PCP Withdraw vs settlement after a few months

[J............]

Hi everyone,

sorry about this question, i have searched and read other threads but am still slightly uneasy as i havent bought a new vehicle on pcp before.

We are looking at a cali on PCP approx 7%. For the purposes of this the cali is approx £65k. We were looking it a large deposit, circa £30k and around £250 per month instalments with a balloon around £35k.

We have the ability now to potentially withdraw from the agreement and pay in full if it makes sense. But, I had a couple of queries around this.

Withdraw and pay the full price of the cali within 14 days appears the best option in terms of lowest cost to us.

But, I had seen talk of paying a month or two of instalments to be covered under consumer credit act should something go wrong with the vehicle, then requesting a settlement figure, but I wasn't sure what this would cost us.

There would be the deposit up front, plus 2 instalments (£500). But what would the settlement likely be? The balloon plus a little bit of interest for two months or would this be part of the £500 paid up already?

Any thoughts on if it is worth paying a month or two to have this potential additional layer of protection?

thanks in advance for any advice, really looking forward to owning a cali but the whole finance thing has me unsure

 

[andyinluton]

My educated guess would be that as your deposit + the final balloon = the purchase price, your monthly payments are purely interest.

The penalty for ending the contract = 2 months interest
Any payments you have already made would be in addition to those 2 months.
So if you have the van for 2 months you would make the 2 monthly payments + the 2 month penalty + the £35k balloon.

Obviously if some of each monthly payment you make is for more than just interest the ballon will be higher.

 

[J............]

Thanks andy, that seemed the most logical way of looking at it to me too. Just not having done it before I didn't want to do that and then get stung for much more than i thought.

Having the potential backing of the finance in the event of an issue is in some way a nice thing to have, not sure if it would actually be any use though.

 

[andyinluton]

Thanks andy, that seemed the most logical way of looking at it to me too. Just not having done it before I didn't want to do that and then get stung for much more than i thought.

Having the potential backing of the finance in the event of an issue is in some way a nice thing to have, not sure if it would actually be any use though.

I'm not sure that there's much if any benefit of having the finance to fall back on if there is a problem - it would be VW Financial Services arguing with VW Commercial & chances are the two sides would just agree with each other.

 

[Mansfieldman750]

Hi everyone,

sorry about this question, i have searched and read other threads but am still slightly uneasy as i havent bought a new vehicle on pcp before.

We are looking at a cali on PCP approx 7%. For the purposes of this the cali is approx £65k. We were looking it a large deposit, circa £30k and around £250 per month instalments with a balloon around £35k.

We have the ability now to potentially withdraw from the agreement and pay in full if it makes sense. But, I had a couple of queries around this.

Withdraw and pay the full price of the cali within 14 days appears the best option in terms of lowest cost to us.

But, I had seen talk of paying a month or two of instalments to be covered under consumer credit act should something go wrong with the vehicle, then requesting a settlement figure, but I wasn't sure what this would cost us.

There would be the deposit up front, plus 2 instalments (£500). But what would the settlement likely be? The balloon plus a little bit of interest for two months or would this be part of the £500 paid up already?

Any thoughts on if it is worth paying a month or two to have this potential additional layer of protection?

thanks in advance for any advice, really looking forward to owning a cali but the whole finance thing has me unsure

They won’t allow you make a £30,000 deposit on a £65,000 van, that’s 46.15%. Maximum is 30% or £19,500.
The only reason I can see for taking out a PCP agreement if you can afford to buy the van outright would be if there are incentives to take out PCP.
As it happens VW Finance are offering a £1000 deposit contribution, 3 free services and one free MOT at present. Interest is 7.5%.
You could take out the PCP to get the incentives and get a settlement figure at any time.
Another thing to bear in mind is there are some very good rates available on risk free savings now. Eg National Savings One Year Guaranteed Growth Bond, 6.2%. Not quite 7.5% but close. Bear in mind your personal savings allowance is £1000, if held outside an ISA.

 

[Kernowboy]

You can pay 50% deposit on HP no problems, and then pay off in 14 days to take advantage of the offers or keep it running longer if you prefer. But agree there isn’t any obvious advantage to keeping it going beyond the initial withdrawal period just in case on an issue that wasn’t apparent at handover or shortly after.

 

[J............]

Thanks, seems the obvious option is likely the best then

 

[Mansfieldman750]

You can pay 50% deposit on HP no problems, and then pay off in 14 days to take advantage of the offers or keep it running longer if you prefer. But agree there isn’t any obvious advantage to keeping it going beyond the initial withdrawal period just in case on an issue that wasn’t apparent at handover or shortly after.

