/ About Refinancing My Payment (To Pay Balloon)

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L ming89er 27 Nov 2019

My parents' agreement will end next January and they intend to buy the car.

I plan to contact their finance company about refinancing their payment (to pay the balloon payment), but I’m nervous when talking over the phone (especially when I can't see the other person and there are awkward pauses).

Besides them asking for a registration number and car registration, what other questions can I expect from them before they could allow me to refinance my payment?

I have never owned a car myself, so I'm not familiar with the process.

I'm PCP.

Thank you.

2
Ben_Climber 27 Nov 2019
In reply to ming89er:

You shouldn't have an issues financing the ballon.

This will essentially change the contact to HP, meaning you are the owner at the end of the contract.

They will likely want to know what terms you want? Length of time you want to finance over. I doubt they will ask about milage etc as it will be of no interest to them on a HP contract.

Make sure they don't sting you on the APR.

One other thing to keep in mind is that often garages will offer great deals on a newer model of car at the end of a PCP.

wintertree 27 Nov 2019
In reply to ming89er:

I’m not clear - are you working on behalf of your parents or to get the car transferred to yourself?  Either way data protection many be a stumbling block without the authority of your parents being communicated as the vendor needs.

Sorry I am going to give you advice not directly answering your question - ignore it if you don’t like it!

Check independent sources of a personal loan to see if they’re cheaper.

Any car finance company that sells PCP is trying to rob people blind.  If you’re nervous over the phone they’ll look to work you to sign you up to a worse deal than you can get elsewhere.

If you (or your parents, depending on what’s going on) have a good credit history, the peer to peer lender ratesetter commonly lend unsecured for car finance at a decent rate. (Disclaimer - I lend through ratesetter).  Also ask your/their bank and maybe another high street bank.  I’d say by far that’s the smartest move if you don’t have the cash but have the headroom for repayments.

Depending on the model and the timing in its life cycle a dealer can have a glut of ex-PCP cars cluttering up their lot, so push for 0% hire purchase if you feel comfortable - worst they can do is say no.  My advice is “under no circumstances ever sigh a PCP deal and assume the dealer is lying to you about its purported benefits”.  When waiting in a dealer to sign papers for a used car I had to physically restrain myself from joining the conversation between a suited dealer and a young couple who were about to loose a lot of money.  Flabbergasted it’s legal really.

1
L ming89er 27 Nov 2019

Thank you for the comments.

How long can I expect to be on the phone for roughly? Would it be a lengthy phone call?

For quick clarification, I will be acting on my parents' behalf because English isn't their first language, and the car will still be under my parent.

Post edited at 13:57
Neil Williams 27 Nov 2019
In reply to ming89er:

Another option, if your credit rating is good enough, is to obtain a separate personal loan online and settle the balloon payment in full.  That avoids any negotiation.

Post edited at 14:01
dunc56 27 Nov 2019
In reply to ming89er:

Do you think it's overpriced ? Come on people - wake up !

wintertree 27 Nov 2019
In reply to ming89er:

If you are acting for your parent you may need them to write a letter or email to the dealer authorising you to act on their behalf due to our data protection laws. Then again some dealer staff seem to be amongst the worst trained of least responsible when it comes to data protection...

For closing down a PCP deal you will I imagine want access to

  • the original PCP documents
  • a truthful description of the state of the car and the actual annual mileage as both of these factor into the final settlement

For negotiating a new loan from the dealer or elsewhere

  • Annual income, household expenses and other costs of the parent(s) to take the finance
  • Potentially the nature of their employment contracts (fixed term, permanent, zero hours, self employed etc)
  • Age, address, sex and legal name of the parent(s)
  • Details of any criminal convictions or county court judgements against them (CCJs), information on if they’ve ever been declared bankrupt.
  • Potentially immigration status

Given your comments on how you feel during a phone call I strongly recommend doing the process over two calls - making clear on the first one that you only want a list of all the information that will be required, to allow you to prepare for the second one.  Entirely reasonable given you are acting on someone else’s behalf quite regardless of how you feel on the phone.

