# Reducing costs of PCP



## wendigo (Oct 28, 2015)

Along with others on this forum I have taken out a PCP with Audi finance. I put down a £2000 deposit, £290 per month, over 4 years, Apr 6.8% with final payment / value of £14555. First payment November 2015.

I asked Audi finance what effect a further payment of £5000 in April this year would have on the costs. They provided two options.

First option, monthly payments reduced by £130 per month, period remains the same as does final payment. Interest saved ££604.

Second option, monthly payments remain the same, but agreement finishes August 2017, final payment £14355. But interest saved £2997!!!

The second option achieves the best savings and the equity in the car would be better. As long as you did not mind trading in at an earlier date.

Your thoughts on this would be welcomed fellow TT owners .


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## leopard (May 1, 2015)

You're going to have to get finer with the detail.

What model is it firstly and what options have you gone for ?

Do you intend to go the whole duration or hand it back early ?

Do you intend to keep the car and pay the final payment or trade in ?


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## winrya (Feb 22, 2014)

Id be keeping the money in the bank. You never know what's around the corner and I wouldn't want to tie so much cash in a depreciating asset. I'd imagine if you got a settlement figure in August 2017 the settlement figure would still be £5000 plus the £14555 GFV. The £2997 you're saving in interest is I imagine the 26 months of interest you'd save from paying off early which you'd still save paying off in 2017

General rule of thumb is for every £1000 you put in, or add extra in options, it's adds £25 to the monthly figure


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## wendigo (Oct 28, 2015)

Leopard

Car is a standard Audi TT 2 litre sport with optional tango red paint. Deducting £2000 deposit left £23250 subject to finance. If I let the PCP run full term the interest would be £5225. Making the £5000 payment would cut the interest by £2997 if I decide to trade in , in August 2017 which would make sense as the equity should be reasonable. I would not pay off the car.

Winyra

Yes I would not use money that I would need access to but if you could even a lesser amount of say £3000 or £2000 would still be beneficial. The settlement figure at August 2017 is £14355. Nothing more . As long as you did not mind trading in at an earlier date you stand to gain on two fronts less interest and a better trade in value.

In my opinion the second option is a no brainer if you have the cash available. To pay £5000 to save £2997 is remarkable.


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## leopard (May 1, 2015)

I wouldn't rely on the equity being reasonable as a lot can happen in a year.For example people are finding they can now buy new cheaper than used (which I know sounds ridiculous)The reason seems to stem from over supply and easy finance which has resulted in the knock on effect of residuals across the board,not just the mk3 and is one of the reasons why I've bailed out for now.

Personally I'd go with Winyra on this one and keep the money in the bank and the reasoning behind this.

Also see the "Massive cost to change thread"


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## Mr R (Mar 1, 2015)

IMO, 4 years is quite long for a PCP, and the interest soon adds up, as you've shown. Also, the car won't be under the standard 3 year warranty if you keep it during year 4.

Your idea of plowing money in to reduce monthly costs and overall interest is a good one tho... Over the years I've done that with my mortgage when interest rates were higher, but definitely wouldn't do it on a depreciating asset, unless I planned to keep the car for a long time.


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## ZephyR2 (Feb 20, 2013)

Virtually the same final values at 2 years and 4 years doesn't sound right. Are those figures correct?
Personally I'd always try to reduce the interest. Your £1500 will getting next to nothing by way of interest in the bank and could save you close on 3 grand in interest.


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## wendigo (Oct 28, 2015)

The value after two years is correct. But there is no reduction in the monthly costs. The large saving in interest is down to the agreement term reduced to 2 years. I take the point made about depreciation but I would I like to think that the value would be better after 2 years rather than 4.
Yes I accept that the TT is a depreciating asset as with any car, but the chance to cut the costs so significantly must be a major plus. The source of the monies will be from a maturing ISA. Where would I get a better return if I were to reinvest elsewhere?


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## jc74 (Jul 6, 2014)

wendigo said:


> The value after two years is correct. But there is no reduction in the monthly costs. The large saving in interest is down to the agreement term reduced to 2 years. I take the point made about depreciation but I would I like to think that the value would be better after 2 years rather than 4.
> Yes I accept that the TT is a depreciating asset as with any car, but the chance to cut the costs so significantly must be a major plus. The source of the monies will be from a maturing ISA. Where would I get a better return if I were to reinvest elsewhere?


Any overpayment on the PCP sounds like it is effectively saving you 6.8% APR (compounded and tax free). I really doubt you'll anywhere near that with zero risk anywhere else (exception being to pay of any other debts which have a higher interest rate). A very shrewd move in my opinion...


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## tonymar (Jun 1, 2013)

the 6.8 pcp interest will be against the full amount owed which includes the final payment thats why you have to get the max discount you can on top of dealer contribution to guarantee at least 50% after 3 yrs


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## IC_HOTT (May 29, 2010)

Without stating the obvious, which means I'm about to state the obvious :lol: but it be fair it isn't always so,

They make their money on the time you've borrowed it like most loans, so pay £10k and pay earlier and so on.

Question is will you be ready to either do another deal at the end point or ready to hand over the cash and keep the car?

If it's do another deal do whatever the cheapest version is to that point, if it's keep the car do it as soon as you can afford to pay it off otherwise your just handing more money over to them than you need to. 4 years is a long time to commit if you can afford to move on earlier - itchy feet and all that :wink:


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