This means that if you're coming to the end of a PCP contract and want to keep your current car, but don't have bags of cash to buy it outright, refinancing can be a simple and affordable way to do it. Even if you had no cash at all to put down for another deposit, monthly payments would be around £265 - the same as the initial PCP contract, but with no large final payment needed to own the car. If you want to avoid having to pay a large final sum - and pay less interest overall - choosing Hire Purchase when the car is six years old would give you monthly payments of around £225 (again on a four-year contract with a £2,000 deposit).Īfter the four-year term, the car would then be yours to keep. You can either pay this to own the car or refinance again. Go for this option and after another four years, the car may have an optional final payment of around £4,000. That £20,000 car that might have cost £265 per month if you initially financed it at two years old, could be £150 per month if you refinanced the balloon payment - at six years old and with a £10,000 cash value - after the initial contract ended (again with a £2,000 deposit). Refinance with another PCP deal and your monthly payments should drop noticeably (assuming the same contract length, deposit amount and mileage allowance). And you have the option of taking out another PCP finance deal or Hire Purchase. If you're in that camp but you'd like to keep the car - either because you've fallen in love with it, because a new car is a little out of reach, or simply beause you'd rather keep your current car than source another one, then refinancing could be the answer. And most of us simply don't have that kind of cash to hand. That means that a £20,000 car that may have cost you £265 per month on PCP with a £2,000 deposit, could have an optional final payment of £10,000. The problem is that the optional final payment may be half the initial cash price of the car - or potentially even more - at the end of a PCP finance contract. The idea of simply making the optional final payment to own the car outright might sound simple, but it can be tricky in reality, if you don't have plenty of cash to hand. Refinancing a PCP finance optional final payment
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