Post edited at 14:28
Blue Straggler 27 Nov 2019
In reply to dunc56:

> Do you think it's overpriced ? Come on people - wake up !

Are you suggesting what I think you are suggesting?

Qwerty2019 27 Nov 2019
In reply to wintertree:

Wow that’s quite aggressive.  If someone is telling you they are slightly nervous of something, maybe such aggression is the wrong way to approach things.  I have 25yrs commercial motor trade experience and I signed up to a PCP deal on my wife’s car.  Want to know why?  They charged 0.3% interest PA.  I loaded the mileage as high as I could so the final balance was much less than the car was worth and I always intended buying it.  Cost me about £200 to finance a car over 3yrs.  So not all deals are there to shaft the customer.  In fact a pcp deal couldn’t be clearer.  At point of signing the contract you are told how much you are being charged for the car over the period of the contract and how much the final payment is.  How on earth this is shafting the customer I don’t know.

Anyhow, to the op.  TBH the answer is in wintertee post.  Get yourself a few alternative costs for borrowing the money from your bank and wherever is reasonable at the moment.  I think we lend money out on vehicles at about 3% so every £1000 borrowed costs £1030 per annum to pay back, but that is to commercial customers on new vehicles.  I think it’s more like 4-5% on used.  Not sure what high street lending rates are.  I can’t see any dealer lending you money at 0% against a car they have already sold.  Those kind of incentives are for shifting their own metal.  Get your examples, call the finance company up with your agreement number and your parents present (they will not talk to you unless they have your parents permission).  Tell them you want to refinance the vehicle and the best price you have.  Then let them see if they can beat it.

No stealing, no corruption and if you are not sure, just ask for them to mail it through and I would happily tell you where to look to ensure it’s fair.  

Doing it this way you will probably be on the phone for 10-15mins.  If you prefer, wherever your parents bought the car will have a finance/business manager who will do it for you.  Again if you go in with some alternatives then it should go the same way.

wintertree 27 Nov 2019
In reply to Qwerty2019:

The nice thing about giving free advice is I can lay me view out there and people can take it or leave it.  I’ve seen PCP used over and over again on new cars to push people’s mental levers into handing over a lot of excess money - it largely comes down to the economics of making the balloon payment (or not) rather than the interest rate.  You can do okay out of it but in my view it’s the kind of product fragmentation and obfuscation that is used to exploit people who don’t really dig down in to all the details.  Par for the course in 21st century Britain.

My views over the the toxic effect to people of the wider personal credit industry are only mildly less strong.

> I have 25yrs commercial motor trade experience and I signed up to a PCP deal on my wife’s car.  Want to know why?

Why?  Because you have 25 years experience, know how the systems are set up, know how the people you interact with on the sale are trained and what their processes are.  You are better placed than most people to do well out of the system.  I’ve seen other people be - in my view - mugged by it.

>  I can’t see any dealer lending you money at 0% against a car they have already sold.  

I got a 3 year old, low mileage car from a main dealer at an average price on 0% HP for 3 years with a 25% deposit, with two year’s free servicing thrown in.  You have to know when to move to get a deal but if can be done.  

As you say, the information on total cost is presented in the PCP paperwork - give or take speculation over model depreciation and thus actual value when the balloon payment is due.  But it’s another lever pushing the consumer economy further into a credit based existence which I don’t like.  Saving and then buying on cash is a dying lifestyle, with credit industries expanding to - literally when you consider work > stress > health - suck the life out of the population.

Post edited at 14:58
Neil Williams 27 Nov 2019
In reply to wintertree:

> My views over the the toxic effect to people of the wider personal credit industry are only mildly less strong.

> > I have 25yrs commercial motor trade experience and I signed up to a PCP deal on my wife’s car.  Want to know why?

