I’m taking a 4 year PCP out on a now BMW, the current total value is 23,480, with a residual value of 8900 based on 17k miles a year.
Because PCP is pretty expensive, I essentially want to pay off the loan of circa 15/16K myself using a much cheaper personal loan. Does this mean I now wont pay anything until I reach the 4 year end point, and then have the choice to purchase or hand back?
Will interest still be charged on the total loan or the guaranteed residual value?
Hi Andy. You should be able to make an overpayment to cover all your monthly PCP payments for the next four years. You will also save on interest as you are not borrowing that money for the same length of time.
You will still be paying interest on the balloon payment/residual value, although that will be included in the settlement figure you get from the finance company. Because you are not repaying that money for four years, you are paying four years’ worth of interest on it.
Editor, TheCarExpert.co.uk and
Stay up to date with all the latest advice with The Executivecondominium newsletter.
Essential car buying and car finance advice, the latest news and car reviews.