Paying off PCP 'immediately' to minimise interest?

zoomee · 22 Mar 2017 at 13:05

I took the PCP option when I bought my last VW CC. Total cost was £15k. Had the cash but If I purchased using PCP, VW had a special offer on - 2 years free servicing AND warranty. I jumped for it as it also included a free £500 deposit on the car.

I waited it out for 2 months (minimum term recommended to ensure I keep the warranty & servicing benefits) - Then decided to pay it all off. I was shocked when they sent me the bill!!

BE CAREFUL - They screw you for all the interest up front - I ended up having to pay about a grand more than what I should have due to the interest they had whacked on (its in the terms and condition of VW PCP finance).

Oh and another thing - This free 'warranty' and servicing they give is transferable to a new owner if you sell the car (they will deny it at first obviously - just ring the VW finance team direct and they'll tell you, you can) - I used it to get dealer prices for my car

[TW]Fox · 22 Mar 2017 at 13:11

zoomee said:
BE CAREFUL - They screw you for all the interest up front - I ended up having to pay about a grand more than what I should have due to the interest they had whacked on (its in the terms and condition of VW PCP finance).

This isn't how it works so not sure what that extra 1k was about.

zoomee · 22 Mar 2017 at 13:29

I rung them (VW finance) and they explained - they whack the interest on straight away. This is outside the 14 day cool-off period btw.

I'll try and find the settlement statement when I get home bud.

Lustral · 22 Mar 2017 at 13:46

zoomee said:
I waited it out for 2 months (minimum term recommended to ensure I keep the warranty & servicing benefits) - Then decided to pay it all off. I was shocked when they sent me the bill!!

I think thy got you there. I still kept my service plan etc etc when i paid mine off pretty much straight away.

zoomee · 22 Mar 2017 at 14:01

Lustral said:
I think thy got you there. I still kept my service plan etc etc when i paid mine off pretty much straight away.

Darn it - oh well you live you learn. It was a mate of mine (who works for VW) who recommended I leave it a couple of months to be able to retain the servicing and warranty. I cussed the poopookakaa out of him when I had to settle and it cost me more than I expected!

Stupid ex-wife and her 'I've got a masters degree in business' recommendation. lol.

Flipt · 22 Mar 2017 at 14:02

I bought a new Audi A5 on PCP as it worked out I got a £1,500 saving and haggled 2 years free servicing and paint protection. I rang up Audi Finance and used my right to 'withdraw' using the 14 day cooling off period. They sent me a settlement letter through the post and 30 days to pay it all off. Job done!!

The dealer will obviously want you to pay up to 3-6 months so that they get their commission. Warning you that you will lose the £1,500 saving and servicing, this is a ploy. So long as you don't go past the 14 day cooling off period you will be fine and should be able to keep the lot.

zoomee · 22 Mar 2017 at 14:05

The way it was explained to me bud was to allow at least a month for all the paperwork to go through for the servicing and warranty.

Fell for the 'ploy'

- Will try to get the figures when I get home, between the car salesman, my ex-wife and me not being well at the time, it was one costly car.
First car I lost £3k on within the first year (I never buy brand new)

Abyss · 22 Mar 2017 at 19:35

I've done it twice now with vw finance with no issue. On my current car I got a £2k deposit contribution and two free services, then withdrew within 24 hours of taking out the finance. The key is to withdraw not to settle if you want to avoid paying extra costs.

I'm pretty confident that all this talk by dealers about keeping it for a month or so is just so they get their commission.

Note each time I have read the terms and conditions in detail highly recommended doing this.

Richie · 22 Mar 2017 at 19:53

HangTime said:
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.

Most of the time, its not the dealer receiving a "kickback" but the finance company themselves that are offering "deposit allowances" if you take their finance i.e. the discount is coming from the finance company, not the dealer.

FerretBoy · 22 Mar 2017 at 20:14

I plan to do this when i pick up my golf. Canceling within 14days

HangTime · 23 Mar 2017 at 07:53

opstrat said:
What kind of realistic savings can you achieve doing it this way?