Yes you can put 50% deposit on HP but not on PCP. I’m not sure if you get the freebies on HP though, VW website only mentions PCP deal.

 

[teeboy]

We did HP and settled within 3 days. We did this to get the "Happy Camper" deal in April/May - but suspect it works for all finance deals.

We paid £67k for the Van
£1,000 Deposit on reservation
£49,000 On Collection (so effectively £50,000 deposit)
So £17,000 on finance

Called them within 3 days we had to pay the £17,000 plus £3.39 per day interest, so £10.17 in total. As long as you send the £17,010.17 within 30 days you are all good, they will write to you about 10 days after you paid the settlement to say "Your Finance Has Been Cleared"

 

[Kernowboy]

I’m not sure if you get the freebies on HP though, VW website only mentions PCP deal.

Indeed you do, or at least I did.

 

[CoboCali]

like others have said here, my experience was that I took out a PCP merely to gain the benefit of incentives (free service package, £1000 contribution etc). around 7 days after new vehicle collection from VW Preston I rang VW Finance to settle the outstanding finance. I kept the benefit of the incentives.

 

[Maidment_Ocean]

Yes you can put 50% deposit on HP but not on PCP. I’m not sure if you get the freebies on HP though, VW website only mentions PCP deal.

I just did 31k deposit on a PCP so don’t think there is a blocker on that.

 

[Mansfieldman750]

I just did 31k deposit on a PCP so don’t think there is a blocker on that.

You are quite right and I stand corrected on that. I went on the VW finance calculator and it allows me to put a £37,699 PCP deposit on an imaginary California with a cash price of £77,342. £1 more and it won’t have it.
If you include the £1000 contribution from VW that’s near as dammit a 50% deposit.
In which scenario VW Finance would actually be paying me £32.64 a month on a 36 month agreement. I don’t think that could happen in reality but who know, I might be wrong there too.

 

[dspuk]

You are quite right and I stand corrected on that. I went on the VW finance calculator and it allows me to put a £37,699 PCP deposit on an imaginary California with a cash price of £77,342. £1 more and it won’t have it.
If you include the £1000 contribution from VW that’s near as dammit a 50% deposit.
In which scenario VW Finance would actually be paying me £32.64 a month on a 36 month agreement. I don’t think that could happen in reality but who know, I might be wrong there too.

View attachment 114783

That’s just an error in the online calculator as the deposit + RV (final payment) is more than the price of the vehicle so the coder who built the page obviously never expected that to happen. They have just taken that remaining amount (a minus amount) and divided it by 36, hence -32 quid.

With regards to the OP, I’d say as long as the offers are worth more than the cost to cancel the agreement after a month, go for it, else, just pay outright.

 

[Mansfieldman750]

That’s just an error in the online calculator as the deposit + RV (final payment) is more than the price of the vehicle so the coder who built the page obviously never expected that to happen. They have just taken that remaining amount (a minus amount) and divided it by 36, hence -32 quid.

With regards to the OP, I’d say as long as the offers are worth more than the cost to cancel the agreement after a month, go for it, else, just pay outright.

I think the OP’s idea is to withdraw from the PCP agreement during the 14 day cooling off period and keep the freebies. I think it will work.
These deposits of more than 30% on PCP are interesting. We have had loads of new Skodas on PCP ( Škoda Finance and VW Finance are one and the same ) Everytime I asked the question - what’s the maximum deposit ? and the answer was always 30%
There is no doubt California customers are making higher deposits on PCP so something has changed.

 

[Betsycalifornia]

Indeed you do, or at least I did.

I did as well. 1st of September 23

 

[itsSteve]

Earlier this summer I paid up our PCP on a GC 600, without penalty, a year into a five year deal ........ VW finance were very helpful. I have just bought a new car, not a VW, and sorted a trade in and cash deal. I then agreed to HP for some of the money to provide the dealer with an incentive bonus, some of which was then offered to me as a further discount. Again, I can pay off the finance whenever I want, without penalty. There's a broader message here, beyond early payment of PCPs - if you and the dealer can be open with one another, a win-win option may be an option

 

[Barry Chuckle]

Hi everyone,

sorry about this question, i have searched and read other threads but am still slightly uneasy as i havent bought a new vehicle on pcp before.

We are looking at a cali on PCP approx 7%. For the purposes of this the cali is approx £65k. We were looking it a large deposit, circa £30k and around £250 per month instalments with a balloon around £35k.

We have the ability now to potentially withdraw from the agreement and pay in full if it makes sense. But, I had a couple of queries around this.

Withdraw and pay the full price of the cali within 14 days appears the best option in terms of lowest cost to us.

