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Ask Justin

Ask Justin

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Can I get out of a BMW PCP?

Borrowing | Hire Purchase Helpful? 7

Asked by zrobinson, submitted 26 July 2010.

Open Quote I purchased a BMW on PCP in September 2007. I took out a 4 year agreement with a final optional balloon payment. I have never missed a payment.

The deposit of £1500 was dealer paid. I would like to hand the car back without it affecting my credit rating or inhibiting my ability to purchase another car. I dont have the official figure to hand but the approx purchase price was £28,000 and the monthly payments have been £441. The final payment was around £8500 but was optional.

Can you please give me some advice on what my options may be? Thanks
End Quote

Answered by Justin on 28 July 2010

Because the total amount on the PCP agreement is over £25,000 it won’t be covered by the Consumer Credit Act, which I’m afraid limits your options.

On PCP agreements under £25,000 customers can return the car at any time provided they’ve made good any missed payments and paid at least half the total amount payable on the agreement.

In your case you’ll have to take a look at your BMW PCP agreement and check whether there’s an early termination clause. Chances are there is and BMW Finance will probably either give you a settlement figure and take the car back from you or give you a higher settlement figure and leave you to sell the car yourself. Provided you pay the settlement figure your credit rating should be unaffected. Note, you may also be liable for excess mileage and repair/renovation payments if they apply.

When you get a settlement figure you should compare the cost to that of running the agreement for the full four years (i.e. the remainder of your monthly payments), including an estimate of what the car will be worth at that time (September 2011) so you can judge whether you’ll be likely to hand the car back or keep it (possibly to sell) by paying the final £8,500.

If you want to buy another car the dealer may offer to roll the settlement figure into a new contract, but I'd be wary as this would then increase our borrowing costs.

Getting out early from PCP plans totalling £25,000 or more is rarely a good deal, but obtaining the above information from BMW should at least allow you to make a balanced decision.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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