegotiate the terms of the finance deal so i can keep the car but reduce the payments to reflect the lower milage expected at the end of the deal?
Hi Jamie. Unfortunately you can't renegotiate the annual mileage down (although most finance companies will allow you to amend it upwards).
The upside is that your car is likely to be worth more than its GMFV at the end of the term, so you may have some more equity if you are part-exchanging it on another car.
Hi, I'm about to enter into a PCP agreement with Nissan – in fact I've signed all the documents and am due to receive the car at the end of the week. I received a call from the business manager today, advising that the care packages (cover for scratches and dents, scotchguarding) and GAP insurance shouldn't have been included as part of my monthly payment and will need to be paid upfront in full (in effect making my deposit higher) and I will need to sign new documents reflecting the difference. My monthly payment will decrease a little as a result but I'm pretty confused about this. When I questioned this I was advised that as the cover is an insurance product it can't be part of the monthly payment – is this correct or is this a tactic to simply increase my initial deposit? Additionally surely the documents I've already signed with the agreed figures are legally binding? Any advice please?
Hi Anna. This is correct; insurance products cannot be financed in a PCP and have to be paid separately (although the scotchguarding should be fine – except that it's a waste of money anyway). It's less likely to be a deliberate tactic and more likely to be incompetence.
The finance company can simply cancel the contract before it's even activated if the dealer has made a mistake in the figures. You can use this as an opportunity to renegotiate the deal, since your current position is that your contract is void.
Dianne Corkhill
Hi my mother in law has just got my daughter a new car on pcp with her making the payments, as my daughter isn't yet 18 until July.
My daughter then wants to take over the finance agreement & have it transferred in to her name.
Can this be done & then the registration document put in to her name?
I am in a quandary! Have seen nice 3 year old Range Rover for £26k I have been enticed to have a pcp for. I understand how they work but bunny is concerned that we don't own anything and are spending lots of money approx 22k then we have to do it again or start afresh with cash. If we borrow money we will pay £30k but will own a £10k car. Swings and roundabouts I think!!!! Help me someone!!
Hi Dianne. If the PCP is in your mother-in-law's name, then it has to stay in her name for the duration of the agreement. The V5C logbook (registration document) also has to stay in her name. For more information, have a read of our article about accommodation deals.
Hi Sue. I'm not sure what you need help with.
Cars depreciate, so you can pay £26K cash now and you will still own a £10K car in a couple of years.
If you take out an HP or a personal loan, you will be paying £30K rather than £26K and you will still have a £10K car in a couple of years, but paying £4K in interest and fees rather than all the money up front.
If you take out a PCP, you pay off the depreciation rather than the whole car, plus interest and fees. You end up in roughly the same position as an HP, but instead of spending more and having a £10K car at the end, you spend £10K less and don't have a £10K car at the end (or pay £10K at the end to keep it).
Paul Clayton
Hi Stuart.
My father had a BMW 520d SE on a three year PCP. Commenced in July 2015. Unfortunately he was diagnosed with terminal cancer in October 2015 and died (suddenly and earlier than expected) on 19th May. I contacted BMW to enquire as to the options available. Having given them proof of death they have sent me details.
My question relates to Voluntary Termination.
We are under 50% paid but they have shown this an option but require approx 6500 in charges to hand the car back. Given that my father is the agreement holder and deceased clearly they will not be getting this money – he has no estate to speak of.
What will happen if I just return the car to them.
Other options given are to pay off the finance (redemption figure is approx equal to cars resale value)or for a family member to take on the agreement. Whilst this is something I have considered I am unlikely to pass the credit check they have stipulated.
Thanks for any help or advice you can provide.
Hi Paul. If you return the car, the finance company will be entitled to claim any balance owing from your father's estate as a creditor. If there is not enough to pay the finance company from the estate, that should be the end of it and they simply lose out.
If you can sell the car for more than the settlement value, you can pay off the finance company and keep whatever is left.
I would suggest visiting the excellent legal advice site at legalbeagles.info, where you may be able to get more detailed information on how these things work in your circumstances.
Hi Stuart,
I am 28 months into a 4 year contract with Fiat. The car I am driving has caused me nothing but problems so I am looking to hand it back to Fiat in exchange for a different model. Is it crucial that I would need to service the fiat before handing it back, i never have done before.
I am concerned that the problems I am having with the car will cost a small fortune to fix through no fault of mine, surely the corrections to the car would be covered under the 3 year warranty?
