I took a pcp out 5 months ago , 95 pm x36 months , with a final balloon payment of £5093
What I’m struggling with is after 5 months of payments ( plus some overpayments ) my settlement figure is £5900 , so unless I’m getting my sums wrong I’m going to have a settlement figure thousands below my final balloon payment
Is this right , or what happens , my payments have reduced from £95 to £69 but I still will be miles under the balloon payment in 3 yrs ( I
Intend to vt after 2 yrs )
generally interest is calculated daily the more you pay of the principle (the amount you borrowed) the less the interest is on the outstanding.
bank loans for example are calculated so by the final payment you have paid back the amount borrowed plus any interest. pcp loans are different. They deliberately underestimate the repayment plan so there is a balance owed at the end of the loan term. cars are a good example of this because they have already got back the price of the car and then some by the end of the loan term. The client cant afford the final payment so the nice garage buys back the car minus the final payment so gets it far below market price and sells it again at a bigger profit than if they had paid a fair price for it,
In your case you have paid more per month than the requested 95 quid therefor at the end of the 5 years there will be less owed as you are paying off the loan quicker. You will also pay less interest as you are paying off the principle quicker.
