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Hi,

Ive seen quite a bit of discussion in the other threads regarding PCP, in particular implications and rules of paying of early.

So far i gather it is possible to pay the whole amount off (loan and optional final payment) within the first month with no penalty and save the interest.

Also it is possible to pay it off after the first month with a penalty of 2 months interest.

Not sure if the above statements are accurate so posting for confirmation.

Anyone have a PDF of the small print ?
 

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Is it not part of the TandCs of the consumer credit act cooling off period allows you to pay off in full within the 1st 14 days or return the goods?
 

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This may have been covered elsewhere, but, once you've taken out a PCP agreement, is it possible to pay a lump sum to reduce your monthly payments while leaving the balloon payment intact? The balloon payment seems a good insurance policy in terms of a guaranteed end-of-contract valuation, but it would be nice to reduce the monthly payments significantly and save a chunk of the interest.
 

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Hi,

Ive seen quite a bit of discussion in the other threads regarding PCP, in particular implications and rules of paying of early.

So far i gather it is possible to pay the whole amount off (loan and optional final payment) within the first month with no penalty and save the interest.

Also it is possible to pay it off after the first month with a penalty of 2 months interest.

Not sure if the above statements are accurate so posting for confirmation.

Anyone have a PDF of the small print ?
The optional final payment is included in the total loan amount, it’s just the final payment, but you do of course have the option of walking away at that point which is a potential benefit of a PCP.

The terms and conditions are all written down on the agreement you sign up to, there’s no mystery, and within 28 days you can pay off the loan amount and own the car, with no penalties.

After that, if you wish to settle early, you request an early settlement figure that will be the amount due under the agreement less a rebate of interest that would accrue should you have let the PCP run its term. This figure will include the balloon/final payment. A penalty of 2 months interest isn’t mentioned anywhere on my agreement.
 

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Interesting. Can they recover the "contribution" that VWFS made towards the purchase?
 

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Interesting. Can they recover the "contribution" that VWFS made towards the purchase?
I don’t see how, the loan amount you’ve legally entered into is the amount after finance contributions, PICG and any dealer discounts have been deducted.

The dealer couldn’t come after you for the discount they offered, same for the VW finance contribution, which is really just another discount.
 

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This may have been covered elsewhere, but, once you've taken out a PCP agreement, is it possible to pay a lump sum to reduce your monthly payments while leaving the balloon payment intact? The balloon payment seems a good insurance policy in terms of a guaranteed end-of-contract valuation, but it would be nice to reduce the monthly payments significantly and save a chunk of the interest.
Yes - that’s exactly what I’m planning to do, pay off as much as possible of what is due over the 48 months. That should leave me paying just a little bit more than the interest on the final purchase amount. My thinking is that this gives me the flexibility to save for the final payment, or a deposit on a replacement car, but also allows me to use the money for something else if I need to.

The way it was explained to me when I almost bought a Golf 8 was that when setting up the PCP agreement VW limit you to a 30% deposit, including any offer contributions. On day one you can phone up and pay as much off as you wish. Some people might clear the whole thing. Others want to do something to reduce the monthly payments.

After that you can make extra payments (I think some small interest penalty was mentioned) and - I was told - decide whether they are off the monthly payments or the final payment. Obviously, if you get to the point where you’ve paid all that is due over the PCP term, then you’re paying off the final purchase amount.
 

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The crucial thing is whether you can separate the 2 elements of the loan (the monthly payments and the balloon) and pay a lump sum that just affects/reduces the monthly payments. Haven't come across anyone who's actually done this yet.
Section 7.2 of the VW PCP agreement covers this;

137794


For the purposes of the loan, the balloon payment and monthly payments are not treated any differently, the balloon payment is still part of the loan.
 

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Section 7.2 of the VW PCP agreement covers this;

View attachment 137794

For the purposes of the loan, the balloon payment and monthly payments are not treated any differently, the balloon payment is still part of the loan.
This is really useful, thanks for posting it.
I wonder what VWFS would choose to do if you repaid most of the loan? It would be great if they retained the original term and PCP options on final value at a lower monthly payment rather than just reducing the term, but I guess that is having your cake and eating it.
 

