At The end Of The PCP Contract

[johnb80]

We have a way to go yet (3+ years) but already our MG5 is getting prices less than the guaranteed minimum price. Do MG allow negotiatio0n i.e. our guaranteed minimum value is £16k at 4 years and 24,000 miles. WBAC, Motorway and some others are only offering 13K now at 8 months and 3,500 miles. At the end of our years are MG likely to accept a lower figure as the balloon payment ?

 

[Ian Key]

I'd have thought that it would be the PCP provider that owns your car not MG so they would be the ones to negotiate with but I stand to be corrected.
They might accept a lower balloon payment because if you return the car it will go through auction and they'll get a lot less.

 

[Anon70]

In my experience ballon payments are nothing to do with the value of the car and more to do with the finance outstanding. So if the initial PCP was for £30,000 and your agreed balloon payment was £10,000 then that is what you would have to pay to keep the car.

If you know you could buy the same car at current prices for £8,000 you are better off giving the car back on the PCP and buying it (or it's equivalent) for the £8,000.

I always have this discussion with car sales people when they offer me a PCP, using Autotrader values of 2 or 3 year old cars to prove the balloon payment in no way reflects reality. It is NOT a guaranteed future value of the car, it is the guaranteed amount you will owe to pay off the finance

 

[siteguru]

Agreed ... the higher the balloon payment vs the contract cost then the lower the monthly outlay. (It's all about the monthlies these days, it seems).

 

[johnb80]

I'd have thought that it would be the PCP provider that owns your car not MG so they would be the ones to negotiate with but I stand to be corrected.
They might accept a lower balloon payment because if you return the car it will go through auction and they'll get a lot less.

Thanks for the reply, youre thinking on the same lines as me. I intend to get a price from WBAC, motorway and Autotrader etc at the time and try and make them an offer similar to those prices, they would get less at auction etc.

In my experience ballon payments are nothing to do with the value of the car and more to do with the finance outstanding. So if the initial PCP was for £30,000 and your agreed balloon payment was £10,000 then that is what you would have to pay to keep the car.

If you know you could buy the same car at current prices for £8,000 you are better off giving the car back on the PCP and buying it (or it's equivalent) for the £8,000.

I always have this discussion with car sales people when they offer me a PCP, using Autotrader values of 2 or 3 year old cars to prove the balloon payment in no way reflects reality. It is NOT a guaranteed future value of the car, it is the guaranteed amount you will owe to pay off the finance

But applying logic to this, if on the market the car will fetch say £11,000 and the guaranteed minimum value on my PCP is £16,000 surely the finance company could see the wisdom of accepting an offer of say £13,000, £3k below the guaranteed value but £2k more than they could get at auction?

Am I missing something here, do they not look at it the same way?

 

[siteguru]

Don't ask, don't get.

But if the lower figure had been used at the outset then your monthlies would have been higher as you'd have been paying off more of the capital on the loan. Simplified example:

£30k car cost
£3k deposit
£27k loan value
£15k GMFV
£12k capital (plus interest) to pay off monthly
5% APR, 3 year term
Total cost of loan £29,131
Monthly cost = £29,131 - 15,000 = £14,131 / 36 months = £392.52 per month

Same calculation but GMFV = £11k
Monthly cost = £29,131 - 11,000 = £18,131 / 36 months = £503.64 per month

 

[johnb80]

Don't ask, don't get.

But if the lower figure had been used at the outset then your monthlies would have been higher as you'd have been paying off more of the capital on the loan. Simplified example:

£30k car cost
£3k deposit
£27k loan value
£15k GMFV
£12k capital (plus interest) to pay off monthly
5% APR, 3 year term
Total cost of loan £29,131
Monthly cost = £29,131 - 15,000 = £14,131 / 36 months = £392.52 per month

Same calculation but GMFV = £11k
Monthly cost = £29,131 - 11,000 = £18,131 / 36 months = £503.64 per month

I understand that completely but from my angle:-

I can hand the car back and the agreement is complete. They have a car that the market value is say £11k. Why would they not allow me to pay them £12k for it?

 

[Anon70]

But applying logic to this, if on the market the car will fetch say £11,000 and the guaranteed minimum value on my PCP is £16,000 surely the finance company could see the wisdom of accepting an offer of say £13,000, £3k below the guaranteed value but £2k more than they could get at auction?

Am I missing something here, do they not look at it the same way?

Finance companies don't tend to employ logic they look at the agreement as a single fixed transaction with associated risk and return. Once they have calculated this they don't deviate, they would take the hit as they have already factored that in to the original agreement.

