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[Finance] PCP finance help - can't work it out



T

the slow norris

Active member
Feb 8, 2005
358
Suffolk
Apologies, just after some genuine help here and not trying to humblebrag or anything like that, but I just cannot work this one out..

So I want to buy a used car this Saturday for £53,995 (so the "as new" depreciation will have been taken off). I have paid a £1000 deposit, There is a remaining £52,995 to pay on the car. I will be settling this car in full in April.

It's a main dealership (BMW if that makes any difference) and they have suggested I use PCP to do this. They suggested the following terms:

6.9% apr
5yrs
£1000 deposit
6000 miles per year.
Gives a roughly £762 per month repayment (however I have the intention of only paying 1 repayment before settling in full)

I am good with figures/finance so wanted the dealership to tell me how much the settlement figure would be in mid-april after 1 payment. They are unable to tell me, they are only able to tell me what it would be after 3 months, This figure is £52,139.

Now, in my head, by that time I will have paid, in total, 3x762 + £1000 = £3,286 towards that car. If I take that off the total price, it takes it to £50,709. This means the difference between this and the settlement price is £1,430 - which presumably is the interest? So over 3 months, that means I will be paying on average £477 interest per month. Which seems very high - especially when the PCP calculators online suggest about £300/month.

They are completely unable (and I have asked BMW financial services themselves) to provide me with a settlement figure after 1 month in advance of me taking the car. But it seems that they are front loading something and I cannot for the life of me work it out. I just want to make an informed decision.

My questions are:

1) What am I missing, is there some significant front loading of interest over and above that which is expected (similar to a mortgage) that car financers supply?
2) Any advice (apart from get the money earlier to pay it off earlier) to reduce this potential interest. I know I can always not buy the car, I'm just interested in what I can do to reduce this burden
3) Any further advice as to how I can get around this? i.e. am I missing any other possible ways to finance a car for an incredibly short period.
4) Now that I've done this digging (i.e. I know that BMW are unable to provide the settlement figure for me) will I be worse off in the event that I take the finance and I end up having to pursue this through the regulators etc for mis-selling? Buyer Beware and all that?

Thanks in advance for any help given, I've never been in this position before and don't want to just throw money away and am incredibly wary of the sales patter.
 




Cotton Socks

Cotton Socks

Skint Supporter
Feb 20, 2017
1,734
If you can pay it off in full in 3 months, why don't you just wait 3 months? If you take out a loan from the bank and ask for a settlement figure it usually is more than what your loan statement says at the time. They're not there to help you out, they're there to make money.
 






South Stand Bonfire

South Stand Bonfire

Who lit that match then?
NSC Patron
Jan 24, 2009
2,202
Shoreham-a-la-mer
the slow norris said:
Apologies, just after some genuine help here and not trying to humblebrag or anything like that, but I just cannot work this one out..

So I want to buy a used car this Saturday for £53,995 (so the "as new" depreciation will have been taken off). I have paid a £1000 deposit, There is a remaining £52,995 to pay on the car. I will be settling this car in full in April.

It's a main dealership (BMW if that makes any difference) and they have suggested I use PCP to do this. They suggested the following terms:

6.9% apr
5yrs
£1000 deposit
6000 miles per year.
Gives a roughly £762 per month repayment (however I have the intention of only paying 1 repayment before settling in full)

I am good with figures/finance so wanted the dealership to tell me how much the settlement figure would be in mid-april after 1 payment. They are unable to tell me, they are only able to tell me what it would be after 3 months, This figure is £52,139.

Now, in my head, by that time I will have paid, in total, 3x762 + £1000 = £3,286 towards that car. If I take that off the total price, it takes it to £50,709. This means the difference between this and the settlement price is £1,430 - which presumably is the interest? So over 3 months, that means I will be paying on average £477 interest per month. Which seems very high - especially when the PCP calculators online suggest about £300/month.