> Why?  Because you have 25 years experience, know how the systems are set up, know how the people you interact with on the sale are trained and what their processes are.  You are better placed than most people to do well out of the system.  I’ve seen other people be - in my view - mugged by it.

FWIW, I've never found anywhere near as good a finance deal from a dealer than I have by shopping around for the best rate on an unsecured personal loan.  A further advantage of this is that the loan is decoupled from the car - if I have financial problems I can sell the car and settle the loan (though this isn't 100% guaranteed, obviously) but I could also sell the car and keep the loan going if this made sense.  And another is that the state of the car at the end is my problem and not anyone else's.

When I've bought a car I've always gone along with that loan quote and laid it in front of them when they start blabbing about finance, and on no occasion have they yet got close.

(Having an unblemished credit record really does help, though - it won't work for everyone)

Post edited at 15:08
Qwerty2019 27 Nov 2019
In reply to wintertree:

Ok smarty I will bite on your less than correct reply.  Just for one upmanship

Your example of your 3yr old car is that of a car they were looking to sell to you.  You got yourself 0% and well done to you.  The OP has a car the dealership has no responsibility to sell as they did that at the start of the agreement.  In fact it technically belongs to the finance company at present until their interest is removed with the final payment.

Anyhow, I kinda agree with you about the levers and all that, however you were the one that stated that anyone offering PCP is robbing you blind.  It’s not that at all.  It’s idiots who see a shiny car and decide not to engage their brains which are as much of a problem.  I work in vans and I have lost count of the amount of couriers I have refused to sell to because they want never ending finance on vans they are doing 50k per annum in.  They are always the ones who are so vocal when they have £15k finance outstanding on a van with 150k on the clock at 3yrs old.  By all means, hate finance but don’t tar everyone with the same brush.

wintertree 27 Nov 2019
In reply to Qwerty2019:

> Ok smarty I will bite on your less than correct reply.  

It's hard to be totally correct and not endlessly wordy.

> Your example of your 3yr old car is that of a car they were looking to sell to you.

Corollary; that I walked in the door with the intention of buying.

> The OP has a car the dealership has no responsibility to sell as they did that at the start of the agreement.  

Correct, it belongs to the finance company.

> In fact it technically belongs to the finance company at present until their interest is removed with the final payment.

Correct - as did our car - but in my case I interacted with an employee of the dealer who prepared all the paperwork for me to sign.  The paperwork was not with the dealer but was with the finance company (RCI), and I assume the dealer gets a commission from RCI although I did not enquire.  In the OPs case I do not know if they will deal with the dealer or with the finance company directly - but my concerns remain over both.

> Anyhow, I kinda agree with you about the levers and all that, however you were the one that stated that anyone offering PCP is robbing you blind.  It’s not that at all.  It’s idiots who see a shiny car and decide not to engage their brains which are as much of a problem.

It's not idiots though - it's a wide cross section of society who are not well educated in the specific and gnarly issue of personally unsafe credit and its long term consequences.  Nobody is forced to take a bad credit deal, but many dealers are only too happy to offer them and to help sign customers up to them both to shift their product (car) and to get a commission for shifting the credit agencies product (debt).  The diversification of finance products on offer and the prominence given to them by dealers is having a further effect of normalising the business model in society and therefore nudging generally sensible people into taking it as the normal way of things.  Have you tried walking in to a dealer and asking to buy a new car for cash?  Some of them treat you like you're insane.  

> I work in vans and I have lost count of the amount of couriers I have refused to sell to because they want never ending finance on vans they are doing 50k per annum in.  They are always the ones who are so vocal when they have £15k finance outstanding on a van with 150k on the clock at 3yrs old.  By all means, hate finance but don’t tar everyone with the same brush.

Difficult one.  If there wasn't a profit to be made for the finance firm (and therefore a loss to the customer - unlike primary industry finance is to first order a zero sum business) they wouldn't be in business.  For sure there is a spectrum of ethics in both the individuals on commission in car dealers and in the business practices within the finance industry.

