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PCP question

Matt97

Passed Driver's Ed
Location
England
Hi..
I got a question about PCP deal. Basically I bought a car from VW retailer. The full price is £23728.05 and I paid deposit of £6315. So it works out total amount I own VW is £17413.05. The APR is 4.89% for 4 years. So they told me the monthly repayment is £254.38. and the final optional payment is £7875. So I assume the loan I take out is £17413.05-£7875=£9538. So then I put in this number to the loan calculator and it comes out £218.72. This is where I am getting confused. Why the difference? Can anyone shed me some light here. I am getting a bit worry that I am paying what I suppose to pay. Appreciate if anyone can sort out this math for me. Thanks.
 

Hayden

Love/Hate Relationship
Location
Vancouver, Canada
Car(s)
2016 GTI
So if the total price is 23,728.05 and you paid 6,315 that means you owe a total of 17,413.05.

17,413.05 + 4.89% = 18,264.55

18,264 divided by 4 years = 4,556.14 divided by 12 months in a year = $380 per month.

Then I read "final optional payment is 7,875"..So did you buy the car (finance) or lease? Because if you leased, then you have a final buyout price, but that isn't built into your monthly payments
 

Matt97

Passed Driver's Ed
Location
England
So if the total price is 23,728.05 and you paid 6,315 that means you owe a total of 17,413.05.

17,413.05 + 4.89% = 18,264.55

18,264 divided by 4 years = 4,556.14 divided by 12 months in a year = $380 per month.

Then I read "final optional payment is 7,875"..So did you buy the car (finance) or lease?


I bought it on finance. The final optional payment is included in that £17,413.05.
 

IWMTom

Autocross Newbie
Hi..
I got a question about PCP deal. Basically I bought a car from VW retailer. The full price is £23728.05 and I paid deposit of £6315. So it works out total amount I own VW is £17413.05. The APR is 4.89% for 4 years. So they told me the monthly repayment is £254.38. and the final optional payment is £7875. So I assume the loan I take out is £17413.05-£7875=£9538. So then I put in this number to the loan calculator and it comes out £218.72. This is where I am getting confused. Why the difference? Can anyone shed me some light here. I am getting a bit worry that I am paying what I suppose to pay. Appreciate if anyone can sort out this math for me. Thanks.

I work it out as £254.57, so close enough.

You're correct that the loan amount is £17,413.05 - we then compound interest at 4.89% over three years (yes, three, not four) and get £20,094.50.

From here, we subtract your final payment of £7,875 which leaves us with £12,219.50.

Divide that by the 48 months and you get £254.57.

PCP is complicated, but it's also extremely regulated - you aren't being overcharged based on the data you've provided, as any minor discrepancies could be attributed to rounding errors.
 

IWMTom

Autocross Newbie
So if the total price is 23,728.05 and you paid 6,315 that means you owe a total of 17,413.05.

17,413.05 + 4.89% = 18,264.55

18,264 divided by 4 years = 4,556.14 divided by 12 months in a year = $380 per month.

Then I read "final optional payment is 7,875"..So did you buy the car (finance) or lease? Because if you leased, then you have a final buyout price, but that isn't built into your monthly payments

Interesting maths you've got there...
 

Matt97

Passed Driver's Ed
Location
England
I work it out as £254.57, so close enough.

You're correct that the loan amount is £17,413.05 - we then compound interest at 4.89% over three years (yes, three, not four) and get £20,094.50.

From here, we subtract your final payment of £7,875 which leaves us with £12,219.50.

Divide that by the 48 months and you get £254.57.

PCP is complicated, but it's also extremely regulated - you aren't being overcharged based on the data you've provided, as any minor discrepancies could be attributed to rounding errors.



Thanks for reply. I am wondering why the interest rate only apply for 3 years while the duration of the loan is 4 years?
 

IWMTom

Autocross Newbie



Thanks for reply. I am wondering why the interest rate only apply for 3 years while the duration of the loan is 4 years?

Interest is compounded at the end of the year. After 12 months, 4.89% is added. After 24 months, 4.89% is added. After 36 months, 4.89% is added. At 48 months you've paid in full, so there's no interest to add.
 

Hayden

Love/Hate Relationship
Location
Vancouver, Canada
Car(s)
2016 GTI
What, interest is only applied for one year? I doubt it...

For financing in Canada this is the way it works..

Say you're financing $20K, and the financing interest rate is 5% and the term is 5 years. You are paying interest on the total owing...not per year?

$20,000 + 5% = $21,000 total, irregardless of duration of loan.

$21,000 / 5 years = $4,200 per year.

$4,200 / 12 months = $350 per month

Although I haven't heard of "PCP" in Canada, so maybe its something to do specifically with that.
 

IWMTom

Autocross Newbie
For financing in Canada this is the way it works..

Say you're financing $20K, and the financing interest rate is 5% and the term is 5 years. You are paying interest on the total owing...not per year?

$20,000 + 5% = $21,000 total, irregardless of duration of loan.

$21,000 / 5 years = $4,200 per year.

$4,200 / 12 months = $350 per month

Although I haven't heard of "PCP" in Canada, so maybe its something to do specifically with that.

It's an annual interest rate... it's applied each year..

What sort of loans do you have in Canada where the interest is only.applied once over a 4 year period?!
 

Hayden

Love/Hate Relationship
Location
Vancouver, Canada
Car(s)
2016 GTI
It's an annual interest rate... it's applied each year..

What sort of loans do you have in Canada where the interest is only.applied once over a 4 year period?!

What?

If you add 5% interest to the total amount or to the yearly payments it is going to be the same total..

$20,000 + 5% = $21,000

$20,000 / 5 years = $4,000 (per year)
$4,000 + 5% = $4,200 x 5 (years) = $21,000

Unless I got this all wrong... :confused:


Edit: well I looked it up and figured out how wrong I was.. sorry lol.
 
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