There is certainly no harm in asking the question but it will depend how flexible the finance companies systems are

 

[johnb80]

I'll report back in September 2027!

 

[Ian Key]

You might think it's worth paying the higher balloon payment to keep a car you know has been looked after instead of rejecting it and taking the chance on getting a badly treated one.

 

[johnb80]

You might think it's worth paying the higher balloon payment to keep a car you know has been looked after instead of rejecting it and taking the chance on getting a badly treated one.

Absolutely, I just hope Santander will negotiate or I'll track it to the auctions and try and buy it there.

 

[Harry 17]

Interesting thread.

For people who have handed a car back on PCP, does some randomer come and pick the car up? Or are you required to take the vehicle back to the dealer?

I ask this due to my dealership selling up and ceased trading.

Or, would handing my car back to any MG dealership be an option?

I will have had the car two years in September, and if the figures work, I may be tempted into getting a Cyberster on another PCP deal. However, with Johns post above regarding the vast difference in Balloon payment versus market value, I may just sit on my hands until the car is 4 yrs old, hand it back, then start anew with whatever my future car will be.

 

[salty]

But applying logic to this, if on the market the car will fetch say £11,000 and the guaranteed minimum value on my PCP is £16,000 surely the finance company could see the wisdom of accepting an offer of say £13,000, £3k below the guaranteed value but £2k more than they could get at auction?

Am I missing something here, do they not look at it the same way?

Logically yes, agreed. But who knows how they think. ??

 

[Gomev]

Thanks for the reply, youre thinking on the same lines as me. I intend to get a price from WBAC, motorway and Autotrader etc at the time and try and make them an offer similar to those prices, they would get less at auction etc.


But applying logic to this, if on the market the car will fetch say £11,000 and the guaranteed minimum value on my PCP is £16,000 surely the finance company could see the wisdom of accepting an offer of say £13,000, £3k below the guaranteed value but £2k more than they could get at auction?

Am I missing something here, do they not look at it the same way?

It may happen with PCP all you can do is ask. I believe it is more likely to happen with PCH though. It may be worth a quick look at this video

 

[mystreet]

Interesting thread.

For people who have handed a car back on PCP, does some randomer come and pick the car up? Or are you required to take the vehicle back to the dealer?

I ask this due to my dealership selling up and ceased trading.

Or, would handing my car back to any MG dealership be an option?

I will have had the car two years in September, and if the figures work, I may be tempted into getting a Cyberster on another PCP deal. However, with Johns post above regarding the vast difference in Balloon payment versus market value, I may just sit on my hands until the car is 4 yrs old, hand it back, then start anew with whatever my future car will be.

It is the finance company that 'owns' the car. At the end of your agreement they will tell you where it goes if you are not trading it in, or keeping it. Usually the nearest car auction.

 

[Ruislip Resident]

Absolutely, I just hope Santander will negotiate or I'll track it to the auctions and try and buy it there.

How easy is it to do that. I've certainly considered that conceptually. If say the balloon payment was £16k, the regular price at auction was say £12k, then if you offered say £14k at auction you are likely to get it. As you already know the car as it was yours before there is pretty much zero risk of getting a lemon.

 

[johnb80]

How easy is it to do that. I've certainly considered that conceptually. If say the balloon payment was £16k, the regular price at auction was say £12k, then if you offered say £14k at auction you are likely to get it. As you already know the car as it was yours before there is pretty much zero risk of getting a lemon.

Ive no idea but I may well give it a go in 3 years time

 

[siteguru]

My previous lease (company) cars have tended to end up at BCA. I'd imagine this would equally apply to many end of term PCP cars.

 

[tsedge]

Nothing to lose by asking. We might be interested in doing the same.

 

[cjmillsnun]

Thanks for the reply, youre thinking on the same lines as me. I intend to get a price from WBAC, motorway and Autotrader etc at the time and try and make them an offer similar to those prices, they would get less at auction etc.

Be careful with that as trade value is not the same as retail. They will likely go back and look at what a dealer is selling the same car for. In reality as others have said they will likely stick to their guns and you'll be going to the auction to get the car back. Remember you will have to pay in full immediately for the car so make sure you have enough on a card or enough cash in the bank.

It's a reason I'm actually changing my car and getting an MG4. I'm in a 4 year PCP with my Zoe, which ends next March.

The balloon payment is £10,741, however a car that is identical spec to mine, and the same age with a lot fewer miles can be had for less than £9k. There's little point in doing anything except hand it back to the finance company, and once the MG4 arrives I'll be doing a voluntary termination. Lesson learned, the MG won't be on PCP. I'll pay the extra a month and actually own it at the end.