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Finance - Did You Know This?


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On an earlier topic I mentioned that my car has reached the 50% stage of my PCP and so i can walk. The PX value and O/S finance are about the same at 15.5. An interesting dilema because I could not buy the same as it for that (dealer adds profit) but that is all i can sell it for. Do I go on or do I bale out andI have been looking at the options trying to figure out the captain sensible approach .

I have been looking at new cars and discovered something about the finance clause that I did not realise. To be fair I have never really thought about it before and it is the Credit Crunch times and the impact on the car market that focuses your attention.

The Early Termination (ET) clause can be invoked after 50% has been paid - you walk on the car and have no equity. This applies regardless of the mileage and regardless of the mileage relative to any PCP agreement you have. The car has to in good condition for age and miles but the miles can be anything.

So - consider someone who puts down a high deposit, predicts 20k per year mileage, makes payments and gets to halfway point at about 16 months - like me. The finance company has had half the total cost of the finance and gets the car back at more or less same value.

Fred next door puts a low deposit down and pays a low monthly amount based on 6K mileage over as long a period as they will allow and gets to the halfway point on a 4 year deal at around 2 years 10 months with 60k( or anything - could even be 200K) on the clock. The finance company gets a car back that is older and has higher mileage for half the total finance cost and loses on the profit in the balance and in the value of the car. The total finance cost is higher because of the time period and low deposit but from Freds point of view the car has depreciated to a point that it is worth nowhere near the outstanding finance and so he walks - when he divides the total months by the depreciation and cost of finance he is a winner.

It seems the mileage consideration is only important if you go full term and want the guaranteed future value.

Also - the finance examples i have got today assume a much more pessimistic, ultra safe, guaranteed value that they used to.

Have I missed something and if not, why doesnt everybody do the Fred option and arrange the finance expecting to ET?

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this is exactly what i have done with my 220 i put down a 3k deposit and pay £300 a month i can hand it back now and walk away the outstanding finance is more than the car value. but beware if you do it more than twice with the same finance company you will get refused finance from them next time

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Surely though wouldn't they be looking to charge you for the excess mileage at the time you hand back the car as they would if you reached the logical end? I have never bought a car on these PCP Finance packages in all honesty so I must profess to being a little unawares.

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Surely though wouldn't they be looking to charge you for the excess mileage at the time you hand back the car as they would if you reached the logical end? I have never bought a car on these PCP Finance packages in all honesty so I must profess to being a little unawares.

I thought exactly the same but apparently the mileage only related to the guaranteed value. The walk at 50% is part of the consumer credit act/rights. I can understand a finance company getting hacked off - I would too. I also feel that I am in a position that is unique to the economy/doom and gloom of the last 18 months where the usual depreciation on cars seems to have got a lot worse and peoplel ike me look to these clauses whereas previously we would have part exed for another one.

On a side note - BMW quoted me 12.5% finance and tried to convince me that was competitive even thought interest and libor are less than 2 - somebody is making a good margin methinks.

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Surely though wouldn't they be looking to charge you for the excess mileage at the time you hand back the car as they would if you reached the logical end? I have never bought a car on these PCP Finance packages in all honesty so I must profess to being a little unawares.

I thought exactly the same but apparently the mileage only related to the guaranteed value. The walk at 50% is part of the consumer credit act/rights. I can understand a finance company getting hacked off - I would too. I also feel that I am in a position that is unique to the economy/doom and gloom of the last 18 months where the usual depreciation on cars seems to have got a lot worse and peoplel ike me look to these clauses whereas previously we would have part exed for another one.

On a side note - BMW quoted me 12.5% finance and tried to convince me that was competitive even thought interest and libor are less than 2 - somebody is making a good margin methinks.

My pcp deal is up with Lexus end of March - I have asked them to take it off me a month early (so only 1 month payment would be outstanding) - the reply I got was that if I cancel the agreement early - even it is only by a few weeks - it will be recorded on my credit rating as "cancelled contract" which obviously would affect my rating. Not worth the risk imho

They also said that if my alloys were curbed I would be billed as it is not deemded normal wear and tear :crying:

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I've cancelled pcp contracts a couple of times in the past and had no problems with credit rating.