Post edited at 16:01
marsbar 27 Nov 2019
In reply to ming89er:

Make sure the parent who signed the paperwork is present for the call.  Most places will allow you to discuss on their behalf  but they will need to speak to who ever signed the paperwork on the phone to agree it. I assume they can speak enough English to say yes and I suggest explaining to them before you call that they need to say yes to the person on the phone if they want you to handle the call. 

wintertree 27 Nov 2019
In reply to Neil Williams:

> A further advantage of this is that the loan is decoupled from the car - if I have financial problems I can sell the car and settle the loan (though this isn't 100% guaranteed, obviously) but I could also sell the car and keep the loan going if this made sense.  And another is that the state of the car at the end is my problem and not anyone else's.

I agree very much with this.  Keeping constraints on your life as separate as possible makes for so much flexibility.  If you have to make an unexpected choice you are much more likely to have only bad choices available if too many constraints are joined together.  

I also think it puts you in a stronger position with the seller of the car as you know they aren't secretly thinking about their commission or bonus from a credit company when dealing with you.  If they really want that commission and it's 3 years since a new model came out there's a chance the finance company has a glut of ex-PCP models recently returned to dealer forecourts sat on its books costing them money, and that's when a salesman at a dealer can perhaps get themselves a commission whilst getting you an exceptionally good HP deal...

LastBoyScout 27 Nov 2019
In reply to ming89er:

You could also do what I did - ask them exactly what the balloon payment is, take out a credit card with an interest-free period for, say, 2 years, pay it with that and then repay the credit card.

This assumes you can take out a card with a high enough initial limit to cover the balloon payment and can pay it off in the interest-free period, but it means no interest and de-couples the loan from the car.

Neil Williams 27 Nov 2019
In reply to wintertree:

> I also think it puts you in a stronger position with the seller of the car as you know they aren't secretly thinking about their commission or bonus from a credit company when dealing with you.  If they really want that commission and it's 3 years since a new model came out there's a chance the finance company has a glut of ex-PCP models recently returned to dealer forecourts sat on its books costing them money, and that's when a salesman at a dealer can perhaps get themselves a commission whilst getting you an exceptionally good HP deal...

Quite possibly, which is why I always offer them the chance - one day it might well come up trumps.

I'm not, however, interested in PCP, as I generally want to pay for the full purchase price over 3 years, but often if things are going well keep the car for 5-6 years, thus enjoying a few years of no payments.  PCP is mainly intended for those who replace their car with a brand new one every 3 years, which does describe my parents but doesn't describe me.  (I don't mind that people do, as it creates a ready stock of 3 year old cars in decent condition, ready-depreciated, for me to buy).

Post edited at 16:16
Deadeye 27 Nov 2019
In reply to dunc56:

> Do you think it's overpriced ? Come on people - wake up !


Good spot.  They waited until the last one lapsed.

Post edited at 16:23
wintertree 27 Nov 2019
In reply to Neil Williams:

>  (I don't mind that people do, as it creates a ready stock of 3 year old cars in decent condition, ready-depreciated, for me to buy)

Yes, if I had any sense I'd keep my opinions to myself.  Don't want to disrupt that supply...  It's notable how fast cars depreciate in the UK compared to some comparable places, and it's great when someone else takes that hit for you.  I'm not sure if it makes me a hypocrite or not...

Dax H 27 Nov 2019
In reply to wintertree:

Personally I love PCPs for the right application. I'm currently riding a £20k motorbike and paying £150 a month for it. It will be 3 years old in April, out of warranty and pretty worn out from me abusing it for 3 years. In my experience if the dealer it came from won't do a good deal on a new one a different dealer will. 

My vans though I buy on HP, or if flush at the time cash, pay for them over 3 years and change them when they start costing money. Because my guys respect their vans and I don't abuse mine like I do my bike I normally see 6 to 9 year's from a van so I'm looking at 3 to 6 years free motoring. 