They are completely unable (and I have asked BMW financial services themselves) to provide me with a settlement figure after 1 month in advance of me taking the car. But it seems that they are front loading something and I cannot for the life of me work it out. I just want to make an informed decision.

My questions are:

1) What am I missing, is there some significant front loading of interest over and above that which is expected (similar to a mortgage) that car financers supply?
2) Any advice (apart from get the money earlier to pay it off earlier) to reduce this potential interest. I know I can always not buy the car, I'm just interested in what I can do to reduce this burden
3) Any further advice as to how I can get around this? i.e. am I missing any other possible ways to finance a car for an incredibly short period.
4) Now that I've done this digging (i.e. I know that BMW are unable to provide the settlement figure for me) will I be worse off in the event that I take the finance and I end up having to pursue this through the regulators etc for mis-selling? Buyer Beware and all that?

Thanks in advance for any help given, I've never been in this position before and don't want to just throw money away and am incredibly wary of the sales patter.
Click to expand...
I can’t help you with your particular figures but the last two cars I bought outright, albeit both new, in 2015 and 2016, I wanted to pay in full in cash, but it worked out about £1-£1.5k cheaper per car if I took their finance deal (not leasing) and just paid it off in the first three months. I suspect they work on the assumption people forget to pay at some point and it’s an incentive to get them into a finance package. Is PCP the same as a personal finance deal or is it a leasing deal?
 




beorhthelm

beorhthelm

A. Virgo, Football Genius
Jul 21, 2003
35,315
i reckon there's a loan setup fee and possibly early redemption fee in there.

whats the game taking out finance to pay off after a month? may be they know and dont want you to do that.
 


dazzer6666

dazzer6666

Well-known member
NSC Patron
Mar 27, 2013
52,513
Burgess Hill
Imagine you’d get hit with early repayment penalties which accounts for the higher than expected settlement figure. BMW tried to get me to take out a PCP when I got my last car from them, but it made no economic sense with the interest rates and balloon payment due at the end of the term. My previous one was on a PCP (the figures at the time made sense because a) interest rates were a lot lower and b) there were discounts that would only be applied if I got it on PCP). When the term was up, I paid the balloon payment and kept it for a bit despite them trying to convince me that wasn’t a good option (but without being able to explain why). I got quite a bit more for it a year later as p/ex for another than I paid out. The dealerships are incentivised on getting PCP deals agreed I believe.

Personally would wait until you’ve got the cash, you’re then in a stronger position to get the best deal for yourself.
 


South Stand Bonfire

South Stand Bonfire

Who lit that match then?
NSC Patron
Jan 24, 2009
2,202
Shoreham-a-la-mer
Just a thought and I may be talking bollox (again) but I always assumed that car dealers like other companies tried to maximise their end of years sales figures for performance related bonuses etc. You should be in a good position it you can hang out and try and potentially agree a deal that completes just before 5 April 24
 






S

Springal

Well-known member
Feb 12, 2005
23,857
GOSBTS
South Stand Bonfire said:
Just a thought and I may be talking bollox (again) but I always assumed that car dealers like other companies tried to maximise their end of years sales figures for performance related bonuses etc. You should be in a good position it you can hang out and try and potentially agree a deal that completes just before 5 April 24
Click to expand...
They don’t all work same financial year. Work on calendar quarters.

I don’t understand the OPs plan, just do a short term loan or similar. Likely BMW would have early settlement fees etc
 


Affy

Affy

Silent Assassin
Aug 16, 2019
495
Sussex by the Sea
From my understanding, most PCP contracts require you to settle at least 50% of the total contract interest. The monthly payments mostly factor in the cars depreciation in value plus some interest (otherwise the lender won’t make any money). The purpose of a 3-4 year hire is so they make some money. If you plan to cancel that contract early then the lender will most likely want to earn the money they would be losing.

I’m not trying to take sides and often play devil’s advocate so…

Look at it from the lenders point of view, you have entered into a contract whereby they will earn £X. If you decided to suddenly cancel that deal, wouldn’t you (as the lender) want what you’d agreed to? They’ve done credit checks (which they will pay for), admin and paper work to sort the loan and finances out which is likely why they are “front loading’ as you put it.

