What are the options at the end of the PCP deal?
As mentioned in brief earlier you have will 3 options available to you when the contract term comes to an end. It may have seemed like a long time coming when the deal finally draws to an end but this is the time when you have start thinking about what you want to do next. Most of require a car in order to carry out our day-to-day jobs so it’s important to understand what you can do next.
At the end of the PCP scheme you have three choices you can make. These are, make the final payment and buy the car, return the vehicle and walk away with nothing left to pay or trade it in for a nice new shiny one!
Return the car to the manufacturer
So, providing you have made all the monthly payments over the life of the contract and haven’t damaged the vehicle (beyond the fair wear and tear agreement), kept the agreed annual mileage within the limit and serviced the vehicle when required, you can hand the vehicle back and have nothing else to pay.
You can expect to pay additional charges if you cannot meet any of these conditions. If you have damaged the vehicle you can get a quote to fix it from the manufacturer and compare this price with a trusted garage of your choosing as it could cost you a lot less doing it this way.
In most cases people look after their vehicles and when it comes time to hand it back they can do so and walk away with no additional cost to themselves. In this instance you must remember that walking away leaves you with no capital and no vehicle to trade in so effectively you’ve just been renting on a long-term basis.
Buying the car
This option, as it suggests is taking advantage of the optional final payment on the vehicle, also known as Guaranteed Minimum Future Value, GMFV) and taking ownership. If you choose this option you become the legal owner of the vehicle and is yours to do with as you please. One payment option, if you don’t have the balloon payment in cash, is to refinance with a bank loan and have lower monthly payments that suit your budget from this point on.
The good news is once the term is up and if the car is worth more than the GMFV you are also free to sell the car on and make some profit on the difference. This ultimately means you will have a lump sum you can then use towards your next motoring venture!
Trade in the car for a new one
Manufacturers will be falling over themselves to take this option as they get some repeat business from you and lets say the car is worth more than the GMFV you get to put this difference into the next deal. If you imagine, from the dealers perspective, all the values stay in house with the manufacturer. This is why you will find some very attractive new car deals in the market.
It’s important that you’re not depending on equity being left in the car at the end of the agreement because if the exceed the mileage or damage the vehicle there is a strong chance that the vehicle may not be worth the GMFV which leaves you with the shortfall.