Paying off PCP within first 14 days or carry on with it?

[TimA]

Hello all, 

I received my new VRS Challenge last Friday.  I entered into a PCP deal to get the Skoda £2.5k deposit, but have read on other posts that you can pay off the settlement figure within the first 14 days with only interest for those days charged (5.9%).  I am in the fortunate position to have the money to pay off the loan in a savings account, so my question is, is there any cons for paying off the PCP early and not paying 5.9% for 3 years?  Mathematically it makes sense to do it.

Thanks,  Tim

[nbramwel]

When I bought my Fabia 3 years ago and again when I bought my Octavia in August, I took out Skoda's HP agreement so that I could take advantage of their £159 servicing offer for the next 2 services in August 2020 and 2021.  I cancelled the agreement within a couple of days by ringing Skoda Financial Services and ended up paying just over £1 in interest charges plus the amount of the HP loan.

 

I appreciate PCP is a different financial package but as far as I know, you can cancel the agreement within 14 days and pay off the total amount due.  It's simply a question of whether you can get a higher rate of interest on your money in the bank than you are paying on the PCP agreement.  I suspect not so it makes sense to pay off the agreement if you have no other use for the money. 

[Guest]

Have been purchasing cars for over 30 years and have heard many theories on how this way or that way is best to buy a car. Bottom line, the finance companies are not sugar daddies, they lend you money to make a profit.

 

Even if you tie up your money for the next three years you'll be luck to to receive 1.5%APR. And the lender is charging 6%?  It's no brainer if you're looking to save money.   

 

   

 

 

 

[TimA]

Thanks for the responses.  I understand the money side, I just wondered if there was any pros for PCP, perhaps at the end of the 3 year term and moving to another new car etc.  The difference would be between changing the car and finance or using the car as part exchange for another car.  If there aren't any pros, I will just pay off the PCP this week. 

[matrix2020]

The only pros are if the value of the car plummets for whatever reason... then you can always get your guaranteed value back, but at 6%.. I would pay it of within the 14 days!! 

[ChoonDoode]

The only reason I stretched out the finance duration for 42 months was because it was 0% finance. If it had have been such a high apr like most of the deals are now, I would have either chosen a shorter finance deal or paid up as soon as I could.

[Achallenge]

2 hours ago, TimA said:

Hello all, 

I received my new VRS Challenge last Friday.  I entered into a PCP deal to get the Skoda £2.5k deposit, but have read on other posts that you can pay off the settlement figure within the first 14 days with only interest for those days charged (5.9%).  I am in the fortunate position to have the money to pay off the loan in a savings account, so my question is, is there any cons for paying off the PCP early and not paying 5.9% for 3 years?  Mathematically it makes sense to do it.

Thanks,  Tim

 

Just on a technicality - I don’t think your looking for a settlement figure. Your looking to “withdraw” - I believe during the 14 day cooling off period.

 

In the small print it’s not 5.9% for these days - it’s a fixed figure (£3ish per day)... so request ASAP (you don’t have to wait 14 days), they asked me zero questions when I said I wanted to withdraw - so don’t think you will suffer any harassment.

 

Note that once you have requested a withdrawal - you have 30 days to pay it - certainly in my case the figure is fixed once requested - and doesn’t accumulate further costs during the 30 days... (effectively an interest free loan for a further 30 days !)..

 

Check your own own small print 

[SurreyJohn]

The only disadvantage is you relinquish the option to return it at the end without paying more (except damage and excess mileage).

 

But that would be irrelevant unless the return value is set so stupidly that Skoda are clearly going to lose if you returned it at end.

[BoxerBoy]

3 hours ago, TimA said:

Hello all, 

I received my new VRS Challenge last Friday.  I entered into a PCP deal to get the Skoda £2.5k deposit, but have read on other posts that you can pay off the settlement figure within the first 14 days with only interest for those days charged (5.9%).  I am in the fortunate position to have the money to pay off the loan in a savings account, so my question is, is there any cons for paying off the PCP early and not paying 5.9% for 3 years?  Mathematically it makes sense to do it.

Thanks,  Tim

But at the outset did you “plan to buy” the car and keep it for a few years and happily spend £X per month?
 

Or did you “Plan to rent” the car for 42 months and happily spend £Y per month?

[TimA]

2 hours ago, Achallenge said:

 

Just on a technicality - I don’t think your looking for a settlement figure. Your looking to “withdraw” - I believe during the 14 day cooling off period.

 

In the small print it’s not 5.9% for these days - it’s a fixed figure (£3ish per day)... so request ASAP (you don’t have to wait 14 days), they asked me zero questions when I said I wanted to withdraw - so don’t think you will suffer any harassment.

 

Note that once you have requested a withdrawal - you have 30 days to pay it - certainly in my case the figure is fixed once requested - and doesn’t accumulate further costs during the 30 days... (effectively an interest free loan for a further 30 days !)..