Hi Sasha. If you are wanting to claim anything under warranty, you need to have kept the car serviced on time, every time.
Your Fiat dealer may still be able to do warranty work for you, but would insist on servicing the car first to bring its maintenance record up to date. Fiat head office will not authorise warranty work on a car which has not been serviced.
if you are wanting to part-exchange it on a different car, you will probably be in negative equity, so you will have to pay money to settle the current finance agreement before worrying about your next car.
Thanks for the help Stuart,
Would you agree that my best bet is to service the car and keep it for more months so that i am not in negative equity?
We can't advise what decision you should take, because that depends on what your are wanting to achieve and everyone's financial circumstances are different.
In terms of your negative equity, it should gradually decrease each month. For more information, have a read of our article about settling your PCP early.
Hi Stuart,
So – Skoda are offering a £2,000 discount at purchase with a PCP plan at 2.9%.
The car I'm looking at is £30,000 new so approximately £870/year in interest charges. I'm waiting to see the actual PCP contract, but I've been told there is no charge for repaying early (outside of one month's interest). I feel like I have to be missing something – as why wouldn't I just take the £2k discount, then repay in the first month? (since I'm fortunate enough in this case that I can pay in cash)
What am I missing?
Hi Steve. Yes, you should be able to withdraw from the finance agreement within the 14-day cooling-off period and not pay any interest or fees on the finance, and still keep the £2,000 deposit contribution – unless there is a clause in your car purchase contract somewhere which says that if you cancel the finance you have to repay the £2K (and I'm pretty sure there won't be).
For more information, have a read of our article about deposit contributions.
Last year I took a PCP plan on a VW Polo. It is now due a service. I checked through my paperwork and it does not state that servicing requires to conducted through a VW dealer. However I called Volkswagen Financial Services who stated that it does- despite it not being in the lease agreement. This is obviously much more expensive- is there anything I can do?
Additionally I was under the impression that at the end of the PCP plan if I wanted to own the vehicle i would have to pay the GFV of the car as stated at the beginning of the PCP, is this correct?
Thanks :)
Yes, you will be required to have the car serviced by a Volkswagen dealer if you want to claim the G
servicing your car when you have a PCP.
Yes, you are correct that to own the car outright at the end of the term you will have to pay the GMFV amount. If you do this, it doesn't matter where you have the car serviced, as the car's value is irrelevant if you're not giving it back.
Hi Stuart, I'm thinking of buying a Tesla Model S on PCP through my Ltd Company. Whilst trying to justify the enormous cost, I've done a breakdown of total cost of ownership over 3 years. So, I've included the cost of my current car (paid for in full recently) at £30k, then added road tax for 3 years, and fuel. (Haven't bothered with depreciation for simplicity). The Tesla PCP is £18800 down payment and £820 a month. In doing this comparison, am I correct in splitting the £30k (that I saved up for my current car) over the next 3 years, as part of the "cost to my pocket", along side the down payment and monthly repayments for the Tesla? Or should I be ignoring the £30k I saved up, and just comparing the costs for the Tesla against the current running costs for my current car? Also, I gather that the £820 a month payment for the Tesla would be less corp tax, is that correct?
Hi Nick. In terms of "justifying the enormous cost", it depends on what you're trying to justify. You now own a £30K car that you are preparing to sell in order to finance a £70K(ish) car. You are spending £19K on your deposit, and then the other £11K over the next year, and then another £20K or so over the following two years, and then give the car back. If you're comfortable with that, then great.
In terms of what you can claim from a taxation point of view, you will need to speak to your accountant as it will depend on your circumstances.
Hi Stuart,
I'm planning to take out a PCP on a new vehicle (my first PCP, having previously cash bought a car) and part-ex my current car. I'm wondering how best to use the part-ex money. If used to make a bigger deposit, will it essentialy bring down the final balloon payment if I choose that route? Or I wonder though that if I don't go for the balloon but for another PCP, would I essentialy have 'lost' my deposit as there would no longer be an outstanding balance to pay? Is it better to get a cheque for the part-ex value and bank that to use towards monthly payments/servicing/etc?
Appreciate your thoughts.
Many thanks,
Hi Patrick. The final balloon/GMFV is determined by the age and mileage of your car and is a fixed amount.
With a PCP, you are essentially paying off the depreciation between the selling price of the car and the final balloon value. If you put in a bigger deposit up front, you pay less per month. If you put in less now, you will pay more per month, but you are still paying off the same amount of money.
