Paying off PCP 'immediately' to minimise interest?

HangTime

HangTime

HangTime

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I am currently researching new cars and as part of that I have come across some offers on new cars that are dependent on taking out PCP to receive part of the discount (manufacturer/dealer contribution). As I understand it this is because the dealer gets a kickback if they can convince the customer to take out finance so they can offer bigger discounts for finance vs cash.

Now, I don't actually want finance unless it is 0% but as I understand it there may be ways round this in terms of something like this:
1) Buy car taking out finance based on the maximum allowed deposit and minimum term
2) Soon after purchase, make a repayment for the vast majority of the outstanding balance (leaving say a nominal £100), I read something to suggest they have to allow this by law i.e. An early payment but not actually terminating the finance agreement yet?
3) Then arrange to end the agreement early and pay the balloon, this would incur a charge limited to a maximum of 2 months interest? So presumably very little but possibly some sort of additional admin fee?

Has anyone done something like this before? Are there any pitfalls t watch out for? From what I read it wasn't 100$ clear to me whether this process would work for PCP as well as other types of finance.

I am not set on this course of action but need to figure out if it is feasible in practice so I can weigh up the options,
 
Surely you need to read the specific contract before signing to get these answers. They could put anything in the small print, there's no international standard to adhere to.
 
There's sometimes a cooling off period for 14 days, worth speaking to the finance company involved to find out as it may be possible to take out finance and then ask for a settlement figure. You may have to make one finance payment otherwise it may be seen as 'cancelling' the agreement and essentially withdrawing from it (thus leaving you without a vehicle).
Read the print!
 
Obviously I will be reading the small print and asking a dealer once I have decided on a specific make and model but right now I am just in investigation mode to figure out if it is even something worth pursuing. Essentially to make buying a new car worthwhile a lot of the time it seems dependent on these PCP discounts as otherwise the depreciation is too great compared to a used car - however that in turn is dependent on being able to dodge most of the interest as otherwise the discount just gets eaten up by the cost of finance.
 
I did exactly this when I got my car , as there was a £2K contribution from VW for taking out the PCP. After 3 days of having my new car and I was happy with it , I called up and told them that I wish to withdraw from the finance and requested a settlement figure , i.e exercising my 14 day cool-off period. Got the remaining balance to pay off and details to pay within 30 days . Only extra was the £10.50 interest that accrued over the 3 days.
 
My understanding is how Lustral explained it. However, I've also been told by sales people "to leave it 6 months or sometimes they take back the extras" - eg. service package or something like that. How true that actually is hopefully somebody else can weigh in, might just be related to how long finance has to run before they get their commission!

I don't believe I've ever heard of them lumping the deposit contribution back on top due to exercising the right to withdraw.
 
Thanks for the feedback. I think from what I've read the clawback can happen to the dealer if you withdraw during the cooling off period, but not the customer. So the sales people at the dealership will try and steer you away from that because they might get 'stitched up' by the customer withdrawing and them not getting their money from the manufacturer finance arm.
 
opstrat said:
What kind of realistic savings can you achieve doing it this way?
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Well in my case £2K plus any other discount that you can haggle/ negotiate off. Also there might be special service plans that can only be had when taking out their finance package , i.e in my case the VW 2 year service plan for £149.
 
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My mum did exactly this. She bought a focus that had an extra £1k discount if bought through PCP. She made one payment and cleared the rest of it in one go with no issues. It's worth doing!
 
Our accountant did this on his last car as they threw in a huge discount and 3 years free servicing, Paid it off a month after getting the car.
 
Yep, it's a brilliant idea actually. I've done a lot of research into PCP over the past two months as I've just ordered a new car using PCP. The discounts being offered are extremely good, and better than anything coming back from coast2coast.
You have lots of options really, including ringing the finance company directly asking for a settlement figure. I'll be doing the same thing myself.

My PCP is just over 3% so if I can match that with a straight loan or better than I'm laughing.
 
I am also looking to do this also but was thinking of making the 1st month (maybe 2nd as well to let things settle down properly) and then clearing the whole thing rather than buying straight up cash.

Sometimes the incentives to take 'their' finance are worthwhile the tenner or so a month interest.
 
Maundie said:
I am also looking to do this also but was thinking of making the 1st month (maybe 2nd as well to let things settle down properly) and then clearing the whole thing rather than buying straight up cash.

Sometimes the incentives to take 'their' finance are worthwhile the tenner or so a month interest.
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Becareful when doing that as there might be a 'early termination free' or 'settlement fee' added on point if you choose to pay it off after a month or two. As always , read the small print
 
Lustral said:
Becareful when doing that as there might be a 'early termination free' or 'settlement fee' added on point if you choose to pay it off after a month or two. As always , read the small print
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Yeah was going to check the small print, still if you have to keep the finance for 6 months there should still be a decent saving.
 
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