 

Check your own own small print 

Agreed, wrong word choice!  I have the final figure now from Skoda and see that the figure is valid for 1 month which did surprise me!

[TimA]

1 hour ago, BoxerBoy said:

But at the outset did you “plan to buy” the car and keep it for a few years and happily spend £X per month?
 

Or did you “Plan to rent” the car for 42 months and happily spend £Y per month?

I planned to buy the car but the PCP deposit and servicing deal seemed too good to miss out on, so went PCP.  It is only on this forum that I saw that people had paid off the PCP within the first 14 days, and this is what I will do.

[Phil245]

 

I bought mine on the PCP deal ( after putting down roughly £5k deposit) but actually have the money in the bank to pay for it if I chose to do so.......

 

But the freedom to just hand the car back at the end is a big bonus to me. I don't know what my circumstances will be, I might pay the GMFV then keep or p/x the car or not need such a powerful car etc. It gives me the freedom of no responsibility or worry about disposing of it.

 

Secondly, with adult kids constantly turning to the bank of mum & dad, I would prefer my savings in the bank, just in case....

 

Thirdly,  if I want to swap another high ticket item, like my motorhome, having some decent savings is very useful.

 

As alluded to above, there are several good reasons to have a car on a PCP even if you have the cash in the bank.

 

It works for me.....!

[AlexBlue]

I've done the same TimA. I was planning to keep the car long term so not worried about the aspect of handing it back. The only downside (and I'm no expert) as mentioned above is if the car depreciates faster than expected and if you hypothetically traded it in after 3 years or whatever it could be worth less than the gfmv (gmfv?) you have on your quote.. So best destroy that!

 

I like the freedom of as many miles as I want, not worrying about the effect of scratches (none yet)... And anything else that could have affected what is get for the car at the end of a pcp period. Which is what I would have based all my costs around, and been annoyed if it changed.

[Gmac983]

It's definitely a percentage per day calculation when opting out during the cooling off period, so obviously the sooner you get it payed off the better. If you can afford it, get it payed and keep the benefits. 

Would highly doubt the car would plummet enough in value (to fall below guaranteed amount) to make you better of paying the interest over the 3 or 4 years. 

Just opted out of PCP on my kodiaq to get the 2k ish cash back but not pay interest, payed about £6 interest in the 4 days I waited. 

As above its a no brainer. 

Edited 9 October, 2019 by Gmac983

[Octaviarse]

9 hours ago, matrix2020 said:

The only pros are if the value of the car plummets for whatever reason... then you can always get your guaranteed value back, but at 6%.. I would pay it of within the 14 days!! 

 

You won't "get anything back" though. You'll hand the car back 'with nothing more to pay' at the end of the term but you'll likely have paid nearly £3k in interest on top of the depreciation for the chance to do so. 

[Guest]

4 hours ago, Phil245 said:

 

I bought mine on the PCP deal ( after putting down roughly £5k deposit) but actually have the money in the bank to pay for it if I chose to do so.......

 

But the freedom to just hand the car back at the end is a big bonus to me. I don't know what my circumstances will be, I might pay the GMFV then keep or p/x the car or not need such a powerful car etc. It gives me the freedom of no responsibility or worry about disposing of it.

 

Secondly, with adult kids constantly turning to the bank of mum & dad, I would prefer my savings in the bank, just in case....

 

Thirdly,  if I want to swap another high ticket item, like my motorhome, having some decent savings is very useful.

 

As alluded to above, there are several good reasons to have a car on a PCP even if you have the cash in the bank.

 

It works for me.....!

 

That makes about as much sense to me as a chocolate teapot.

 

What you're saying is it's good to have money in the bank so you're able spend it?   If you spend it then than means you have no money bank which is the situation you don't want to get yourself in to at the moment.   

 

How's this take on it:  What you're doing is giving money that could have went to your kids but you've decided it's better to give it to your money lender instead.

 

Please, no offense meant whatsoever, everyone has different priorities,  but if you paid off your car and it leaves you with little or no savings, that tallies with what I said above - the only people that see a loan as a good idea are either those who stand to make a profit out of lending money or those who can't afford to buy the car which, if you need the money for something else, you clearly cannot afford to do.   ( I apologise, that sounds really bad mannered - it's not meant to be just not sure how else to phrase it ).

[Phil245]

20 hours ago, Scot5 said:

 

That makes about as much sense to me as a chocolate teapot.

 

What you're saying is it's good to have money in the bank so you're able spend it?   If you spend it then than means you have no money bank which is the situation you don't want to get yourself in to at the moment.   

 

How's this take on it:  What you're doing is giving money that could have went to your kids but you've decided it's better to give it to your money lender instead.

