Should I pay off my PCP early, ahead of me selling/trading my car?

WhiteCobra · 7 Sep 2020 at 16:56

Hello all - looking for a little bit of advice on how to proceed as this is the only PCP car I've had.

I'm currently 33 months into a 48 month PCP deal on my Mini F56 JCW. There's currently a balance of a bit over £18k but the settlement figure is £17.5k. The PCP is at 5.9% apr and I have monthly payments of £300. Online valuations give it a trade-in value of £17k and private of £18k.

We're now expecting our first child in March so the days of me having a 3 door hatch are numbered. I'm looking at getting a second hand 3 series for roughly the same value that's in the car now and intend to finance this with a 5 year bank loan at 3.5% - which had me wondering...

Should I just take out the 5 year loan now and settle the PCP immediately?

My intention would be to sell it privately in the coming months, I work from home currently and the wife has a car, and then look to buy it's replacement shortly after. Surely there would be less hassle in selling the car privately with no secured finance on it? Mini Finance have already advised me that due to C19 it is taking them up to 48 hours to provide confirmation to potential buyers that the finance has been settled.

I'd also consider just trading it in - but I know I'm unlikely to get what I want for the Mini if I'm going to be using my own finance to purchase a car anyways... What's the best action to take in this scenario?

Any suggestions/thoughts?

Thanks
Josh

HangTime · 7 Sep 2020 at 17:19

If due to WFH you are not making much use of the car then it probably makes sense to get shot of it, it sounds like maybe you can afford to be patient and wait for the right private buyer to get you to break even or better on the settlement figure.
What car does your wife have? Have you considered just running down the PCP and then handing it back, baby would be what 10 months old at that point? If the wife's car has enough space that might be another option,

WhiteCobra · 7 Sep 2020 at 17:49

We both have JCWs purchased the same time... I'm in the better position to trade as mine has more value in it and I made a larger deposit at the time of purchase - she still has roughly £1.5-2k of negative equity in the car.

I was hoping to get a "dad" car in plenty of time as we'll probably need to wait for her to close that equity gap a bit more before looking for the right Mini Clubman she wants.

I think you might be right.. I should just stick my car up for a little over £18k and wait for the right buyer to come along. Time to stick the standard exhaust back on!

DereksDontRun · 7 Sep 2020 at 19:45

Can you even sell a car with pcp outstanding on it? I thought you couldn't until the pcp was paid off, but you can trade it in (as they effectively pay the settlement and use the difference between trade value and settlement as a deposit).

options I can think of:
1) complete remaining PCP and trade in against your desired beemer (easy as Mini is owned by BMW) with hopefully a little positive equity for deposit. (possibly only a k or 2).
2) VT the pcp when you've completed 50% total payment, probably need to be closer/past 40 months into 48month contract? Could be worth a check. Basically walk away from the PCP.
3) Trade it in with the pcp outstanding against the car you want at a dealer (probably end up with zero deposit, or slightly owing if the settlement is more than the dealer is willing to pay for the car's trade in price)
4) pay off the pcp with the settlement figure (sounds like you'll need a bank loan) - then either sell the car privately or trade in like option 3.

Sounds like time is a pressure, so options 1 and 2 are down. So, get a quote from BMW for trade in price before working out if you want to bother with bank loan. Then you need to work out how much it's worth to mess about selling the car privately, how much you'll realistically get for it etc. If it really is 18k private, then you might actually have a tough time selling it, as at that price a LOT of people will prefer to pay a bit more for a dealer warranty (or even approved used) - so, you're potentially sat trying to sell it for a while, slowly reducing the cost towards the original trade-in price (at the start of a possibly monster recession).

WhiteCobra said:
I should just stick my car up for a little over £18k and wait for the right buyer to come along. Time to stick the standard exhaust back on!

try to get "my car" out of your head with pcp. you don't own anything until the pcp is completed - so either walk away or find the settlement to actually make the car yours.
also, if you've got it modded, then you might be better off buying it (depending how modded), as it's against the T&C of pcp to mod anything. Sometimes people get away with it, other times it could add extra costs to the end, as they might charge you to return it to standard. (could be an argument to trade in before the end of pcp)

Vanquish-Storm · 7 Sep 2020 at 19:57

Have you paid over 50%

WhiteCobra · 7 Sep 2020 at 20:39

I've spoken to Mini Finance and they allow the sale of the car so long as the finance is clearaed as a condition of the sale. So that can either be me, dealer/trade or private buyer settling the debt at the point of sale.

If I sell it before the year end the new customer will still have the benefit of manufacturer warranty until the end of January 2021 - that should put their mind at ease if any issues pop up immediately after purchase. I take your point on the £18k value though, although my car prior to this I purchased privately for £15k so we do exist! Although we are in different times.

Haven't checked the 50% figure - but I assume that's only helpful if there's negative equity involved as you just hand it back and call it quits? Seeing as I'm at the point of pretty much being even it would make sense to sell or trade-in?

+edit+ Mods is just the exhaust, which I can rectify, but the modified one is a replica "mini" valved system that is essentially standard/loud. It would be easier to sell with it on rather than faff with putting a standard one back on so I'd rather not hand it back to mini finance!

johnny6 · 7 Sep 2020 at 21:37

I very much doubt mini finance will notice the exhaust unless the tailpipe is obnoxious

Havana_UK · 8 Sep 2020 at 13:18

In your circumstances I'd definitely consider settling the finance now. The loan to do so will be much cheaper than continuing to pay the finance and you have the added advantage that, come resale time (whatever route you choose), it has no unsettled finance attached to it. What's the GFV/balloon at the end of your 4 years?

Vanquish-Storm · 8 Sep 2020 at 19:01

johnny6 said:
I very much doubt mini finance will notice the exhaust unless the tailpipe is obnoxious

It would be BCA that do the inspection not Mini. Depends who you get from there but the guy who collected ours new a fair bit about them.

If you can sell for the same or more than what you owe the do that.

We had to VT as we were £2k+ short of what was owed, although it looks like it was sold on for more than we owed.

DereksDontRun · 9 Sep 2020 at 19:24

WhiteCobra said:
I've spoken to Mini Finance and they allow the sale of the car so long as the finance is clearaed as a condition of the sale. So that can either be me, dealer/trade or private buyer settling the debt at the point of sale.

This is why you need to pay the pcp before the end.

If you're expecting a private buyer to to settle the outstanding then what?!? You list the car for 18k and the settlement is 17.5k - so say you both agree on 17.5k. They would settle and you get nowt. What's the point? just trade it in against the new car you want...

or, possibly have someone less trusting buy the car. you "sell" the car for 18k and the settlement is 17.5 - so you walk away with £500 in your pocket. You trust them to settle, but they don't (or cancel if they did it infront of you) and either try to sell the car on Facebook for cash cheapo or strip the car of parts and sell them - then you're still paying the finance and they've done one with the car... A prime reason you need to pay it off beforehand.

Also, call me cynical, but until the pcp is cleared, won't it fail an HPI check? If i'm looking to spend 18k on a used car, I'd do a HPI check before viewing it and walk away if anything was flagged. I'd want it all hunky dory and clean before it was listed for sale - which means clearing that pcp 1st (or just trading it in).