Please explain (car) PCP and “immediate” cancellation to me

I’m sure it’s been done before but I’ve googled my pretty li’l ass off and got many conflicting comments, so cleaerly I’m here for the definitive answer, please 😉

Looking at a new car with a decent discount that makes a newish used car a bit pointless.  Price is better again if I take the PCP offered.  I can pay in full and that feels the better option to me but the seller is saying that I should take the finance and then immediately request to pay it off in full, suggesting that the penalty would be a nominal amount (said “under £50” but can’t/won’t show me that in writing and says it won’t actually appear as an option on any paperwork.

All sounds a bit speculative.  Does anyone have any good info on this ?

(to clarify, I do not want to cancel early – don’t intend to return the car; this is to keep it and pay in full ASAP)

Sounds super fishy to me. A colleague at my work got proper conned by a car salesman in a similar situation.   Ask him what sales option generates the most commission for him

Essentially your salesperson is getting credit for selling you the PCP, so they want you to take it, and are giving you back what you want – payment in full – albeit the get extra commission.  I thought this practise was recently deemed illegal.

You need to see the small print and numbers in writing, that’s a massive red flag to me, e.g. you could end up paying six months interest as the early repayment fee.

I did something similar, although it was about 6 months in when I paid it off outright.

Not sure it was all that much cheaper than buying outright, if it all, but I wanted a cheap-ish way of running the car for a while before fully committing so it worked for me.

I’m guessing the seller gets extra commission for you taking out credit?

I normally buy my cars outright. But have done this once.

The car was offered with an extra £1k off if i took the finance, and like you, they said take the finance and get extra money off, but i had to ensure i paid one months payment, then i could cancel the finance and pay in full.

The car was on 0% however, but i did as said, paid the first installment, then cancelled and paid the outstanding balance.

Read the small print to see if there is early repayment charge.

(The car was a Ford Fiesta ST)

I did it a couple of years ago with a VAG car – finance option gave a discount and servicing package so was too good to ignore. I phoned VAG finance about 2 days after I got the car and paid it off. Kept the benefits, no hassle, no comebacks.

As above.

Basically, the seller is on commission for finance so wants you to take it. They incentivise you to do this with a better price if you take it.

The theory is that if you take the car then cancel the finance immediately and pay it off in full (all finance products legally have to have a 14 day cooling off period) then the seller gets their commission and you get the car a bit cheaper. If you cancel in the 14 day period then there should be no fee to pay.

Leave it longer than 14 days to cancel and you’d need to have read the contract to find out what the cancellation fees and process is.

All the above is a bit of hassle and admin so the amount you’re saving would need outweigh the time and effort spent cancelling.

Iirc the seller wants you to wait till after the first payment as that is what triggers their payout.

I did this with my last PCP. As others have said there is a legal right to withdraw from the finance agreement within 14 days with no need to provide a reason.

https://www.car.co.uk/car-finance/faqs/cancelling-finance/can-you-cancel-car-finance-within-14-days

The finance company can charge a nominal amount to cover the interest in that 14 days period. (I think mine was about £25).

I found the whole process painless.

The actual legislation

https://www.legislation.gov.uk/ukpga/1974/39/section/66A

You can withdraw at any point within 14 days of taking out the agreement, you have to pay back any money borrowed, the lender can charge interest at the rate agreed, but cannot levy any other fees or charges. Once you’ve paid back the money owed to the lender, title of the goods passes to you.

After 14 days, you cannot withdraw from the agreement but you can settle it.

With respect to cars though, this section is worth bearing in mind. It means that if another contract, such as a service contract is linked to the main agreement, then that ancillary contract also gets cancelled and is deemed to have never been entered into.

(7)Subject as follows, where the debtor withdraws from a regulated consumer credit agreement under this section—

(a)the agreement shall be treated as if it had never been entered into, and

(b)where an ancillary service relating to the agreement is or is to be provided by the creditor, or by a third party on the basis of an agreement between the third party and the creditor, the ancillary service contract shall be treated as if it had never been entered into.

Thanks everyone – still a bit unclear

From bensales’ post, this bit worries me most:

(a)the agreement shall be treated as if it had never been entered into

so if that agreement included what was effectively a couple of grand as a gift, is that now void too and woulod require paying back ?

(I guess I’ll need to talk to the finance peeps once I see their actual offer, though it’s nearly break even to see through the PCP to term if it comes to that, esp if I put the ballon money in a savings account for the term)

Or am I missing something else

I believe that you can pay the finance off as soon as you like.

However, the car salesperson will only get their “cut” from the finance provider if you pay the finance payments for at least three months.

If you pay it off immediately the salesperson gets nothing. I have been told that the “cut” from the finance for selling finance is worth more to the salesperson that their commission from the retailer

Done this a number of times with Audi and recently Nissan.

Do not withdraw from the agreement as you will have to pay the finance contribution.

Simply  request a settlement figure from the finance company website or you call and request one.

Audi charged interest by the day, Nissan charges by the month.

Transfer the funds and wait for the closure letter to arrive, its usually the cheapest way to buy if you can afford it and they are only

offering a deposit contribution if you buy on PCP.

I asked my salesman about the 3 months to get his cut, his reply was to look after myself and pay it off ASAP.