The word 'deposit' is a bit of a misnomer in finance terms. It is an up-front payment, and you do not get it back again. Obviously the more you put in up front, the less you have to borrow and therefore you will pay less interest.
Many thanks for your reply Stuart! Appreciate your advice and insight.
Hi Stuart
My husband bought a Volvo on PCP in March this year. 48 payments plus a GFV. Sadly my husband has recently passed away. I would like to keep the car. As far as can see I have 3 possible options to do this. 1) use savings to settle the agreement early and take ownership the car 2) see if the finance company will give me a PCP of my own to take over the remainder of the term 3) don't tell them and continue to make the payments to the end of the term and then sort it. As with all the admin I now have to sort out none of this is without problems. Can you help me with the pros and cons of each option? Have I missed anything?
Hi Kath. The executor of your husband's estate will need to contact the finance company to inform them of his passing. They will become a creditor of his estate and will want the finance settled immediately.
You can use your savings or take out a personal loan to settle the PCP if you want to keep the car. The finance company may be interested in offering you a new PCP to cover the settlement, but be aware that the terms offered may not be anywhere near as good as the original agreement.
The last option is not legally available, although I am sure it happens. It's more of a 'cross your fingers and hope that the finance company doesn't find out' option, and will present difficulties if you want/need to sell the vehicle or return it to the finance company at the end of the agreement.
Can anyone tell me whether I can apply for a personal car loan before I hand back my car theough voluntary termination? Bmw advised me to secure car finance before handing it back? Does that not look like I am applying for a 2nd car loan as my pcp loan will still be present on credit file? Or do lenders ask about this??
Hi Julie. There is nothing to stop you applying for a personal loan at any time; it is more a question of whether your credit rating is strong enough to support two finance agreements at the same time. BMW Finance is correct in recommending that you have alternative finance arrangements in place before cancelling your PCP.
You don't need the bank to activate the loan immediately, as you will have 28 days to pay your BMW Finance invoice once you cancel the PCP agreement.
I am sure the bank will ask you about why you want another car loan, and you can explain it to them, but they may or may not make any allowances for it.
The risk is that you cancel the PCP, and then for whatever reason the personal loan doesn't happen (or doesn't happen in time) and you have a large invoice for the cancelled PCP that you can't pay.
I did a VT on my BMW back in Oct 2015. I paid the wear and tear costs but not the excess mileage.
just looked at my Experian credit rating, it is red so it affecting my credit rating.
given that I have never missed any of payments, I am now confused why BMW can do this. the excess mileage is £280.
can I demand that BMW remove it. if not , what are my options ?
Hi John. In terms of how you work with out with BMW Finance, I recommend visiting legalbeagles.info and ask the legal experts there.
Hi there looking for some information if you can help,
last year purchased a 2012 audi a5 from arnold clark in october 2015 everything went fine and both parties were happy. however, I've now owned the car for 1 year and just re mot'd it. during this time i have had nothing but problems with it, the start stop doesn't work been quoted £250+ to repair, had problem with central locking shortly after purchase, now it seem the car ecu may be on the road out as i have several warning lights on dash. i took extended warranty out with arnold clark but everytime i phone them about a problem they find some way out of the repair under warranty. i have looked through the warranty items covered and ecu is one thats covered. the car will need to be ran through a diagnostics computer to see what the fault is, and then i will again be charged by arnold clark to do the diagnostic before any work is actually carried out. the car is in good condition and never driven hard or eraticaly.
basically my question is, is there anything i can do about this? I'm in a 3 year pcp and have had so many issues within the first year? I'm worried that the car will give more problems before the 3 year return period, I'm unsure how i can return it in reasonable condition if there are continual problems. I'm upto date with all relevant services and mot's. and look after the car very well (its my pride and joy)
any advice would be greatly appreciated as I'm really worried about it,
thanks in advance,
Hi Dylan. With an aftermarket used car warranty, you will usually be expected to pay for diagnostics and inspections to establish clearly whether the fault is covered under your warranty. If it is, then the warranty company will reimburse you for the initial expenses. If it's not, then it will be up to you to fork out for any repairs.
Aftermarket used car warranties are very different from new car warranties provided by the manufacturer. If you have any questions about the warranty, I would suggest speaking to the warranty provider directly rather than going through the dealer. Unfortunately, Arnold Clark seems to have a very poor reputation for after-sales service when customers have problems. We get more complaints about them than any other dealership group.
I've read your previous advice regarding cancelling the PCP finance within the 14 day cooling off period, and keeping the dealer contribution.