A PCP is just another hire purchase type arrangement, and you have every right to early settle it as with an other form of lending. This does not affect your credit rating at all.

On the wear and tear issue I have just come out of a 4 month argument with Merc finance on handing back a CLK. They wanted £800 which was nonsense and have now settled for £125. In future I will be very careful when handing back and take plenty of pics as evidence of good condition. I have also crossed Merc off my list for the future.

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I've cancelled pcp contracts a couple of times in the past and had no problems with credit rating.

A PCP is just another hire purchase type arrangement, and you have every right to early settle it as with an other form of lending. This does not affect your credit rating at all.

On the wear and tear issue I have just come out of a 4 month argument with Merc finance on handing back a CLK. They wanted £800 which was nonsense and have now settled for £125. In future I will be very careful when handing back and take plenty of pics as evidence of good condition. I have also crossed Merc off my list for the future.

Is "different" to cancelling though?

Lexus Finance have told me that I am cancelling and therefore it will have to be marked against my credit history - do you reckon they are bulling? - I'd rather have my last payment in my pocket rather than theirs

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I am sure that Robertb is correct. As credit histories are very important in these troubled times, I would seek legal advice if you have legal cover on your car insurance. If Lexus are in the wrong they need to be held to account.

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I am sure that Robertb is correct. As credit histories are very important in these troubled times, I would seek legal advice if you have legal cover on your car insurance. If Lexus are in the wrong they need to be held to account.

Cancelling a credit agreement is only possible under the cooling off period under the Consumer Credit Act. Typically this is 30 days days from signing up - avoid the hard sale basically.

Once this has expired then paying the credit off early is termed early settlement and will not affect your credit rating, although to be a stickler for accuracy if you have been in arrears during the term of the agreement you may already have a late payment or default lodged.

Re the legal cover mentioned, no policy will give you free advice on this. This cover is principally designed to help you recover losses and costs against a third party relating to a car insurance claim.

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with the pcp agreement it states that once you have reached the point where you have paid half of the finance agreement you can hand the car back with nothing further to pay, it doesnt affect your credit rating,

if you havnt paid half even a month early then you break the agreement and are liable to pay the full amount, i suggest you make the final months payment and then terminate

i did it years ago they just sent a recovery lorry. the driver said he was dropping it off at the auctions

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The guy at Lexus finance that I talked to was great - he explained clearly what the process was and that once I had set it off by returning the forms it was a done deal and the car would go back - his advice was that you can get the forms anytime but dont send the forms back until you are certain. He also said that they send a third party to examine and pick up the car leaving a copy of their report with you. The use of third party is partly to be fair to both sides. Bonnet chips are no problem, scratches an scuffed alloys are a problem and his advice was to get them fixed first rather than have lexus bill it. Seems fair and resonable to me.

In my case I decided to keep the car - it is only worth its trade in value to sell but it is worth more than that to me and I am still wincing from taking the early year depreciation hit and dont want to do it again. Besides - I have looked around still think IS is the best.

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I am sure that Robertb is correct. As credit histories are very important in these troubled times, I would seek legal advice if you have legal cover on your car insurance. If Lexus are in the wrong they need to be held to account.

Cancelling a credit agreement is only possible under the cooling off period under the Consumer Credit Act. Typically this is 30 days days from signing up - avoid the hard sale basically.

Once this has expired then paying the credit off early is termed early settlement and will not affect your credit rating, although to be a stickler for accuracy if you have been in arrears during the term of the agreement you may already have a late payment or default lodged.

Re the legal cover mentioned, no policy will give you free advice on this. This cover is principally designed to help you recover losses and costs against a third party relating to a car insurance claim.

Sorry, you are right in respect of car insurance legal cover. However I have found that if you have the legal expenses option on your house insurance it covers for .... "A breach of your contract to buy or hire goods" or at least mine does.

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I have used the 50/50 clause twice before, one on a MK3 mister2 and a subaru legacy turbo. the term was "Volantary Termination" it does appear on the credit record but does NOT have any adverse score against it as it is a 100% legal above board situation.

The Scooby was worth nothing really so I saved thousands, the Mister2 was a valdal magnet the roof was ripped 3 times in 6 months it had to go!! Funny thing is the Porsche has not been touched and that has a cloth roof also.

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