But, I had seen talk of paying a month or two of instalments to be covered under consumer credit act should something go wrong with the vehicle, then requesting a settlement figure, but I wasn't sure what this would cost us.

There would be the deposit up front, plus 2 instalments (£500). But what would the settlement likely be? The balloon plus a little bit of interest for two months or would this be part of the £500 paid up already?

Any thoughts on if it is worth paying a month or two to have this potential additional layer of protection?

thanks in advance for any advice, really looking forward to owning a cali but the whole finance thing has me unsure

I've just bought on PCP, I'm not 100% sure but I'm fairly confident that if you repay in the 14 day cooling off period you won't benefit from the 3 years servicing plus 1 MOT offer currently with the finance. You may want to check this with the dealer first as if you withdraw from the finance within the cancellation period the PCP is deemed null and void.

Hello from Shropshire too!

 

[Kernowboy]

I've just bought on PCP, I'm not 100% sure but I'm fairly confident that if you repay in the 14 day cooling off period you won't benefit from the 3 years servicing plus 1 MOT offer currently with the finance. You may want to check this with the dealer first as if you withdraw from the finance within the cancellation period the PCP is deemed null and void.

Hello from Shropshire too!

Never heard of it’s being cancelled if you withdraw from finance, and that matches my own experience having done it a number of times.

 

[Mansfieldman750]

Never heard of it’s being cancelled if you withdraw from finance, and that matches my own experience having done it a number of times.

Post #9 confirms your experience.
The thing is, a cash buyer shouldn’t have to go through the rigmarole of taking out a credit agreement then withdrawing from it, just to get the same incentives as someone buying on credit.
A deposit contribution is just a discount in disguise. If you don’t want credit, they should just knock the £1000 off the price and give you the free services anyway.
Out of interest, does withdrawing from a credit agreement affect your credit score ?

 

[AndrewCook680]

£60,620 is the limit where you have right to withdraw from PCP - so make sure finance discount and servicing deal worth it and exceeds interest you might have to pay on settlement

i didnt know this so when I asked to withdraw and pay off pcp credit within 14 days of getting my GC, I ended up paying 2 months interest to cancel it.
but still worth it as got £1800 discount for taking the pcp and the free services and mot. the interest cost me £800.
if I had known I would have put down a bigger deposit to make sure loan under 60k

Cooling off periods

Under the Consumer Credit Act you have 14 days to withdraw from a credit or loan agreement. The legislation applies to all credit agreements, whether made in person, on the internet or over the phone.

Your right to withdraw from a loan agreement is extended to all agreements falling within the Directive, as well as hire purchase agreements, pawn broking agreements, and business loans below £25,000. The right to withdraw doesn't apply to loans above £60,260.

 

[J............]

Thanks for all responses, much appreciated. Looking forward to getting it!

 

[turnitdown]

Just want to check my understanding of something. I've read this thread and others but was told something by a main dealer (and a well-known one at that!) at odds with what's reported here, so I'm wondering if anything has changed.

I'm buying a California for ca. £65k. I need to complete before funds arrive from overseas, so was thinking of just putting £10k down and signing up for a PCP deal (have automatically qualified). The dealer said I could pay off the PCP at any point - one week, one month, three months, etc., and only pay pro-rata interest. I specifically queried this, saying I had a vague memory with PCP there was a penalty. Nope, they insisted it was pro rata interest only.

After the phone call, looking at this thread and others, it sounds like if I withdraw within 14 days, I will pay pro rata daily interest. But after 14 days if I pay off the PCP I'll have to pay 2 months interest as a penalty.

Can anyone clarify? (Yes, I should read the fine print when it comes through, but I have to base some decisions about moving money around whether to go with this PCP deal or not, so hoping for a quick answer here.) Thanks.

 

[Kevin5658]

Bought van recently, had small amount of finance as they would give me a £1000 discount. When I paid off after a few months, then realised there was a £500 setting up fee! Or whatever they want to call it. In hindsight it would have been better to pay it all off & not had the hassle.

 

[california.will-g]

I withdrew from the pcp offer after 7-10 days after collection in July 23, at the time there was a £1000 deposit allowance and a service pack, paid minimal interest on the sum due and kept the deposit allowance and service pack.

One thing I would check is I recall reading the finance agreement at the time and noting that had I borrowed an amount greater than i had borrowed, can't remember the figure, but it then did not allow me to withdraw from the agreement, the way I understood it was if i was borrowing that amount I should be capable of knowing what I was signing and the 14 day cooling off period did not apply. My figures were 72k value, 15k deposit, the dealership suggested 5k deposit and should I have done that I wouldn't have been able to withdraw.

Hope this helps