[Closed] PCP query, over paying

Any advice appreciated

Have you tried phoning or emailing your current provider to ask?

sorry if that last response sounded blunt by the way - it wasn't supposed to but it's just that I imagine most providers have different Ts&Cs.

But I suppose I wonder what the point of overpaying would be? is the APR excessive on the current loan?

You are effectively renting the car - why would you want to pay more per month? Are you intending to keep the car (so you may be able to reduce the final balloon payment by overpaying) or are you just going to trade it in and get a new car (in which case I can't see much point in paying more)?

Cars are generally retaining their value well at the moment so it may be that there is more equity in the car than you expect when the current contract ends.

I doubt you will be able to reduce the term of the contract by paying more.

Thanks.

Intend to buy the car at the end of the term.

Not worried about the term of the payments , just the final value, as I would like to reduce this to more like £7000.

Well deffo worth checking with your provider. With some the final payment is actually a guaranteed final valuation (for a given age/mileage) so it may not be possible to reduce perhaps.

Thanks

Other option is to put that extra a month aside into premium bonds* and enjoy whatever interest you manage to accumulate. Never know, might win the £10k prize. Most likely a few £25s here and there, but better than sitting around in the bank.

*or other investment vehicle, premium bonds value won't ever go down though so good if you 100% need the money at a certain point.

Personally for a PCP I'd pay the original amount and put any extra in savings each month. That way, at the end of the term you've got the extra in cash ready to pay over, but if you need it in the meantime or if something happens (e.g. car written off, boiler dies and needs replacing) that means your don't want to/can't buy the car at the end then you've not paid an extra £3k to the finance company for no benefit other than a few quid in interest.  Unless the interest rate is extortionate, and if it is then why would the finance company want to let you pay off early?

You signed an agreement so it should be detailed in that document.
For an example this is what an Audi doc says.

7. Early Repayment
7.1 You have a right at any time to make early repayment. To do so, you should give us notice, and pay us some or all of the sums payable by you before you are obliged to do so under the terms of this Agreement . The payment should be made before the end of the period of 28 days, beginning with the day following the day that we receive your notice, or on or before any later date specified in your notice.
7.2 Any such repayment will be applied first to discharge sums which have already fallen due under this Agreement . The balance will then be applied to discharge your indebtedness under this Agreement by the amount paid and any applicable statutory rebate . If the effect of the early repayment is to discharge only part of your indebtedness, we will, at our discretion (subject to any agreement between you and us) elect to apply that sum to reduce either the amount of each future monthly payment, or the number of such payments to be made by you in successive months, and we will notify you of our decision.

Overpaying will reduce the amount of interest you'll pay over the full term.

The overpayments will either reduce the number of regular instalments left to pay, or reduce the amount of each instalment. This depends on the lender and their T&C's though. The former is 'standard', with some lenders offering the latter.

You won't be able to reduce the final balloon payment by making overpayments, not via the agreement anyway. If you want to lessen the final bill you'd need to save and offset that yourself.

If you are intending to buy the car at the end, consider looking at the interest rate of the PCP agreement, and see if you could take out a personal loan at a cheaper rate. Nothing preventing you settling the PCP early, and using a personal loan instead. That would save you interest.

Pretty sure there is no facility to overpay on a PCP contract. Think about it, the contract monthly is based on a future payment/value. If you overpay and circumstances change do you think they would refund you the overpayment?

We manipulated our contract on my wifes car nearly a decade ago by asking them what the maximum mileage was on a contract for this car. Whatever they said we said that will do. Net result monthly payments went up and final payment went down. This was on a 0.3% per annum contract on a £10k car so made no real difference to the interest really, just better cash flow.

The last PCP agreement I had would only allow two options - a single partial payment or pay the whole thing off (loan plus balloon).

The partial payment would not reduce the monthly payment amount, but would reduce the amount of monthly payments before the balloon was due. In other words if my agreement had £3000 outstanding with a £7000 balloon, and monthly payments of £300, after 10 months I would have to pay the £7000 balloon. However if I made a one off payment of £2400 I would then make two more monthly payments of £300 at which point the £7000 balloon would be payable.

I would just save the overpayments until such time as you can pay the whole thing off in one go.

Thanks for the replies