Fough figures but I'm looking at cars mostly around £22-24k mark, with discounts you can get these for say £17-18k but around £1-3k of that discount might be PCP related. That isn't too bad compared to say a 1 year old second hand model at say £15-16k.

Jamesyboyjim · 23 Mar 2017 at 10:41

My missus paid off her finance early and I believe they added a fee on the end of the final settlement figure, it still worked out far less than another few years interest at the ridiculous % it was.

londonbairn · 23 Mar 2017 at 13:54

You have the right to settle a loan whenever you wish. Have done this as well to get a dealer contribution / lower OTR and then just paid it off almost straight away with a few pounds interest

Bunka · 23 Mar 2017 at 14:24

londonbairn said:
You have the right to settle a loan whenever you wish.

Not quite true, it can depend entirely on the terms stated when you're signing the contract. Think of early repayment fees on a mortgage for instance, same thing.

Also, word to my West London brethren.

kaku · 23 Mar 2017 at 16:47

zoomee said:
BE CAREFUL - They screw you for all the interest up front - I ended up having to pay about a grand more than what I should have due to the interest they had whacked on (its in the terms and condition of VW PCP finance).

[TW]Fox said:
This isn't how it works so not sure what that extra 1k was about.

Might have been interest payments were front-loaded, so the first two months' payments only paid off a tiny bit of the capital - basically being "worthless" when it comes to settling the actual amount owed.

kindai · 23 Mar 2017 at 17:57

I think people are getting withdrawing from a finance agreement and settling finance early confused.

Kyle009 · 24 Mar 2017 at 15:25

If you settle "early" you could still have to pay the full finance interest settlement.

What you definitely can do by law is withdraw a finance agreement within 14 days and only pay a daily rate of interest. You'll still keep anything associated with the initial purchase (warranty, service plans paid outright, etc).

Few people I know use PCP to get the deposit contribution and then immediately withdraw from the finance agreement the next day. No issues with servicing or warranty or them asking back the contribution.

kindai · 24 Mar 2017 at 18:42

[like button] @ Kyle

Fr0dders · 27 Mar 2017 at 12:37

Kyle009 said:
If you settle "early" you could still have to pay the full finance interest settlement.

What you definitely can do by law is withdraw a finance agreement within 14 days and only pay a daily rate of interest. You'll still keep anything associated with the initial purchase (warranty, service plans paid outright, etc).

Few people I know use PCP to get the deposit contribution and then immediately withdraw from the finance agreement the next day. No issues with servicing or warranty or them asking back the contribution.

So I guess the above is what you do to avoid this. Because zoomee waited 2 months, he was outside of the cooling off period so could only settle and not withdraw.

Lustral said:
Be careful 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

zoomee said:
I took the PCP option when I bought my last VW CC. Total cost was £15k. Had the cash but If I purchased using PCP, VW had a special offer on - 2 years free servicing AND warranty. I jumped for it as it also included a free £500 deposit on the car.

I waited it out for 2 months (minimum term recommended to ensure I keep the warranty & servicing benefits) - Then decided to pay it all off. I was shocked when they sent me the bill!!

BE CAREFUL - They screw you for all the interest up front - I ended up having to pay about a grand more than what I should have due to the interest they had whacked on (its in the terms and condition of VW PCP finance).

Oh and another thing - This free 'warranty' and servicing they give is transferable to a new owner if you sell the car (they will deny it at first obviously - just ring the VW finance team direct and they'll tell you, you can) - I used it to get dealer prices for my car

Dazzy · 27 Mar 2017 at 19:37

I got a £2k discount and 2 years free servicing from Volkswagen for taking out PCP. A couple of days after collecting the car I phoned VW finance and asked straight out if I pay off the finance now does it affect the discount/servicing and was told no. After being given a settlement amount (a few days interest was charged) I was given a number of weeks to actually pay it off. I imagine I would have struggled to get the same price paying cash direct to the dealer.

Paying off PCP 'immediately' to minimise interest?

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