Originally Posted by am36
Hi - has anyone got any experience of this please....?
I'm debating my options, but basically want to pay as little as possible in the way of interest charges. If I take the PCP, my intention is to pay a 40% deposit (maximum allowed). Over a 2yr period, I'll have 23 x £262 a month + the GFV / balloon payment of nearly £21k to pay. This will be front end loaded with the APR @7.5% with interest of ~£3.3k.
The Dealer Business Mgr. and Sales guy both say that I'll be able to pay off chunks (without penalty) of the outstanding balance to reduce the term and the impression i get is that the interest is calculated on a daily basis, therefore the theory is that I'll reduce the interest loading if i pay off some big chunks of the balance early on. Though it appears that this doesn't happen that often for them to have much experience. The BMW UK site does not cover this scenario or anything close to it.
Has anyone done this with the PCP? If so, how did it pan out in practice?
Must add that i have no intention of changing the car after 2 years. I'm thinking about a (3 Yr) personal loan (at 5.4% APR) will be the cleanest method, but not necessarily the cheaper in terms of interest paid. (If i wanted to pay off extra - these payments would attract a penalty)
Also - got all the excel calculators thanks!
When I looked at the front loading of PCP's, the only way I could get the APR to work in my excel calculator (based on the BMW PCP quote) was to front load the interest and then set the interest rate to 0%. This means that for the first few months of the PCP you are paying interest only BEFORE you even start on paying the capital off. Hence the need for some sort of gap insurance.
I can't see any advantage of paying a PCP off early- you'll have to pay the interest regardless because its part of the loan.
There might be a clause in the PCP contract where they will give you a small nominal sum back for early settlement. I'll try to dig out my agreement later.