However, I've now received the credit terms and under the Right of Withdrawal section, it specifically states that all money owed must be repaid, plus any contributions received in relation to the credit.
Clearly, this is intended to claw back the discount, but how enforceable is it? Does it constitute an unfair contract or breach any FCA/Consumer Act guidelines with regards to incentivising credit?
It will depend on what is written in your vehicle purchase contract and finance contract. They can't make up conditions or invoke clauses that you were not told about before the purchase.
However, I would recommend getting a professional legal opinion regarding your contractual rights. Start by visiting Legal Beagles, which is an excellent consumer advice website.
My husband got a car on pcp last January and we have recently found out that the garage we got it from has gone into administration. The money lender Santander are still fine but where will we stand when it comes to the end of the contract agreement?
Once the car has been sold, the dealer/garage is no longer part of the equation. Your relationship is purely with the finance company, so it should not affect you in any way.
At the end of your contract, you can take your car to any dealership or garage to sell or part-exchange. The dealer will settle the outstanding finance as part of buying your car. If there is anything left over once the finance is settled, that's yours to keep or spend.
I have a very large balloon payment on an audi q3 £15,000 by end of march
due to my bad credit now and am not able to re finance with audi where i purchased from actually its vw finance….. If i pay half would they still take ownership of the car or will it have to go to court first if i have paid 75% of the total finance…. And again contact them and ask if they could re finance the final £7,500 if i show them proof of bank statement as my business is now doing great and i also have a part time employed show the last 3 months… i dont want to loose the car as i have pound 340,000 in total and every year it has lost value and now only worth around £17,000 if i sell private settling the finance at same time. BUT AGAIN I WOULD RATHER KEEP THE CAR
Hi Debbie. Most car finance companies no longer allow any customers to refinance the ballon payments, so your credit score may not affect their decision in this matter – you would need to speak to Audi Finance and ask them about their policies.
The car belongs to the finance company until you have paid every last penny, so if you don't pay up they will be entitled to take action against you.
Most people who want to keep their car at the end of a PCP will take out a personal loan to pay off the balloon. Whether or not you will be able to do so with your credit situation is not for me to say.
Ashley Manning
I have a 4 year finance deal with Renault. I am a little confused as to what i have to pay at the end of my agreement. I paid 1 x payment of £372 and then payments 2 – 48 are £273 per month. Now my agreement states payment number 49 is £4234 and a balloon payment of £4085. This has confused me as i thought at the end of my agreement i can just pay the final amount or hand the car back/exchange. I wont have to money to pay the 49th payment and a balloon payment.
Hi Ashley. Your final fee (payment 49) of £4,234 is probably the balloon of £4,085 and a fee of some sort which accounts for the other £149. This could be an Option to Purchase Fee or some such thing that the finance company makes up in order to take a bit more money off you. It should be spelled out in your finance agreement.
Emily Blewitt
Hi Stuart, can you help? I'm on year 3 of a 4 year PCP agreement and I've recently defaulted on some credit cards because I've entered into payment plans with creditors. When I come to wanting to giving the car back and wanting to take out another PCP on another car, will I then struggle to get finance? Even though I've never missed a payment on my car finance. Hope that makes sense? Thank you Emily
Hi Emily. When you hand your car back, the current finance plan will be concluded. Any new PCP agreement will require a new application, and will be considered on your position at the time of the application.
So your chances are not going to be great, but the finance company will take a wide range of factors into account.
Hi Stuart
just taken out a new PCP for a VW. This is the 3rd pcp I've had but this one features a high interest rate (rather curious in view of interest rates having fallen over the past 6 years). As usual, good discounts offered with deposit contributions and free services so difficult to turn down. However, I note that the final payment is significantly higher as my expected annual mileage rate is now less than traditional. In some respects, the hand it back option at the end of the three-year finance may be attractive, particularly with the high final payment value. It was my intention to pay the full amount either within the 14 days or after a month. However, just wondered playing devils advocate if it's technically possible to overpay so the final payment is less than the balloon payment to keep the contract operational and interest values less. In that instance at the end of the 3 years, is it technically valid that I could hand the car back and the finance company would then owe me money?
Many thanks
Hi John. The final value (GMFV or balloon) is calculated based on the car's predicted value at the end of the term, and the mileage will affect that value. It is not negotiable or adjustable by the dealer or buyer as part of the finance application.
