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PCP finance paying off early?

  • 30-09-2020 4:12pm
    #1
    lcstress2012
    Registered Users, Registered Users 2 Posts: 598 ✭✭✭


    I have a Ford Fiesta in finance with two years left. I have a few grand in savings so would I be able to pay say €7,000 to the finance company and they continue with the monthly repayments as this would dramatically lower the balloon payment as I’m going to keep the car.

    Anyone been in this position and done this?


Comments

  • #2
    bazz26
    Registered Users, Registered Users 2 Posts: 51,363 ✭✭✭✭bazz26


    What do you mean by lowering the balloon payment? The balloon payment is fixed when you take out the PCP agreement and will be fixed until your PCP agreement ends. You can exit the PCP agreement early by paying off the balloon payment or refinancing it. However you cannot partially pay off some of the balloon payment early with a lump sum but continue to pay the original PCP monthly repayments, the same way you cannot over pay the monthly repayments to exit early. It doesn't work like that. And if your looking to exit a PCP agreement only 1 year into then you might be stung for penalty fees.


  • #3
    lcstress2012
    Registered Users, Registered Users 2 Posts: 598 ✭✭✭lcstress2012


    bazz26 wrote: »
    What do you mean by lowering the balloon payment? The balloon payment is fixed when you take out the PCP agreement and will be fixed until your PCP agreement ends. You can exit the PCP agreement early by paying off the balloon payment or refinancing it. However you cannot partially pay off some of the balloon payment early with a lump sum but continue to pay the original PCP monthly repayments. It doesn't work like that.

    So would I be able to pay off my balloon payment (€8500) now and just continue my normal monthly repayments and after the two years the car will be mine?


  • #4
    bazz26
    Registered Users, Registered Users 2 Posts: 51,363 ✭✭✭✭bazz26


    The PCP agreement is broken down into the purchase price of the car less your deposit or trade in, 36 monthly payments including interest and the final balloon payment. To pay off the balloon payment now would make little or no sense as you will probably still get stung for interest accumulated over 3 years.

    Imo your better off putting that 7k into a savings account and let the clock tick down on your PCP agreement. Put a bit away every week or month into account. By the time your PCP ends you should have more than enough to cover the balloon payment without borrowing.


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