Pay off the PCP or keep it?

[mike sel]

Hi all

I am buying my Polo on a PCP agreement, VW are contributing 500. I will be paying just over 8k over the next 4 years that will leave a residual payment of 7.5k if I choose to keep the car. im on 10k miles per year, I would expect to actually do 14k per year. VW charge 4.8p per mile extra including VAT. however they wave that if your either buy the car or take a new one.

Question I have is do I pay off the 15k PCP loan now? I will be using some of my savings to do that, I would then set up a standing order to pay myself the same £ per month back is if I were paying the PCP payment , I will just be paying it to myself. That way I own the car no worries about mileage. I got the VW £500 contribution, free insurance, 2 services free. Had I paid cash for the car I would not have got those little perks. I will save myself about £3500 interest in total.

Or do I keep my cash in Bank, run the PCP for the duration, don't worry about the miles covered cause VW will wave that when I take on a new car. I am getting about 2% return on the 15k savings that I would use. So that's 1200 interest on my savings I will lose not having the money in the bank. (I am not compounding the interest but then I am not taking into account the interest I will make on the £225 per month I will pay my self back, one cancels the other out ...well sort of)

So bottom line, I lose 15k from my savings but save about 2300 on interest. I will own the car outright and wont have to worry about VW finance and PCP closedown complications if I want to change to say BMW or Audi next time around.

Just cant decide the best option.

[Leif]

I was told to take out PCP to get the £500 discount and I paid it off within days. It depends how much you need your savings. And how quickly you can build them back up. I still have a healthy sum in my savings account as an emergency fund, and I own my car outright. So in my case it was an easy decision.

[Aube]

Hi,

Good question as I was in the same position and went through a few options like you have. Also I considered paying a lump sum into the agreement to reduce the monthly cost or term, and you can do this anytime during the agreement. I wanted to make sure that I still had some cash in the bank in case something went wrong, like the central heating boiler broke. I was happy I could cover any emergency, so paid off the VW loan and saved a fair amount of interest. Please remember you want to ‘withdraw’ from the agreement and must do this within 14 days of signing the agreement. This way you pay minimal interest yet keep all the benefits.

[SRGTD]

I think it very much depends on personal circumstances.

If I was now buying a new Polo, and there were benefits to be had from taking the PCP - such as deposit contribution from VW, free (or reduced cost) servicing, I’d take the PCP to get the benefits, but pay it off in full in the first 14 days.

[mike sel]

Its also complicated by the development of cars going forward.

For example 2 years ago we were all into our diesels because we were told we were all causing less harm to the environment as well as saving at the pump. now everyone seems to be at war with diesels for some reason. if I had one on PCP im not stuck with it and its vastly reduced resale value.

same goes with petrol (at least the 3 pot engine im getting) at the moment they are the planet savers, but im already starting to hear mumblings about 3 pots being not the answer and they are more dirty then a larger engine not working so hard. Are we all going to be a war with 3 pot petrol's in a year or twos time?

then there is the electric car question, Development seems to be speeding up to the point where we are all expecting electric driverless cars to be available to the public in the next few years.

Do I really want to purchase a car with a 3 pot 1L petrol in it?

I find it confusing. but I am leaning towards paying for it outright, I will only be using a fraction of my savings. Even if the agreement is in place I think I can still pay it off in full without penalty. Im going away on business for a few weeks so I may take the time to think this one through a bit.

[Leif]

... I will only be using a fraction of my savings. Even if the agreement is in place I think I can still pay it off in full without penalty. Im going away on business for a few weeks so I may take the time to think this one through a bit.

Then it sounds like paying off is the best course of action for you. Yes 3 pots are more polluting, as they generate loads of nitrous oxide apparently, but I don't see the value plummeting, not by more than the amount of interest you will pay during the full PCP term anyway. As for dodgems (electric cars), well at present they are very expensive over their lifetime on a per mile basis. It would need massive improvements in the technology before they became viable for Jo and Josephine Average. You are lucky that you have a beautiful car, and the means to buy it outright if you so choose.

[albob]

Mike sel
and do some research -- I have read elsewhere that you can pay off the PCP at any time (not just within the first 14 days). there is also confusion about whether it is 'withdraw' from the PCP or asking for 'settlemtent'

[stevereeves]

THE $64,000 car-related question, to keep or not to keep. Being less than helpful, only you can answer that. Do your sums, check them twice, have a long think, you know the car has been well looked after so; are you sufficiently happy to keep it a few more years?...

[Aube]

Hi,

To be clear, within 14 days of signing the agreement you can ‘withdraw’ and this is your right under the terms of a finance agreement. As I said before withdrawing has a minimal amount of interest. Yes you can ‘settle’ the agreement anytime, but the settlement figure after the 14 day ‘withdraw’ period has expired will be higher.

If you read the finance agreement, there will be a paragraph explaining your right to withdrawing from the agreement. So if you decide to withdraw, make sure you say these words to the customers service. They will tell you the amount due and how long you have to pay this.

[adam1uk]

You do have to say you’re withdrawing — but they ask you about six times to confirm that that’s really what you want to do!

[mike sel]

Hi all

Bit of an update,

After driving the SEL I was so happy with the car, I just rang VW finance customer services and withdrew from the agreement. I have the pay the calculated sum by 7th July. I have just saved £2773.98 interest, and I own the car.

I will make sure I now pay myself the same sum as I was going to pay VW finance on a monthly basis. That way I will repay my savings and increase them by 2773.00 just in time to change my car.

[silverhairs]

My friend purchased a new Polo and the salesman told him to take out the PCP and when he received his Polo phone VW and cancel his PCP. He did this and he had no problems with VW and the car's his.

[albob]

Hi,

To be clear, within 14 days of signing the agreement you can ‘withdraw’ and this is your right under the terms of a finance agreement. As I said before withdrawing has a minimal amount of interest. Yes you can ‘settle’ the agreement anytime, but the settlement figure after the 14 day ‘withdraw’ period has expired will be higher.

If you read the finance agreement, there will be a paragraph explaining your right to withdrawing from the agreement. So if you decide to withdraw, make sure you say these words to the customers service. They will tell you the amount due and how long you have to pay this.

Nice clear explanation - thanks for that. It's a line I will probably go down......