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Section 7.2 of the VW PCP agreement covers this;

View attachment 137794

For the purposes of the loan, the balloon payment and monthly payments are not treated any differently, the balloon payment is still part of the loan.
Brilliant, thanks. So if you have a loan of £24k (£15k balloon and £9k monthlies, at £250 per month. 36 months), you could pay off £8700 and, at their discretion, your monthly repayments would reduce to £8.30 plus an element for interest on the balloon sum and the balloon payment would remain at £15k. Sound right? 🙂
 

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Brilliant, thanks. So if you have a loan of £24k (£15k balloon and £9k monthlies, at £250 per month. 36 months), you could pay off £8700 and, at their discretion, your monthly repayments would reduce to £8.30 plus an element for interest on the balloon sum and the balloon payment would remain at £15k. Sound right? 🙂
Sounds like it could be one of the outcomes, I guess it would be one of those things you’d need to discuss with them as it mentions discretion?

If it was a £24k loan though, the total amount due under the agreement would be more than that with interest, so not sure your payment amounts would equal the ones you’ve suggested.
 

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I wonder what VWFS would choose to do if you repaid most of the loan? It would be great if they retained the original term and PCP options on final value at a lower monthly payment rather than just reducing the term, but I guess that is having your cake and eating it.
You can tell them what you want to happen when you notify them of the partial payment: Partial Payments | VWFS UK

If you inform us you wish to make a partial payment but don’t advise your preference for reduced term or reduced rental, we will apply the partial payment to reduce your rental.
 

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Sounds like it could be one of the outcomes, I guess it would be one of those things you’d need to discuss with them as it mentions discretion?

If it was a £24k loan though, the total amount due under the agreement would be more than that with interest, so not sure your payment amounts would equal the ones you’ve suggested.
Yes, agree my figures aren't precise (the *** packet wasn't big enough! 😃) To use a well-worn phrase from the finance industry, they were for 'illustrative purposes'. 😁
 

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This may have been covered elsewhere, but, once you've taken out a PCP agreement, is it possible to pay a lump sum to reduce your monthly payments while leaving the balloon payment intact? The balloon payment seems a good insurance policy in terms of a guaranteed end-of-contract valuation, but it would be nice to reduce the monthly payments significantly and save a chunk of the interest.
Why would you want this...? APR is around 5.3% right, so it will cost you around £2,300 to borrow £15,000 over 3yrs as effectively an interest only loan?

So forgetting the PCP a minute, lets imagine you bought the car outright for £24,000. Now the salesperson offers you 'Asset value protection insurance' product, where for the 'small sum' of £2,300 you can guarantee the value of the car for £15,000 in 3yrs time. Well the obvious question is, how likely do you think it is that the car will be worth substantially less than not £15,000, but £12,700 to also account for the cost of the insurance product itself?

Then you start to look into the T&Cs...you can only exercise this on one single day at the end of 3yrs. If you want to sell the car any other day then it doesn't have any affect at all. Oh and you have to keep to a predefined mileage limit. You are liable to pay more if you go over this. Oh and any wear and tear damage, that will cost more too.

I suspect like me, you would end up concluding that it's a dreadful insurance product that is too costly and too punitive to be even worth considering...if it was free sure, why not! But if my sums are right and it will still cost you around £2,300 then I would forget it, just pay the whole lot off.

There are plenty of other ways to borrow money at a much cheaper costs if you need to at a later date for other things (0% credit cards, loan rate personal loans, etc.).
 

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Why would you want this...? APR is around 5.3% right, so it will cost you around £2,300 to borrow £15,000 over 3yrs as effectively an interest only loan?

So forgetting the PCP a minute, lets imagine you bought the car outright for £24,000. Now the salesperson offers you 'Asset value protection insurance' product, where for the 'small sum' of £2,300 you can guarantee the value of the car for £15,000 in 3yrs time. Well the obvious question is, how likely do you think it is that the car will be worth substantially less than not £15,000, but £12,700 to also account for the cost of the insurance product itself?

Then you start to look into the T&Cs...you can only exercise this on one single day at the end of 3yrs. If you want to sell the car any other day then it doesn't have any affect at all. Oh and you have to keep to a predefined mileage limit. You are liable to pay more if you go over this. Oh and any wear and tear damage, that will cost more too.

I suspect like me, you would end up concluding that it's a dreadful insurance product that is too costly and too punitive to be even worth considering...if it was free sure, why not! But if my sums are right and it will still cost you around £2,300 then I would forget it, just pay the whole lot off.

