Paying of PCP

[Vag8]

Hi all,

Recently purchased my VW as used and took advantage of the 2+2+2+2 deal but this was conditional of the the finance being taken via solutions finance (VWFS)
But as it’s at 11.4 % apr obviously I don’t want to be paying that as it will cost £££ in interest, so am I okay to pay it off early and are there any pitfalls I need to know about ?
And will it affect any of the the 2+2+2+2 incentives if I pay it off?

Thanks

[Andy Beats]

So you know 100% you'll be keeping the car, no chance of wanting to hand it back at the end of the PCP?
If so, yes you can settle the finance early without losing benefits.
But you will have to check the contract to find out at which point in the contract this can happen.
Going by other people I've seen do this, you will have to wait at least a couple of months, but no longer.

[SRGTD]

I recently exercised my right to withdraw from my Solutions PCP agreement within the 14 day cooling off period. I retained the benefit of the VWFS £1,250 deposit contribution that was conditional upon me taking VW PCP finance.

Took delivery of my car 09/09/2020, phoned VWFS on 11/09/2020 and gave notice of withdrawal, received a letter on 16/09/2020 from VWFS confirming the amount to be paid (effectively confirming what I’d been told in the phonecall on 11/09) together with VWFS bank account details and methods of payment they’ll accept. Paid off the amount due on 18/09/2020 and received a letter from VWFS yesterday (08/10/2020) where they confirmed they no longer had a financial interest in the vehicle. I was charged £6.21 interest for the three day period 09/09 - 11/09.

So a £1,250 contribution from VWFS for a cost of £6.21 was very good value IMO.

With the 2+2+2+2 deal (2 yrs roadside assistance, 2 free services, 2 years warranty and 2 years MOT cover) on approved used vehicles, I’m assuming VWFS use the same PCP agreement wording as they do with a new car. If they do, then the PCP agreement wording only relates to the amount financed / loaned by VWFS - not any other benefits that might form part of the vehicle purchase deal. So unless there’s anything specific in your PCP agreement small print relating to losing the 2+2+2+2 benefits you got if you repay early (unlikely there is), then you’ll keep them.

[Andy Beats]

If you cancel the PCP within the 14 days, the sales person loses any commission.
Some might say "not my problem", some might see it as messing with someone's income.
Is there any harm to waiting until you're outside the 14 days, then everyone wins?

[SRGTD]

I’m not the only person who’s exercised their legal right to withdraw from a PCP finance agreement within the 14 day cooling off period and retained the financial incentives on offer. In fact the advice given on many forums - including this forum - to people who were thinking of paying ‘cash’ for their new car is to follow this approach.

In reality these days, buyers planning on paying cash for their new car will be a relatively small segment of the overall new car buying population, and of those cash buyers, the number that take finance and then exercise their right to withdraw during the cooling off period will be a small proportion of this small segment. I dare say outside of forums, many won’t be aware they can do this (i.e. withdraw during the cooling off period and retain the incentives), which will make the numbers of buyers that are aware very small. Assuming this to be the case, then there’s unlikely to be much impact on a salesperson’s commission from the actions of a small subsection of a small segment of car buyers.

As for the salesperson who I dealt with losing their commission on the finance agreement from the sale of my car - I’m sure they’ll more than make that up pretty quickly through sales of those essential over priced add-ons (paint protection, tyre, scratch and dent insurance, GAP insurance) to other ‘easily persuaded’ customers!

[monkeyhanger]

The deposit contribution wasn't on when either of our Polos were bought, but when I recently got my A4 (approved used as year 1 depreciation is brutal), there was an offer of 2 free services so I took PCP and exercised my right to withdraw within 14 days to get them without paying PCP interest. From the moment you request withdrawal, you have 30 days to pay VWFS what is owed.

There's nothing dodgy about withdrawing. Within EU law, a car manufacturer cannot offer a cheaper purchase purchase price under finance to encourage you into financing. The legal getaround is that they can offer deposit contributions. It's also enshrined in EU law that you can get out of a finance agreement within a 14 day cooling off period and the lender can only charge reasonable costs e.g. daily interest rate within that period until you withdraw. If the finance company were able to recover the deposit contribution upon withdrawal, they'd be in breach of the first law. Some car dealerships have apparently tried it on (noted in forums) by insisting upon the customer reimburse them, but the finance agreement is with the finance company, not the dealership.

If the OP has already passed 14 days then the likely scenario is 2 months interest penalty e.g if you owe £20k capital plus interest and each month you're paying £300, £200 of which is capital and £100 which is interest then you'd owe VWFS £20200 total.

The only benefit you can't take advantage of with withdrawing from PCP within 14 days is these "3 months free" offers. You have to still be PCPing for at least those free 3 months to benefit from them. In that situation I'd probably have the free 3 months and settle up in month 4 - 3 months total payments is more than paying out on 2 penalty months of interest.

[monkeyhanger]

If you cancel the PCP within the 14 days, the sales person loses any commission.
Some might say "not my problem", some might see it as messing with someone's income.
Is there any harm to waiting until you're outside the 14 days, then everyone wins?

The harm is once outside the 14 days cooling off period, 2 months interest is tacked on to what is owed. On a Polo PCP that's likely to be over £250 in the early days of the agreement when the proportion of your PCP payment that is interest is higher.

Refusing overpriced add ons messes with their income too. Personal commission on the car sale will be about £50, but they'll get £60 for each lifeshine or GAP policy they sell.

[Steve_2019]

If you are over your cooling of period you and might as well keep the monthly payment up into the end of the agreement and if your convinced you want keep the car just pay the balloon payment.

[monkeyhanger]

If you are over your cooling of period you and might as well keep the monthly payment up into the end of the agreement and if your convinced you want keep the car just pay the balloon payment.

If you have the readies, you will still save a bundle settling up outside the colling off period. On a PCP for a £20k motor finance balance (after customer's deposit and finance deposit contribution) , i'd expect there to be about £2500 in interest on a 36 month agreement and closer to £4k on a 48 month agreement.

If you ask for a settlement outside the 14 day cooling off period, you'll pay 2 months penalty interest (maybe £250).