Don’t get me wrong, I don’t agree with the charges etc these companies charge but, forgive me for assuming, you sound like you put the deposit down without getting the settlement figures confirmed first. Personally, I would have waited to just pay the full price in cash if I had it.
sorry, I know that doesn’t help, and I sound like i’m castigating, I’m not, just trying to explain my understanding of the situation.
 




Wallace

Wallace

Active member
Nov 9, 2016
125
I used to sell cars when PCP's first came on the market, in my opinion they are a rip off. They are sold on the basis that you don't have to pay the final payment, you just roll into the next car on a new plan but you pay interest on the final payment from day one. If I were you I'd either set up a 5 year personal loan or if possible stick it on a credit card and pay it off asap. Avoid a PCP at all costs
 








Weststander

Weststander

Well-known member
NSC Patron
Aug 25, 2011
64,102
Withdean area
Wallace said:
I used to sell cars when PCP's first came on the market, in my opinion they are a rip off. They are sold on the basis that you don't have to pay the final payment, you just roll into the next car on a new plan but you pay interest on the final payment from day one. If I were you I'd either set up a 5 year personal loan or if possible stick it on a credit card and pay it off asap. Avoid a PCP at all costs
Click to expand...

It’a really just a contract hire, with an option to purchase at the end.

If personal cash flow’s sound and you’re not bothered about one day owning the car, contract hire can work well, especially for premium brands/models that depreciate at a slower rate.
 


S

Shropshire Seagull

Well-known member
Nov 5, 2004
8,510
Telford
Wallace said:
... or if possible stick it on a credit card and pay it off asap. Avoid a PCP at all costs
Click to expand...
Can't be many folk who have £50k credit limit on a credit card.

Interest on a CC will be more than PCP

Doubt car dealers will take a CC payment that big as they will incur serious fees.

If you have one, why not add it to your mortgage. Then pay it off when you get the cash. Or maybe put the cash into saving if the intetest rate is higher than your mortgage rate.
 


dazzer6666

dazzer6666

Well-known member
NSC Patron
Mar 27, 2013
52,513
Burgess Hill
Shropshire Seagull said:
Can't be many folk who have £50k credit limit on a credit card.

Interest on a CC will be more than PCP

Doubt car dealers will take a CC payment that big as they will incur serious fees.

If you have one, why not add it to your mortgage. Then pay it off when you get the cash. Or maybe put the cash into saving if the intetest rate is higher than your mortgage rate.
Click to expand...
If it was going to be paid off in a month you could avoid paying any interest on a CC. Card companies are often happy to agree temporary increases in limits for specific purposes so you wouldn’t need a permanent limit of that magnitude. You’d need to consider the mortgage arrangement fee going down that route…….and consider the tax on the interest if invested.
 


Herr Tubthumper

Herr Tubthumper

Well-known member
NSC Patron
Jul 11, 2003
59,640
The Fatherland
the slow norris said:
Apologies, just after some genuine help here and not trying to humblebrag or anything like that, but I just cannot work this one out..

So I want to buy a used car this Saturday for £53,995 (so the "as new" depreciation will have been taken off). I have paid a £1000 deposit, There is a remaining £52,995 to pay on the car. I will be settling this car in full in April.

It's a main dealership (BMW if that makes any difference) and they have suggested I use PCP to do this. They suggested the following terms:

6.9% apr
5yrs
£1000 deposit
6000 miles per year.
Gives a roughly £762 per month repayment (however I have the intention of only paying 1 repayment before settling in full)

I am good with figures/finance so wanted the dealership to tell me how much the settlement figure would be in mid-april after 1 payment. They are unable to tell me, they are only able to tell me what it would be after 3 months, This figure is £52,139.