There are plenty of other ways to borrow money at a much cheaper costs if you need to at a later date for other things (0% credit cards, loan rate personal loans, etc.).
[/Q
You make a very good point. I'd focused on removing most of the monthly payment amount and the interest that is applied to that. But that would only save about £750 in interest (on the £9k in my example). To get rid of the bigger chunk of interest you clearly need to pay off the balloon payment too. Food for thought! 😀🍰
 

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Brilliant!! Could you confirm what you just did?
Did you pay off the whole thing or just part of it?
How many instalments did you pay first?
I paid it off in full - I was a cash buyer when looking at cars, but VWFS were offering £4k deposit contribution so I took the finance for the free money (after very carefully studying the T&Cs to make sure that early repayments weren't penalised). Disappointingly, I didn't realise that my settlement figure was above my daily bank transfer limit, so by the time that I had spoken to them and got permission to pay it across two days, they'd taken the first instalment. So at the moment, I've overpaid by 1 instalment. They'll refund it back to me automagically once they've completed the paperwork, so hopefully some time next week.

So to clarify what I did:
  1. Bought car on finance for the VWFS deposit contribution.
  2. Waited until a few weeks after I collected the car to make sure that it worked.
  3. Requested a settlement figure (easy to do, make a VWFS online account and there's a button you can click to get it emailed to you).
  4. Tried to pay it off, bank said no because of my daily transfer limit.
  5. Phoned VWFS and said that I need to pay in two chunks. They made a note of it at their end, otherwise they (apparently) sometimes reject the payments.
  6. Made the first payment. On the same day, they took the first monthly instalment :(
  7. Waited a day for my bank transfer limit to reset, then made the second payment.
I'm now at the "sitting waiting for confirmation" phase.

The settlement figure was the initial loan amount and the interest accumulated up to that point, and is valid for 4 weeks or 30 days or something along those lines. No mention of wanting the deposit contribution back. I did the same thing with my previous car, so knew that what I wanted to do was allowed (or at least it was back then).

But to put it all into context, the dealer set me up with the most "interest efficient" finance that he could manage because he knew I was only taking finance for the deposit contribution. So although I'm saving a bit on the interest, the loan term was so short that this amounts to something like £700-800 - definitely a nice amount to have in my back pocket, but it's not massive compared to the purchase price of the car. More than covers the cost of the charger though.
 

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I paid it off in full - I was a cash buyer when looking at cars, but VWFS were offering £4k deposit contribution so I took the finance for the free money (after very carefully studying the T&Cs to make sure that early repayments weren't penalised). Disappointingly, I didn't realise that my settlement figure was above my daily bank transfer limit, so by the time that I had spoken to them and got permission to pay it across two days, they'd taken the first instalment. So at the moment, I've overpaid by 1 instalment. They'll refund it back to me automagically once they've completed the paperwork, so hopefully some time next week.

So to clarify what I did:
  1. Bought car on finance for the VWFS deposit contribution.
  2. Waited until a few weeks after I collected the car to make sure that it worked.
  3. Requested a settlement figure (easy to do, make a VWFS online account and there's a button you can click to get it emailed to you).
  4. Tried to pay it off, bank said no because of my daily transfer limit.
  5. Phoned VWFS and said that I need to pay in two chunks. They made a note of it at their end, otherwise they (apparently) sometimes reject the payments.
  6. Made the first payment. On the same day, they took the first monthly instalment :(
  7. Waited a day for my bank transfer limit to reset, then made the second payment.
I'm now at the "sitting waiting for confirmation" phase.

The settlement figure was the initial loan amount and the interest accumulated up to that point, and is valid for 4 weeks or 30 days or something along those lines. No mention of wanting the deposit contribution back. I did the same thing with my previous car, so knew that what I wanted to do was allowed (or at least it was back then).

But to put it all into context, the dealer set me up with the most "interest efficient" finance that he could manage because he knew I was only taking finance for the deposit contribution. So although I'm saving a bit on the interest, the loan term was so short that this amounts to something like £700-800 - definitely a nice amount to have in my back pocket, but it's not massive compared to the purchase price of the car. More than covers the cost of the charger though.
Thank you! That's exactly I wanted to know!!
 
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