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What to do if your PCP is coming to an end during coronavirus

Time 2 years ago

Most consumers in the market for a new car these days require some sort of finance deal to help get them on the road.

Whether a straightforward hire purchase agreement or loan, a PCP deal, or a PCH arrangement (usually a lease), there are various options buyers can explore to get themselves behind the wheel.

But what happens if you should come to the end of a car finance term in the next few weeks and months, when the vast majority of dealerships will be closed?

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Below, we answer a few of your questions. But before we get into the detail, the overriding message for everyone would be – talk to your lender or finance house. There’s a fair chance that even though showrooms have shut up shop, representatives of the main banks and finance houses will still be working from home and be happy to talk to you.

If you can’t afford to pay this article may be useful too:

In Detail: I can’t afford my car payments because of coronavirus what can I do?

This post is designed to advice dealers who may be facing queries from customers and the public. Ok, let’s get cracking. 

What do I do if my PCP comes to an end when car dealerships are closed?

In normal circumstances, there are two main options a buyer has when a PCP term reaches its conclusion. They are: hand the car back without making the optional final balloon payment; or make the final balloon payment and keep the car, thereby taking full ownership of the vehicle. 

If the first of those applies, it may well be that your lender, perhaps in association with your car dealer, will be prepared to cut you a bit of slack and keep the car for a little while longer than the prescribed term. After all, if dealerships are closed, who are you going to return the car to? You need to ask your lender, though, so call them.

If you want to make the balloon payment and keep the vehicle, that should be possible without paying a visit to a physical dealership. Money can be transferred online, as we know, and you should be able to move from the PCP contract period to outright ownership fairly seamlessly.

Some dealers are trading online so you could try and arrange a deal with them.

Do I have to take my car back to the same dealer I bought it from when my finance runs out?

No you don’t, although you’re very likely to be looked after by the selling dealer. They’ll want your return business. Dealers are contacting customers regularly, and if they’re not, they should be to tell them their options at the end of the finance deal. it’s likely this will continue through the current coronavirus crisis. Our message would be: Speak to your dealer first to see what your options are.

Can I get a payment holiday on car finance?

If you’re struggling to find the money to keep up the instalments, then first and foremost you must get in touch with whoever is lending you the money and explain your situation. Honesty really is the best policy here.

Don’t ignore the problem. If you miss any payments, that will undoubtedly cause you problems further down the line since your credit rating will be badly hit. The reaction may well vary but all being well this will be a temporary problem, so a deferral of payments might be allowed, or the loan term might be able to be extended, which will cut the amount being paid each month.  Call your lender as many are offering options during this crisis.

Can I get a cheaper car on finance?

Amazing as this may seem, thanks to low APR rates and manufacturer contributions, sometimes a car can actually be cheaper on credit than if it were bought for cash in one fell swoop. The downside is you have to make a sizeable payment before the monthly instalments begin, then another one at the end of the agreement, which usually lasts three years, if you want to keep the car. 

But if you downsize your car you may downsize your bills so if you need to save money it might be worth thinking about changing into a more affordable car. Email or chat to a local dealer online.

Dealers: Are you offering this as an option in your marketing? If not, you should be.

Are car dealers doing deals on cars during the coronavirus crisis?

Yes and no. Some are continuing with online sales and as the saying goes, it’s unquestionably a buyer’s market at the moment. But they’re wise to customers who might be pushing their luck so we would advise you not to try to take advantage.

One thing’s for certain: Many people suddenly have a lot of time on their hands as they are stuck indoors, so it’s a good time to shop around. But there’s something else to bear in mind: even if you were to do a deal today, it’s unlikely that you’d be able to get behind the wheel until the Covid-19 crisis is behind us.

Dealerships have shut up shop and even those who are normally prepared to deliver to customers’ homes have ceased to do so for the time being. There may be some who can offer you a solution but so far we haven’t heard of many.

Do I speak to my finance company or the car dealer about my car finance coming to an end?

We would advise both. Car finance is a three-way relationship and it’s best to liaise with both parties, if you can find people to speak to at the moment!

Dealers should be trying to contact customers who have finance ending during this lock down to explain what their options are. By looking after customers now, they’ll win fans forever.

Can I still buy a car during the coronavirus crisis?

By and large the answer is yes – although maybe not from the dealership of your choosing. Some are still running sales operations via phone lines or the internet; others, maybe because sales staff have been placed on furlough leave, have ceased completely. As we’ve explained already, though, even if you succeed in purchasing a car, picking it up or taking delivery of it will probably be a no-no while we’re all in lockdown.

Do I have to carry on paying my car finance during the coronavirus crisis?

If you can afford to do so, then yes. However, if your personal circumstances have changed as a result of the pandemic, then you’re entitled to end your finance agreement sooner than was originally agreed. This is called a voluntary termination – which isn’t the same as a voluntary surrender, so beware of the latter because that could leave you seriously out of pocket later on.

Whether it’s a PCP (personal contract purchase) or HP (hire purchase) agreement, both are covered by the 1974 Consumer Credit Act.

PCPs can be terminated if you’ve already paid off half of everything that’s owed – and that includes the fees, interest and balloon payment, which is a lump sum the lender would ordinarily have been due at the end of the agreement.

If you haven’t got to the halfway mark, it’s still possible to terminate the finance deal, but you’ll have to make up the shortfall between however much you’ve paid already and that all-important 50 per cent mark.

If, however, you’ve sunk more than half of what’s due when you decide to halt the PCP agreement, you’ll lose the difference between what you’ve paid so far and whatever the 50 per cent figure was.

The ramifications of ending HP agreements at different stages either side of the 50 per cent point are the same, but you do tend to reach that point about halfway in, whereas with a PCP it’ll be later because of its payment structure.

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Voluntary terminations can be used for new and used cars, and when the cars are handed back they mustn’t have suffered more than reasonable wear and tear. You may also have to pay a fee for ending the agreement early.

As for PCH (personal contract hire) agreements, which are also covered by the 1974 act, as these are basically long-term rentals you’ll be penalised wherever you are along the agreement road because, as with something like a mobile phone contract, you’ll have been tied in to its entire duration. Again, watch out for possible termination fees.

More help and advice can be found here.

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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