Pcp, pay off all monthly payments early?

16
Found 23rd Jan
hi

I am 1/3 through a 3 year pcp deal at £120 a month with a 4745 guaranteed future value.

If I pay all remaining monthly payments of £120x24 off now (£2880) and pay nothing until the end of the deal where I have the option to pay, will I save on interest?

thanks,

Andrew
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16 Comments
Might be an idea to call them, and see what the true cost would be, as the £120pm for 24 months will include interest.
in theory yes, but as above, you might end up paying less dependent on the interest rate
Ok, sounds good. Yea hopefully I'll spend less than 24x120. And then leave the balloon payment untill the end to see if it's worth buying it.

I was wondering if it was possible at all since I received a heavy discount over the sticker price through a pcp. There car values was 11k and I got it for 8.1k, add interest it became 9.1k. but hopefully I can have the best of both. Discounts through the pcp without the interest.
Unless you pay off the full amount you will still be paying interest on the balloon payment.
You have to pay the gmfv or you will still have an ongoing finance agreement, with interest being charged. You might save some interest by reducing the loan amount though. Not sure though as I've never had anyone do that before.
Yes you should save the interest charges.

Best thing is to call and ask for an early settlement figure as their system will do the recalculation with reduced interest due on the outstanding balance.

I believe there were new FCA regulations a while ago that means they are not allowed to charge interest for a period of time during which the loan was not held. i.e. In your case, if you settle early, they cannot charge interest on the remaining 24 months of your agreement as there will no longer be a loan in place for that period of time.

They are allowed to charge a (small) admin fee for settling early but I think this is somewhere between £10-£50 tops.
Suzannzan7 m ago

Yes you should save the interest charges. Best thing is to call and ask …Yes you should save the interest charges. Best thing is to call and ask for an early settlement figure as their system will do the recalculation with reduced interest due on the outstanding balance.I believe there were new FCA regulations a while ago that means they are not allowed to charge interest for a period of time during which the loan was not held. i.e. In your case, if you settle early, they cannot charge interest on the remaining 24 months of your agreement as there will no longer be a loan in place for that period of time. They are allowed to charge a (small) admin fee for settling early but I think this is somewhere between £10-£50 tops.


There is still a loan unless they also pay the gmfv which it seems they don't want to do.
Doing this will affect your credit rating and may stop you from getting credit in the future
CoeK27 m ago

There is still a loan unless they also pay the gmfv which it seems they …There is still a loan unless they also pay the gmfv which it seems they don't want to do.


Good point! Although, they will still save on interest on the monthly payments that are not in place for the 24 months in question.
I'm reluctant to clear the whole lot off as it will give me flexibility should the vehicle be worth less than the GFV. Also, as mark stated exiting early can have an adverse effect on credit. At the moment it is worth less than the amount outstanding so it is not beneficial to clear the entire balance.

The monthly payment, however, represents an opportunity to effectively pay them off and pay nothing per month for the next two years saving on interest (3k over 2 years), since these payments are a given regardless.

But after scoping the internet, I cannot find anybody who has done this. People tend to pay off the full amount.
smellyonion12 h, 36 m ago

I'm reluctant to clear the whole lot off as it will give me flexibility …I'm reluctant to clear the whole lot off as it will give me flexibility should the vehicle be worth less than the GFV. Also, as mark stated exiting early can have an adverse effect on credit. At the moment it is worth less than the amount outstanding so it is not beneficial to clear the entire balance.The monthly payment, however, represents an opportunity to effectively pay them off and pay nothing per month for the next two years saving on interest (3k over 2 years), since these payments are a given regardless.But after scoping the internet, I cannot find anybody who has done this. People tend to pay off the full amount.


what makes you think exiting an agreement has an adverse effect on your credit score?

you had a debt - it is settled in full. why would that be a negative?
Edited by: "adamspencer95" 24th Jan
adamspencer952 h, 52 m ago

what makes you think exiting an agreement has an adverse effect on your …what makes you think exiting an agreement has an adverse effect on your credit score?you had a debt - it is settled in full. why would that be a negative?


You're right, I misunderstood, confused with the 50% walking away clause.

Anyway, I've called them up and they say it's not possible. Paying lump sums does not reduce the interest.....without settling the agreement....

It'll cost £7,006 to settle fully, a saving of £490 interest. Is it worth it? Autotrader tells me it's worth £6.7k...
smellyonion1 h, 53 m ago

You're right, I misunderstood, confused with the 50% walking away clause. …You're right, I misunderstood, confused with the 50% walking away clause. Anyway, I've called them up and they say it's not possible. Paying lump sums does not reduce the interest.....without settling the agreement.... It'll cost £7,006 to settle fully, a saving of £490 interest. Is it worth it? Autotrader tells me it's worth £6.7k...


then they have misled you - all regulated finance arrangements must allow early settlement, either in part or in full. the corresponding interest must be reimbursed/negated.

ring back stating this - no amount of small print will get them out of this legal requirement.

if you are definitely going to keep the car, sure. if you think you might give it back, probably not. on such a 'fairly' low value PCP, i dont think you will lose out significantly either way.

having no finance makes it easier to sell privately.
Received this response

The interest on the vehicle is applied from the start of the agreement, I can advise that each monthly payment is made up of part interest, part value of the vehicle. At the start of the agreement the first payment is all interest, the second payment will be something like 95% interest and 5% value of the vehicle – this is just an example and the percentages will be different on your agreement. If you would like exact figures of how each payment is made up we can supply a statement of account to show this.

If you decide to settle the finance there is a rebate, so the final settlement price will not include any future interest that would be on future payments. So it is beneficial for the customer to settle early

Surely they can't charge their interest like that?
adamspencer9524th Jan

what makes you think exiting an agreement has an adverse effect on your …what makes you think exiting an agreement has an adverse effect on your credit score?you had a debt - it is settled in full. why would that be a negative?



Because lenders want to see a pattern in the loan payments not just that you had a loan and it was paid for.

An example in my case is that I over pay my mortgage and have just applied for another one for a buy to let and I had to prove that my mortgage co was OK with me overpaying and even then they were not to happy about it. Managed to talk them around by saying I was reducing my future mortgage payments to make the new loan more affordable.

They said to me that any under or over payments are seen as a possible issue in money control
markvirgo11 h, 14 m ago

Because lenders want to see a pattern in the loan payments not just that …Because lenders want to see a pattern in the loan payments not just that you had a loan and it was paid for.An example in my case is that I over pay my mortgage and have just applied for another one for a buy to let and I had to prove that my mortgage co was OK with me overpaying and even then they were not to happy about it. Managed to talk them around by saying I was reducing my future mortgage payments to make the new loan more affordable.They said to me that any under or over payments are seen as a possible issue in money control


completely separate potential issue. sounds like they were more concerned about affordability rather than credit score

unless you close every account early, it wont make any difference to your credit score. lenders do like to see stability, so having some old accounts with regular payments is good, but paying one loan off early wont negatively affect you, especially a secured loan such as car finance.
Edited by: "adamspencer95" 26th Jan
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