Volkswagen have accidently charged customers who were unable to return their vehicles at the end of their PCP finance plan tens of thousands of pounds, stating that they are “very sorry” for the error and are seeking to refund customers as soon as possible.
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If this might happen to you because you are in a PCP or Balloon Finance deal that is due to end in the next 6 months keep reading
With the lockdown firmly in place, drivers who are on a personal contract purchase (PCP) car finance plan with Volkswagen, who had intended to return their vehicle (as opposed to purchasing it with a ‘balloon’ payment at the end of the contract term) have been unable to do so as VW dealerships struggle to process return requests and collections with reduced staff. This has subsequently resulted in many customers being charged a final ‘balloon’ payment on their vehicles outright, without the payment being authorised and pre-agreed, causing customers great concern.
One customer, former MP Tom Blenkin, discovered £8,400 was missing from his account, even after contacting VW 3 weeks previously to declare his intention to return the vehicle he was using on a PCP finance plan. Luckily after swiftly contacting his bank – Nationwide - he was able to see the return of his money after being granted a direct debit indemnity which allowed his bank to return the cash to his account.
Volkswagen Financial Services have stated that “We are aware that some payments had been automatically requested and transferred when that wasn’t necessary. We are in the process of correcting this and it will be done as soon as possible.”
Car finance allows you to spread the cost of paying for a car, typically paid in monthly instalments over the span of one or more years. With transport being a vital part of modern life, car finance allows people who might not be able to afford purchasing a car outright get on the road affordably. There are various types of car finance available, the most popular usually being Personal Contract Purchase (PCP) or Hire Purchase (HP). PCP finance plans allows you to spread the cost of a car, with the option to return it at the end of your contract or pay a sum, known as a balloon payment, to purchase the car and own it. Hire Purchase finance is similar, but usually spread over 12-60 months, paid in monthly instalments. You become the legal owner of the car once you’ve paid the final instalment at the end of your HP contract.
The balloon payment at the end of a PCP finance plan sometimes be quite high – depending on the value of the car – and many people don’t have the funds to pay it outright. The final sum of your balloon payment will have been calculated at the beginning of your PCP agreement.
The balance of the balloon payment is based on the residual value or guaranteed future value. The cost takes into account trade guides and future predictions on the make and model of the car, mileage and its conditions when sold. Mileage limits could also be set to ensure that the car does not drop below the residual value. Customers at the end of a PCP plan frequently opt to seek another finance agreement upon the return of the vehicle, such as moving to a new PCP agreement or seeking a Hire Purchase finance plan, thereby avoiding a costly balloon payment at the end of the term.
How we can help:
Specialising in helping people with bad credit history, Red Potato can help you finance your balloon payment, or help you find affordable finance for a new 2nd hand car.