It's all about picking the correct payment method for the item and situation you are in. 

bouldery bits 27 Nov 2019
In reply to ming89er:

It's a bit early for a Christmas, Carol. 

L ming89er 27 Nov 2019
In reply to Ben_Climber:

Realistically, at what point does an APR start to become a "sting"? 5%+?

This is just for my reference.

EDIT:

I'm with Fiat.

Post edited at 22:01
dunc56 27 Nov 2019
In reply to ming89er:

1345%

Qwerty2019 27 Nov 2019
In reply to Dax H:

Absolutely correct.

balmybaldwin 27 Nov 2019
In reply to ming89er:

> How high of an APR would you consider a "sting"?

> This is just for my reference.


For me anything higher than what I would get for an unsecured personal loan e.g. The AA, Sainsbury's bank etc.

Remember a Loan secured on the car is significantly lower risk than an unsecured loan.

For reference, I am paying 2.9% APR on my unsecured car loan from Sainsbury's bank.  I have a decent but not excellent credit history, and you may or may not get a similar rate depending on your circumstances. - To this end beware that some of the "pre-approval checks" done by some companies are a ruse in themselves. Read carefully the loan agreement. For example The AA loan I was going to apply for at a quoted 2.9% suddenly jumped to 5.4% when I tried to go ahead with it - hence I cancelled and went with Sainsbury instead for the agreed rate.

Be aware that the value of the vehicle could fall quicker than the level of the loan... e.g. buy the car for £6K, after a year write it off and find it's only worth £4K, but you still have £5k outstanding on your loan (figures purely examples). Any Car salesman worth their salt will try to sell you a GAP insurance policy that covers the difference.  Consider carefully if this is worth it (often the GAP policy would be in the region of £350 one off payment or more)

Another thing to beware of is "Front loaded" Loans which would make the above gap situation worse. This is where the loan/finance company calculate the interest due over the entire term and add it to the balance of the loan so even if you pay it off early, you still end up paying the interest due for the entire loan.

Overall, remember something my Father once said to me: The motor trade is not a friendly one despite the smiles - it doesn't matter how good a deal you get, you will always feel like you could have got a better deal once you've signed on the line.

Make sure you get several valuations of the vehicle to ensure they aren't taking the piss on valuation.  Walk away if they are or don't move significantly.  There are plenty of other cars out there don't feel too tied to this one just because you know it.

wintertree 27 Nov 2019
In reply to Dax H:

> It's all about picking the correct payment method for the item and situation you are in. 

For people with the skills to do that I agree.  I’m very anti car finance company and I have a car on HP from one of them because it worked for me.

For other people it’s a way to loan them a car at a rate that only makes sense if they pay the lump sum, whilst also making the lump sum seem like a bad deal so they walk away poorer...  Probably to sign a new PCP contract on a new vehicle, repeating every 3 years and happily keeping the finance company afloat with what could be their spare cash.

Post edited at 22:13
wintertree 27 Nov 2019
In reply to dunc56:

> 1345%

That sounds a bit expensive to me, do you think they are being greedy?

Neil Williams 27 Nov 2019
In reply to wintertree:

> For other people it’s a way to loan them a car at a rate that only makes sense if they pay the lump sum, whilst also making the lump sum seem like a bad deal so they walk away poorer...  Probably to sign a new PCP contract on a new vehicle, repeating every 3 years and happily keeping the finance company afloat with what could be their spare cash.

That's precisely the idea of it, and precisely why I don't want anything to do with it.

As I said, though, it does make sense if you want to buy a brand new car every three years - that is, basically, they've decided to pay about £200-300 a month as an ongoing thing all the time.  There are plenty of people who do do that (e.g. my parents), and there are reasons to do it, such as "stress free motoring" as you are permanently in warranty, as most new car warranties tend to be three years (though some are now longer).

Post edited at 23:58
LastBoyScout 28 Nov 2019
In reply to ming89er:

Sorry - meant to post this yesterday: https://www.moneysavingexpert.com/car-finance/


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