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So I am in the realms of ordering a new car and have been reliably (or maybe not) informed that if I take out a PCP I am well within my rights to hand the vehicle back once 50% of the payments/balance is paid without any detriment to my credit history/score. Can anyone confirm this or inform on your experience of doing this ?
I had to do this before (long story) but yes, once we were over 50% we could terminate and hand the car back with no issues...bitter pill to swallow spending all that money and giving the car back but hey, that was the circumstance at the time!
I've done it twice. I've always seen PCP as a rental and had no desire to keep the car, and if you can get it on 0% finance you can hand it back at the middle of the term.
It has no impact on your credit record although I believe it may upset the dealer. My heart bleeds etc.
^^^ and presumably if you only put down a small deposit at the outset you're not really out of pocket either ?
This is one of those times when you really have to read the small print.
You can VT a consumer finance agreement once the balance of ownership passes you to. That means you paid 50% of the TOTAL cost of the finance agreement. Because of the way different PCP deals deal with the end of the agreement it can vary because some include the final payment, some don't and it makes a big difference.
If you PCP a car for 3+35 @ £200 with a final GFV of £10k the total cost is £17,600 so you need to pay back £8,800 before you can VT it - with a £600 deposit and £200 a month you don't reach the VT point at any time during the agreement.
But I've seen other agreements that don't include the final payment, but I think with those you have to give it back at the end - with them you can get out roughly half way through.
As for the effect on your credit 'score'.
VTing is a consumer right, and shouldn’t be treated as a blemish on your history – the main credit agencies certainly wouldn’t treat it negatively on the ‘scores’ they produce, but Finance companies aren’t bound to ignore them and they are recorded. When I was an underwriter I always considered them with caution – if a customer VTs a car, it will almost certainly result in a loss for the finance company, really it shouldn’t. A mutually beneficial secured finance agreement should never be written in a way where the asset is worth less than the outstanding balance, but it’s a competitive world and consumers want to buy expensive cars that depreciate by 20% or more on day 1 and don’t want to pay a 20% deposit and if you insist you won’t get much business. When I was financing high-end cars and I saw a file that showed customer bought expensive car, VT’d at half way point, then bought expensive car, VT’d again – I’d ask myself do I really want to risk another £40k to potentially make 5% a year on it, only to lose the lot plus some more 2 years later? No I don’t, so I’d decline it. I don’t have to say why and in fact the finance company who will never state their underwriting criteria anyway will NEVER state why and it’s not recorded.
My mates got a VW on PCP and has had the car 1 year now, he can give it back after another year as its on a 4 year term.
His wife is already eyeing up a more expensive car.....