How do I finance or refinance a PCP balloon payment.
Here's the scenario. You're near the end of your PCP agreement, you want to keep the car or van but don't have the cash at hand to pay off the balloon.
It's a common scenario as not many people have the cash to pay off the balloon in one go. Don't worry though, there are several options, one of which is to refinance the balloon payment that's due.
A PCP agreement has various options at the end of the initial term.
First option is to just pay off the balloon (if you have the cash to do so) and ownership of the vehicle transfers to you (subject to all contractual payments having been made).
Second option is to return the vehicle to the finance company without anything further to pay. This assumes you are within the agreed mileage limits set at the beginning of the agreement and the vehicle doesn't have any damage outside of fair wear and tear guidelines for the mileage you have done. Further information on fair wear and tear can be found on the BVRLA website https://www.bvrla.co.uk/resource/returning-your-leased-vehicle.html. By handing the vehicle back you will need to start a new agreement on another car or van. If you've gone over your agreed mileage and/or have excess wear and tear, then there will be further charges to pay to the finance company.
Third option is to look at the vehicle's value. If it's worth more that the balloon you owe, and you don't want to keep it, then you could look to part exchange the vehicle and use any equity (the difference between what you owe on the balloon and its current value as a part exchange) as a deposit on your new car or van. So, for example if the balloon payment is £7000 but you find the vehicle is worth £8000 in part exchange, the £1000 difference could be used as a deposit on your next vehicle.
Fourth option is to refinance the balloon payment. This applies to people or companies that want to keep the vehicle they already have. There are many reasons to keep your current vehicle, such as:
Whatever you decide, Proactive Vehicle Finance can help. Contact us for more information or simply apply now and we'll arrange the finance for you (finance is subject to status).
It's a common scenario as not many people have the cash to pay off the balloon in one go. Don't worry though, there are several options, one of which is to refinance the balloon payment that's due.
A PCP agreement has various options at the end of the initial term.
First option is to just pay off the balloon (if you have the cash to do so) and ownership of the vehicle transfers to you (subject to all contractual payments having been made).
Second option is to return the vehicle to the finance company without anything further to pay. This assumes you are within the agreed mileage limits set at the beginning of the agreement and the vehicle doesn't have any damage outside of fair wear and tear guidelines for the mileage you have done. Further information on fair wear and tear can be found on the BVRLA website https://www.bvrla.co.uk/resource/returning-your-leased-vehicle.html. By handing the vehicle back you will need to start a new agreement on another car or van. If you've gone over your agreed mileage and/or have excess wear and tear, then there will be further charges to pay to the finance company.
Third option is to look at the vehicle's value. If it's worth more that the balloon you owe, and you don't want to keep it, then you could look to part exchange the vehicle and use any equity (the difference between what you owe on the balloon and its current value as a part exchange) as a deposit on your new car or van. So, for example if the balloon payment is £7000 but you find the vehicle is worth £8000 in part exchange, the £1000 difference could be used as a deposit on your next vehicle.
Fourth option is to refinance the balloon payment. This applies to people or companies that want to keep the vehicle they already have. There are many reasons to keep your current vehicle, such as:
- You will have been using the vehicle and looking after it well for the last 2, 3 or 4 years.
- It's colour, specification, reliability and condition are perfect for your needs still.
- The vehicle is still relatively new.
- Balloon payments are often set lower that the predicted market value and you wouldn't get the same vehicle for the same price if you were to shop around for another.
- The vehicle could have optional extras on that you like or need and other vehicles don't have the same specifications.
- Vans often have bespoke fittings that are specific for the industry and another van would need fitting out all over again.
- Simplicity. It's simple and straightforward to just refinance the vehicle you already have and know.
Whatever you decide, Proactive Vehicle Finance can help. Contact us for more information or simply apply now and we'll arrange the finance for you (finance is subject to status).