Now, in my head, by that time I will have paid, in total, 3x762 + £1000 = £3,286 towards that car. If I take that off the total price, it takes it to £50,709. This means the difference between this and the settlement price is £1,430 - which presumably is the interest? So over 3 months, that means I will be paying on average £477 interest per month. Which seems very high - especially when the PCP calculators online suggest about £300/month.

They are completely unable (and I have asked BMW financial services themselves) to provide me with a settlement figure after 1 month in advance of me taking the car. But it seems that they are front loading something and I cannot for the life of me work it out. I just want to make an informed decision.

My questions are:

1) What am I missing, is there some significant front loading of interest over and above that which is expected (similar to a mortgage) that car financers supply?
2) Any advice (apart from get the money earlier to pay it off earlier) to reduce this potential interest. I know I can always not buy the car, I'm just interested in what I can do to reduce this burden
3) Any further advice as to how I can get around this? i.e. am I missing any other possible ways to finance a car for an incredibly short period.
4) Now that I've done this digging (i.e. I know that BMW are unable to provide the settlement figure for me) will I be worse off in the event that I take the finance and I end up having to pursue this through the regulators etc for mis-selling? Buyer Beware and all that?

Thanks in advance for any help given, I've never been in this position before and don't want to just throw money away and am incredibly wary of the sales patter.
Click to expand...
I really don’t understand this. If you’re settling the price in April why not just wait until April and buy it, or a similar car, without a loan? I’m obviously missing something.
 




A

A mex eyecan

Well-known member
Nov 3, 2011
3,319
the slow norris said:
Apologies, just after some genuine help here and not trying to humblebrag or anything like that, but I just cannot work this one out..

So I want to buy a used car this Saturday for £53,995 (so the "as new" depreciation will have been taken off). I have paid a £1000 deposit, There is a remaining £52,995 to pay on the car. I will be settling this car in full in April.

It's a main dealership (BMW if that makes any difference) and they have suggested I use PCP to do this. They suggested the following terms:

6.9% apr
5yrs
£1000 deposit
6000 miles per year.
Gives a roughly £762 per month repayment (however I have the intention of only paying 1 repayment before settling in full)

I am good with figures/finance so wanted the dealership to tell me how much the settlement figure would be in mid-april after 1 payment. They are unable to tell me, they are only able to tell me what it would be after 3 months, This figure is £52,139.

Now, in my head, by that time I will have paid, in total, 3x762 + £1000 = £3,286 towards that car. If I take that off the total price, it takes it to £50,709. This means the difference between this and the settlement price is £1,430 - which presumably is the interest? So over 3 months, that means I will be paying on average £477 interest per month. Which seems very high - especially when the PCP calculators online suggest about £300/month.

They are completely unable (and I have asked BMW financial services themselves) to provide me with a settlement figure after 1 month in advance of me taking the car. But it seems that they are front loading something and I cannot for the life of me work it out. I just want to make an informed decision.

My questions are:

1) What am I missing, is there some significant front loading of interest over and above that which is expected (similar to a mortgage) that car financers supply?
2) Any advice (apart from get the money earlier to pay it off earlier) to reduce this potential interest. I know I can always not buy the car, I'm just interested in what I can do to reduce this burden
3) Any further advice as to how I can get around this? i.e. am I missing any other possible ways to finance a car for an incredibly short period.
4) Now that I've done this digging (i.e. I know that BMW are unable to provide the settlement figure for me) will I be worse off in the event that I take the finance and I end up having to pursue this through the regulators etc for mis-selling? Buyer Beware and all that?

Thanks in advance for any help given, I've never been in this position before and don't want to just throw money away and am incredibly wary of the sales patter.
Click to expand...
I would have imagined that it’s a mix of arrangement fee, interest and an early settlement fee.
52995 @ 6.9% = 3657pa = 914.23 for 3 months.
 


Driver8

Driver8

On the road...
NSC Patron
Jul 31, 2005
15,985
North Wales
Straight finance is likely to be better than PCP. I’m sure BMW finance offer both. I did similar with Tesla (Black Horse Finance) and you just pay a months interest.
 


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