 

Please, no offense meant whatsoever, everyone has different priorities,  but if you paid off your car and it leaves you with little or no savings, that tallies with what I said above - the only people that see a loan as a good idea are either those who stand to make a profit out of lending money or those who can't afford to buy the car which, if you need the money for something else, you clearly cannot afford to do.   ( I apologise, that sounds really bad mannered - it's not meant to be just not sure how else to phrase it ).

 

Ok, no offence taken and please don't take offence at my reply.....😉

 

As I understood it the OP was seeking any possible reasons why one may choose not to pay off the PCP. I think that we can all see that paying a loan of 5.9% whilst receiving perhaps 1.5% on savings isn't the cheapest way to do it. I think we can work that out without your help......😛

 

But after 4 years I can walk away from the car.  I don't have to sell it privately which worries me. Not everybody worries about that, but I do. I'm not overly interested in anybody elses view of whether I should worry, I've seen enough of life to worry.  And if at the end I want to start another contract I can just use any equity as a deposit, the same as if I'd bought it. But if I got offered, and took, early retirement for example and we could manage  with one less car in the house ( we have four at the moment), I can walk away from the car easily.   

 

Secondly as I said, my grown up kids lurch from one issue to another and I appreciate a cash reserve to dip into. It suits me to have that reserve. Your family circumstances may be entirely different. .

 

I may very well want to have some cash to fund or partly fund other interests in life where a modest cost PCP deal is not available, so I need savings. I'm obviously paying a cost to have all this flexibility, but to me it's a worthwhile cost. Whether it is worthwhile to anyone else doesn't really matter to me at all, but I was trying to offer my view and reasons as the OP was prompting a discussion on it.

 

As for the bit about not being able to afford the car, I obviously think I can, thanks....😉

.

Edited 10 October, 2019 by Phil245
commas added!

[silver1011]

Always exercise your right of withdrawal within the 14 day cooling off period, even if you intend to keep the car at the end of the PCP.

 

By doing this you benefit from the manufacturers and dealers financial incentives, but aren't tied into their high interest rates.

 

Even if you don't have the money in the bank to clear the finance, it is still cheaper to get a bank loan with a lower interest rate. There are plenty out there at less than 3%.

 

All you have to do within the 14 days is request a settlement figure, you then get a month to pay it off. The earlier into the 14 days, the less interest you pay. I paid nothing.

[Golfmk56]

Well for the first time in my life I've went down the PCP route and paid off within the 1st 14 days and yes, it's referred to as a withdrawal. Cancelled after 9 days, worked out at £29 interest. As per above, I too was surprised when I was told I had 30 days to make payment.

 

As for the comments above by Phil 245:  As said everyone is different, although I don't think I've come across anyone who's ever worried about selling their car and I'm even more confused why you should think this has to be done privately. I sold my car to a garage buy back scheme ( as I've done with last few cars ) and received more than what the GFV would have been.

 

I do take issue about the affordability that I highlighted. If someone needs to keep money back for whatever reason rather than pay for goods in full, that means they can't actually afford to buy the goods. Most people are in that situation. As ever when dealing with sales, I had one guy preach to me the benefits of PCP when looking for best deals. He said why use your savings when you can pay monthly and enjoy other things like holidays. My reply to that was why pay in full for holidays when you can take them out on a load and have money left for something else. And why pay in full for something else when you can take out another loan and use the money elsewhere  -   In other words at what point does the argument to pay monthly so you keep your savings for something else fail?

 

Whatever the argument, it costs money. I couldn't have cared less how my dealer worked out PCP, in the end I think it was over 36mth with 1mth deposit. ( Again I was surprised the 1st deposit wasn't too be taken for a month - i.e. I didn't pay a penny to turn up and drive away in a brand new car. )  The interest over three year on the loan worked out at nearly £4000 grand. I'd loose around a grand in interest by not having the money in my account. That's £3000 I'm giving to the finance company rather than my kids? Each to their own but if you have the money to buy outright, PCP makes little sense to me.

 

PS - Skoda were also offering a 0% interest PCP which defo would have made sense, but then you'd lost out on the full £2750 deposit contribution. Which ever way you look at it, the finance company benefits more than you do.      

[Kental]

Keeping the finance as well as handing the car back at the end allows for Voluntary Termination once you have paid 50% of the total owed

[Korran_Kuat]

Sorry to drag up an old thread.

 

I'm just in the process of buying a 2nd hand Skoda Octavia to replace our current Octavia which is not ULEZ compliant.

 

We are taking out a PCP plan as it offer 2 years warranty, 2 years service, 2 MOTS and 2 years break down.  The dealer has said we will lose all these if we exercise our right to withdraw and pay off the PCP in the first 14 days.  I have asked them to show me in writing where this is stated, and their explanation is the right to withdraw will nulify the original PCP contract and thus remover the extras which are provided by the finance.  They say it has to be done after the first payment is made.

 

Has any one had recent experience of this?  Have there been any changes in recent years to mean this is true?

 

Thanks

[Stonekeeper]

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