Should I pay the PCP balloon?
Discussion
Im coming to the end of my PCP agreement and have the option of paying the balloon and keeping the car or handing it back and starting again.
Im really happy with the car, I can’t fault it and I can’t think of another car I’d prefer to have. However my concern is the reliability and risk of an expensive repair bill, now that it’s now 5 years old, 70000 miles and out of warranty. How much longer is the car going to last?
I’ve just recieved a financial bonus from my employer which would cover the balloon payment. So I don’t need to re-finance.
Looking on Autotrader. The car is in positive equity, if I wanted to sell the car, it would sell for more than the balloon payment. However then I would have to buy another car.
My biggest question is what’s the most wisest way to use my bonus? Pay off the PCP and keep the car or use the bonus for something else?
Im really happy with the car, I can’t fault it and I can’t think of another car I’d prefer to have. However my concern is the reliability and risk of an expensive repair bill, now that it’s now 5 years old, 70000 miles and out of warranty. How much longer is the car going to last?
I’ve just recieved a financial bonus from my employer which would cover the balloon payment. So I don’t need to re-finance.
Looking on Autotrader. The car is in positive equity, if I wanted to sell the car, it would sell for more than the balloon payment. However then I would have to buy another car.
My biggest question is what’s the most wisest way to use my bonus? Pay off the PCP and keep the car or use the bonus for something else?
bennno said:
not sure if this is just clickbait
if you want to keep the car - pay the ballon
if you don't want to keep the car - get value from wbac or to px it in against a newer car, if its more than the balloon, pay the ballon
My question was to weigh up the pros and cons. As I’ve no experience of this and I’m no finance expert.if you want to keep the car - pay the ballon
if you don't want to keep the car - get value from wbac or to px it in against a newer car, if its more than the balloon, pay the ballon
Is there any downsides or negatives to paying off the balloon? Other than the risk of having a car out of warranty.
Mr Miata said:
Is there any downsides or negatives to paying off the balloon? Other than the risk of having a car out of warranty.
Not if you like the car. Ultimately, if the car is worth more than the balloon, then you're in a good position. You get a car worth more than you're about to pay for it with the added bonus that you know exactly what the history of the car is (unlike any second hand replacement).Mr Miata said:
Is there any downsides or negatives to paying off the balloon? Other than the risk of having a car out of warranty.
Read my original reply, the balloon status has nothing to do with the warranty position. You can either extend that or you cant.Really simple, you either want to keep it or you don't, if its the latter but its worth more than the balloon as a px then pay the ballon if you want to keep it for a bit, or alternatively just px it and the dealer will pay off the balloon and put the surplus towards your new purchase.
You need to separate the 2 elements.
Finance companies profit from you having a car on finance, paying the balloon and keeping the car keeps that money in your pocket.
Warranty companies make a profit from selling warranties, not buying a warranty keeps that money in your pocket.
But you are carrying the risk.
If you don't want a different car then the only benefit is reducing the risk.
Many people run 5 year old 70,000 mile cars, most don't have big bills.
You pays your money and takes your choice.
Finance companies profit from you having a car on finance, paying the balloon and keeping the car keeps that money in your pocket.
Warranty companies make a profit from selling warranties, not buying a warranty keeps that money in your pocket.
But you are carrying the risk.
If you don't want a different car then the only benefit is reducing the risk.
Many people run 5 year old 70,000 mile cars, most don't have big bills.
You pays your money and takes your choice.
PeteTaylor99 said:
A friend/colleague surrendered her BMW at the end because she wanted something different(Lexus ). An intelligent person(Partner), didn't have a clue how it all worked so just handed it back. This was after Covid and on checking there was £11k in equity. It happens-through ignorance
I have found out about friends doing this after the fact too. It must be quite common as talking to friends they seem to think PCP is the same as leasing.
Dealers must be sitting on plenty of balloons that have never been requested.
How reliable will a 5 year old car with 70000 miles be? Who knows in reality. It should be fine though.
What car is it and how long have you had it and has anything gone wrong so far?
Do you want a newer car and to use the equity for another PCP or would you prefer saving the monthly payments into a pension or for a car in another 2 years or so.
if you want to keep it, then pay the PCP off and either buy an extended warranty or use the monthly saving as a “repair” fund in case of need. That’s what I would do.
What car is it and how long have you had it and has anything gone wrong so far?
Do you want a newer car and to use the equity for another PCP or would you prefer saving the monthly payments into a pension or for a car in another 2 years or so.
if you want to keep it, then pay the PCP off and either buy an extended warranty or use the monthly saving as a “repair” fund in case of need. That’s what I would do.
Nemophilist said:
PeteTaylor99 said:
A friend/colleague surrendered her BMW at the end because she wanted something different(Lexus ). An intelligent person(Partner), didn't have a clue how it all worked so just handed it back. This was after Covid and on checking there was £11k in equity. It happens-through ignorance
I have found out about friends doing this after the fact too. It must be quite common as talking to friends they seem to think PCP is the same as leasing.
Dealers must be sitting on plenty of balloons that have never been requested.
Be interesting to know how the £11K mentioned was arrived at - looking around at used cars up to a couple of years oldand around £35K recently, there was typically £10K difference between what a car was up for and what its WBAC price was (I also checked a few on CAP HPI until they blocked me, and they were the same). So if the £11K came from what the same car was retailing for it's unlikely a seller could achieve anything like that.
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