…does it make sound financial advice?

a) the cars yours and there’s a reduced overall payment for the vehicle yet

b) a SIPP is >20% more efficient

c) the money could reduce a mortgage term

Or, leave it until the end of the term and see where you stand?  If it had to go back, you’d never have invested the balloon payment/balance toward a depreciating asset, right?

Depends on the interest charged over the term and the interest charged for ending early…. whichever makes the most financial sense to you, only you can answer.

If you can then yes, you pay alot of interest on the final payment during the course of the loan.
The only instance i wouldnt pay a car loan off ( if i could ) is if it was 0% or a very minimal rate…say 2-3% APR , you may be better putting the money somewhere else like mortgage overpayment in that case.
On a side note it is possible to part pay a car loan too, which is another option.

Sound financial advice will change depending on you circumstances at the time. I suspect it is not the most cost effective thing to do…the PCP scheme is designed to keep you swapping into a new car every 2 – 4 years or so. If you have a 0% interest PCP deal then I guess it is not particularly detrimental either way but, as you’ve pointed out, you can then ask how are you best deploying the funds if you have other debts or things you want to do in your life that require funding.

I’m always an advocate of chasing the interest (not percentage rate but actual cost of interst)…if you have cash then you’re better off deploying it in a way that reduces what you pay on interst…so no point in saving if you have a mortgage as the paltry amount you might be able to save wont earn as much interest as you’re being charged on your mortgage, so utterly pointless and doesn’t make sense. The same logic would apply here for me.

Also what’s the benefit in paying off the PCP and owning the car? you suddenly open yourself upto all the financial risks of car ownership which is the prime benefit of PCP type deals for me….they are more expensive than buying a car if you just compare purchase price to PCP charges….but that is only half the story.

you suddenly open yourself upto all the financial risks of car ownership which is the prime benefit of PCP type deals for me….t

What financial risks do you open yourself up to?

Well, the interest will cost me £1100 over the remaining life of the PCP, a rebate that I’d get if I paid it now.  The SIPP will pay me back a lot more, but that money isn’t accessible for 10 years.

Paying the PCP off means I have a car that can’t be taken from me if say, I lose my job and can’t make the payments, yet we do have another much older paid-for car as a backup.

I’m thinking it’ll go 50% SIPP, 50% mortgage.   I have 2 years before the PCP balloon needs to be paid – a lot could happen in that time.  I could always save for the balloon, having it in my back pocket should I want to keep the car.

I have no desire to swap to a newer car and keep the PCP going.

What financial risks do you open yourself up to?

Car ownership is a financial risk. What else is it. Nobody wins from car ownership. Depreciation is the biggest, unreliability – you pay for repairs and problems not covered under warranty if you have any warranty outstanding, servicing. The usual. Under my wife’s PCP we don’t pay for servicing, any work done to the car. I just pay for fuel, tyres, tax and insurance. After four years we roll over onto another PCP. It’s the cheapest motoring we’ve done. For the same price as what we were paying for car loans for 5year or so cars we’re driving brand new cars with all the costs covered.

ar ownership is a financial risk. What else is it. Nobody wins from car ownership.

You are making assumptions about warranty remaining and service plans, one of which is dependent on the age and mileage of the vehicle and the other has nothing to do with PCP, they can nearly always be a standalone option anyway.

If you take those factors out the added costs of running a PCP in interest alone cancel out any benefit, including tri part agreements with continue even if the loan is paid off early.

I think you are assuming all PCP’s are the same as your Wifes agreement which they are not.

Might be a daft question, but isn’t a PCP where you take the value of the car at the time of purchase, and the future value of the car at the end of the set term and you’re financing the depreciation? Therefore even if you pay the PCP off, you still have the remaining value of the car to find? Or are you talking about paying the whole thing off?

paying the whole thing off

That, early and owning the car with no finance vs the other options.

…does it make sound financial advice?

a) the cars yours and there’s a reduced overall payment for the vehicle yet

b) a SIPP is >20% more efficient

c) the money could reduce a mortgage term

Or, leave it until the end of the term and see where you stand? If it had to go back, you’d never have invested the balloon payment/balance toward a depreciating asset, right?

Usually no,

1) Most of the manufacturer based ones seem to use some kind of financial alchemy to make expensive cars affordable. I’ve looked at the residual value they’ve put on mine and there’s no way it’s going to sell for that at auction, based on simular cars of the age / mileage mine will be when I return it, it won’t be worth the residual on a forecourt. You’ll be swapping a big pile of cash in exchange losing the option to walk away if it doesn’t make sense to own it at the end.

2) The reduction in interest will depend on how far into it you are, but it’s rarely a massive saving.

3) You now

herefore even if you pay the PCP off, you still have the remaining value of the car to find? Or are you talking about paying the whole thing off?

You can pay the whole thing off and take outright ownership of the car, it is also possible with some finance companies to pay off part of the final payment, giving you more equity at the end of the agreement and therfore a higher deposit if you want to finance a new car on PCP again…

I have no desire to swap to a newer car and keep the PCP going.

Wot 🤯👀

No RS6 in the pipeline??

🤢

FWIW I’d continue with the PCP if the rates less than 3% then at the end of the term chop it in for a newer car…… Shiny New Car, moar bigger, moar Shiny, moar alloyz, moar infotainment systemz, moar driver aids etc.

FWIW I’d continue with the PCP if the rates less than 3% then at the end of the term chop it in for a newer car…… Shiny New Car, moar bigger, moar Shiny, moar alloyz, moar infotainment systemz, moar driver aids etc.

+ new sunglasses 😉

I have no desire to swap to a newer car and keep the PCP going.

Come back in 2 years and tell us that.

Brother in law just purchased his wife’s PCP car via his new lease car company. He was in the very lucky bracket of the car actually being worth more than the settlement figure so ended up making about 500 quid on it. I’m sure they are few and far between tho.

Paid off my Focus ST PCP with some money from a bike accident claim. I was always hoping to pay it off. I feel that PCP is like a treadmill that sucks you in to changing your car more often than maybe you want to.

My car is 2.5 years old and I’m not interested in a new one at the moment. I am glad that next March I don’t have to do anything. Don’t have the stress of choosing a new one or finding a deposit. What if my next car model was not available at the time? Don’t like talking to car salesman.

I owned my last car and was able to shop around and get a great deal on the ST at nearly 6K off list price with Drive the Deal. £1200 of that discount was the PCP finance contribution that I kept.

Hopefully, I will keep the car for at least 5 years.