A Personal Contract Purchase (PCP) agreement can last anywhere between one year and seven years depending on the vehicle you are buying, the amount that you have agreed to pay each month, and your own financial circumstances. But what if, no matter the reason, you decide that you wish to settle a PCP early and leave prior to the agreed closing date of the deal? Here’s what you should know.
To start off, you should realise that making this decision (especially if it is only just after the mid-point of the contract’s duration) would place you in negative equity, because the value of the car is lower than what it was when you began driving it. As a result, you will end up owing more money to the finance company for the vehicle than what the car would actually be worth at that point due to the terms and conditions of the agreement. So let’s say the car was worth £14,999 when a five-year PCP was green-lit, and you exit after three years. This means you would owe £5,999, but the vehicle may only be worth a couple of grand by that stage, thus meaning you would owe more than what the car would now be valued at.
Now, in some situations, you would be able to trigger a voluntary termination, but with a PCP, this could only become a possibility during the final few months. And in most cases, the motorist is more inclined to just complete the finance plan rather than chopping and changing so late. So, what you will find is that in order to settle the PCP early, you would have to make a very substantial payment to the dealer, which would be in addition to whatever you may pay for your subsequent vehicle. And if your decision is influenced by finances and attempting to reduce expenses, then this is not an ideal spot to be in. Ultimately, you have to decide whether you have reached the point where settling a PCP early is your last resort. Regardless of the circumstances, you will be required to pay whatever you still owe on the vehicle. If you are in a strong financial situation and you just want to move onto a new model, perhaps it is worth making that large payment there and then to cut bait.
If you are struggling, though, then we recommend that you think very carefully before deciding to exit your PCP plan at an earlier stage than anticipated, because sticking with a PCP that is somewhat hindering your bank balance might be the lesser of two evils in comparison to completely settling it and trying to move on in a weaker position. So, you should really ponder whether it is worth you settling a PCP early, but if you decide that it really is your best option, it can be done.
So, as you can see, you can settle your pcp early to own the car or terminate the contract. Find out more here pcpmissold.co.uk.