PCP Voluntary Termination - Deposit Query

[AEG]

Hi,

I have my car under a PCP contract and I am due to make my 23rd payment on 11 November (so just over a week). Since I first got the car in December 2015, my circumstances have changed – I no longer live with parents, I am in a new job where my pay is slightly less than my previous job and I no longer drive to work every day (I now have to get the train instead which has become an extra cost). All of this obviously means less disposable income, coupled with the fact that I barely drive my car anymore and so I am essentially paying £250 a month (finance payments plus insurance) for the car to sit on my drive. The car dealership where I got the car had a quick look through my contract and advised me that once I had made 23 payments, I would be able to voluntarily terminate the contract and hand the car back. As I’m now approaching the 23rd payment, I contacted the car finance company (GMAC) and said that I would like to voluntarily terminate my contract. They have sent me a letter through the post which states that half the total amount payable for the vehicle is £6,404.48 and that to date I have paid £5733.34, and that to ‘VT’ the contract, I have to pay £671.14. It also states that the balance for additional products (GAP insurance) is £832.30, and that to date I have paid £523.16, and so to ‘VT’ the contract I also need to pay £309.14, as well as the £671.14. These figures surprised me, so I had a look at my contract again and the financial details section. In this it states that:

(A) Total cash price £12,961
(B) Less: Deposit £1,840 (I handed my old car in)
(C) Amount of credit £11,121 (A-B)
(D) Interest £680.25
(E) Initial arrangement fee
(F) Final arrangement fee
(G) Total charge for credit £680.25 (D+E+F)
Total amount payable: £13,641.25 (B+C+G)

I rang my finance company again this morning to ask why my deposit (figure B) had been included in the total amount payable. The woman I spoke to kept putting me on hold whilst she tried to work it out, and eventually she said that she wasn’t sure why it said B+C+G next to the total amount payable, but that the total amount payable is correct. When I questioned why it included the deposit I put towards the car, she said it was correct because the total amount payable is the total cash price of the car (figure A) plus the interest (figure D). I didn’t feel like I was getting anywhere so decided to end the call, but I’m really confused as to why my deposit now isn’t being taken into consideration? What was the point of me handing in my old car (as the deposit) if I now have to pay that amount back anyway? It means I could have just kept the old car, as well as the new one, if this is the case. If my deposit was taken into account I would be able to come out of the contract now with nothing left to pay, as over half the total amount payable has been paid.
I was just hoping if someone could advise me as to whether this is correct, and whether my deposit does become redundant when I choose to voluntarily terminate the contract?

Thanks

[R0b]

Re: PCP Voluntary Termination - Deposit Query

The Consumer Credit (Agreements) Regulations specify that the deposit / advance payment is part of the total amount payable - see (1) on the image below.

Your deposit will be taken into account when you VT. Your TAP is £13,641.25 so you need to pay £6,820.62 in order to extinguish your liability and your deposit should be taken into account when calculating this.

If you've paid £250 per month and made 22 payments that makes £5,500 but you should also include your deposit as it is considered a down-payment which means you have actually paid £7,340 and therefore exceeded the 50% criteria, and not what GMAC appear to have suggested.

In any event, voluntary termination is not contingent on paying any GAP insurance or even making up the difference. Section 99 of the CCA allows you to terminate the agreement at any time, it just means you are liable to pay the difference making up the 50% if its not already paid.

If you have already given notice of termination then the agreement will terminate on the date you have specified. If you did not specify when it will terminate then I would imagine 14 days would be taken as a reasonable time to terminate the agreement and so any payments that are due before the termination date must be paid.

So, the starting point is what did your letter to VT say exactly? Did you say I 'please can I terminate' or 'I am terminating and it will terminate on X date'?

[AEG]

Re: PCP Voluntary Termination - Deposit Query

The Consumer Credit (Agreements) Regulations specify that the deposit / advance payment is part of the total amount payable - see (1) on the image below.

Your deposit will be taken into account when you VT. Your TAP is £13,641.25 so you need to pay £6,820.62 in order to extinguish your liability and your deposit should be taken into account when calculating this.

If you've paid £250 per month and made 22 payments that makes £5,500 but you should also include your deposit as it is considered a down-payment which means you have actually paid £7,340 and therefore exceeded the 50% criteria, and not what GMAC appear to have suggested.

In any event, voluntary termination is not contingent on paying any GAP insurance or even making up the difference. Section 99 of the CCA allows you to terminate the agreement at any time, it just means you are liable to pay the difference making up the 50% if its not already paid.

If you have already given notice of termination then the agreement will terminate on the date you have specified. If you did not specify when it will terminate then I would imagine 14 days would be taken as a reasonable time to terminate the agreement and so any payments that are due before the termination date must be paid.

So, the starting point is what did your letter to VT say exactly? Did you say I 'please can I terminate' or 'I am terminating and it will terminate on X date'?

Thanks for such a quick response. I should have been clearer when I said I was paying £250 a month, I meant with my insurance included. So my monthly payments are £200.75, and I'm paying around £50 a month for my car insurance which is completely separate to my finance payments.

I haven't given notice of termination yet. All I have done is rang GMAC and said I'm thinking of handing my car back and they have sent me a letter which states how much I'd need to pay and what criteria must be met. It's got a section at the bottom of the letter that says 'customer written authorisation to proceed with voluntary termination' and a section for me to sign and date. So until I sign date and return the letter they won't voluntarily terminate my contract. I don't want to sign the letter though until I know whether what they are saying about my deposit is correct.

So, looking at the thumbnail you attached, they should have taken my deposit off of the total amount payable? Is that correct? If so I will ring them again tomorrow.

Thanks

[R0b]

Re: PCP Voluntary Termination - Deposit Query

No, I think you are misreading it. The TAP is the total amount of credit + total charge for credit + deposit / advance payment. In other words, its B+C+G on your agreement so that is correct. However, the deposit is still something you have paid towards on the agreement so it is included for the purposes of calculating whether you have met the 50% criteria or not.

So even £200 x 22 = £4,400 + £1,840 = £6,240.00 which is a closer to the £6,820.62 leaving £580.62 which is smaller than the amount GMAC are suggesting.

I am really not sure how GMAC have calculated that if the TAP is shown on the agreement as £13,641.25 then their calculations are wrong, unless they have deducted the GAP insurance which is usually rolled into the TAP rather than being a separate agreement entirely. I can't think of any other reason how they've come to that conclusion.

Be aware, if you are ringing them to terminate, then that is not effective termination under section 99 in order to limit your liability under section 100. If you are going to terminate then I suggest you use the template letter found below but given that you are on a tight deadline you need to terminate before that payment becomes due on 11 November otherwise you need to pay it. You are only required to give notice in writing so email is also a form of written notice if you have one for them. VT Template Letters (Click Here)

If you haven't read already, you may also want to read the VT Guide below so you are familiar with everything.

VT Guide (Click Here)