If you make any overpayments during the term, the finance company will recalculate your monthly payments accordingly but it will not reduce the GMFV; that remains the same. If you take that to its extreme (and if the finance company allows you to), you could potentially be paying nothing per month if you have overpaid enough, but it still won't affect the GMFV.
If you hand the car back, you won't get any money back, regardless of what the car is worth relative to the GMFV. If you sell the car yourself, or PX it for another vehicle, and you get more than the GMFV, then you obviously get to keep anything over and above the GMFV.
Many thanks Stuart for the detailed reply. On reflection it is a contract so its all or nothing so to speak with the balloon payment.
I am about to come to the end of my 36 pcp term and have only had my car serviced once, recently. Does this mean I won't be able to part exchange? I would be after a cheaper model this time due to changes in circumstances. Thanks in advance.
Hi Lucy. You can part-exchange the car, but expect the dealership to mark down the price offered due to the lack of a complete service history.
I recently ordered a new car, paying for the car part cash deposit and part PCP finance (arranged through the dealership – Skoda Finance). When I signed all the paperwork the dealer stated a delivery date of 30th June and this was the same date that my PCP finance deal started.
As the date for delivery got closer, I was chasing up with the dealership to see where my car was and was told that it arrived at the dealership on 30th June but was not ready to collect. 2 days later the dealership called to book a date/time for me to collect the car, great I thought. However the dealership is not able to have the car ready until 10th July, citing that the workshop was extremely busy and that they required 5 working days to prepare the car for collection, then with busy a busy weekend (this weekend coming) it is just taking a long time.
So I am in a situation where I have paid for the car and the finance deal has started but will be 11 days into the finance period before I actually take physical ownership; the dealership is unable/unwilling to prioritise the preparation of the car to get it ready earlier.
I acknowledge that all finance must be in place before I can collect the car, but I would have thought that just a day or two prior to collection would be the norm. I suspect that the dealership quoted delivery and arranged finance to start on 30th June in an effort to improve their monthly sales targets, but that is of little consolation to me as I am now effectively paying for a car that I don't yet own.
Hi Kieran. The "5 working days to prepare the car for collection" thing is a flat-out lie, unless you have ordered some complicated and bespoke work to be done to the vehicle.
It sounds like the dealer never had the car in their possession on 30 June, or it had arrived but was then damaged in some way and had to be repaired. Either way, you are right to complain that the vehicle was registered and the finance agreement was activated last month (so you have paid road tax for all of June), yet you still don't have the car.
If a dealer needs to get a car out the door on the last day of the month, they can turn a vehicle around in an hour – I've been through it myself when I worked in car sales. The dealer is almost certainly lying to you about what has happened and is happening now.
I would suggest contacting the finance company to explain what has happened and make an official complaint. The finance company is going to be reluctant to cancel the agreement and start again (and the car is already taxed, so the dealer won't want that either), but you should be pushing for appropriate compensation for them screwing you around.
I have a Mercedes on a 48 Month PCP which is ending on the 1st September.
I have arranged for the car to go back on the 28th August to save me putting it through another MOT
Service is not due for another 3 months.
Car is in good condition and and no warning lights are showing.
Recently had a new tyre fitted and the mechanic said the Front Discs could do with replacing.
Question when I hand the car back can they charge me for replacing the Brake Discs
Regards Assad
The car must be in good condition and with no damage. That's it. As long as the discs are legal and safe, you don't need to replace them before handing the car back.
Hi, We just signed the finance documents yesterday as a part of PCP. Have not got the actual delivery of the vehicle as I didnt had the identity proof. Also paid the initial deposit. So all good here but until I saw in the morning today that company contribution in PCP has increased from 2000 to 3000. Am I still eligible for it and can ask the dealership for it ?
Noel McTigue
I signed a PCP agreement yesterday, which I now want to cancel. The Sales order form has an incorrect lower amount for my part exchange. I have disputed this with the dealership. They are unwilling to refund the deposit and cancel the agreement.
Believe Finance side can be cancelled, just the dealership that is unwilling to co-operate. Contacted immediately but not being reasonable. Won't consider refunding part of the deposit.
Any advice?
I enquired about a new pcp today as mine has now finished. I was offered a good deal at the same spec as my car I currently have now. I paid a £100 deposit for the car but signed no paperwork. I've checked the spec of the car since I have got home and discovered that the spec on the new car is a downgrade compared to my old car. Because I haven't signed a pre order form or a finance contract, can I just walk away and lose my deposit? I would have to sign a new contract for a new car surely? And have not legally binded myself to the new car as of yet?
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