Q. What is PCP?
A. PCP is a Personal Contract Plan which is a form of hire purchase agreement. It is a car finance package that has lower monthly payments over three years compared to a Hire Purchase contract over the same period. With PCP you can have a flexible finance plan to suit your own circumstances. With a Guaranteed Minimum Future Value (GMFV), there is no need to worry about the re-sale value of the vehicle, depreciation or the NCT costs associated with owning a car for over a longer period of time.
Under Volkswagen Bank’s industry leading PCP product, Volkswagen Bank Ireland purchases the car on your behalf. You choose a deposit percentage of between 10% and 31% depending on the type of car. Then you pay an agreed monthly instalment over the agreed term of 37 months. A portion of the car’s value is deferred until the end of the agreement (37th payment). This amount is the minimum value that Volkswagen Bank Ireland guarantees the car will be worth at the end of the agreement, also known as ‘Guaranteed Minimum Future Value’ (GMFV).
The key payment aspects are:-
Q. What are the options at the end of the agreement?
A. At the end of a PCP contract, there are three options:
Q. What happens if the actual value of the car is below the GMFV?
A. Volkswagen Bank Ireland guarantees the minimum future value at the end of the agreement so both you and the dealer are protected. Any shortfall is covered by Volkswagen Bank. As previously referred to, this is subject to the condition of the vehicle and the annual mileage.
Q. What happens if the actual value of the car is greater than the GMFV?
A. At the end of your agreement if you choose to sell your car either to a dealership or privately, the difference between the sale price of the vehicle and the agreed GMFV is known as your equity.
GMFV = €10,000 Sale Price = €12,000 Equity = €2,000
You can choose to exchange the vehicle, or use the equity, as part of the deposit for a new vehicle.
Q. Can I settle my PCP agreement early?
You are free to settle your PCP finance agreement and take ownership of the vehicle at any time. However, fees and charges may apply so we recommend you contact your dealer for further information. Additionally, you can part exchange your vehicle for a new vehicle at any time and, at the same time, upgrade your PCP finance agreement if you so wish.
Q. What happens at the end of the contract if your actual mileage is greater than that stated in the finance agreement?
A. Our PCP product is based on the future value of the vehicle. That value is determined by the wear and tear on the vehicle and calculated on the basis of a maximum mileage (or kilometre) usage. As part of the end of contract conditions, an excess charge applies where that usage is exceeded but only if you wish to handback the vehicle to Volkswagen Bank and not in cases when you wish to avail of the option to sell or trade in the vehicle. The excess mileage (kilometre) charges vary from brand to brand however the average charge is 6 cent per km.
Q. Who owns the car and what are the implications for you, the customers?
A. As with all forms of Hire Purchase, until the final payment is made in settlement of the PCP agreement, the car is legally owned by Volkswagen Bank (although it is registered in you, the customer’s name).
Q. How are PCPs regulated?
A. It is important that we highlight a few distinctions.
(a) As a branch of Volkswagen Bank GmbH, Volkswagen Bank Ireland as an entity is authorised by the Federal Financial Supervisory Authority in Germany and is regulated by the Central Bank of Ireland for Conduct of Business Rules, which include the general rules within Consumer Protection Code.
(b) The PCP product, which is a form of Hire Purchase Agreement, is primarily regulated under the Consumer Credit act 1995, however it is a specific exclusion within the Consumer Protection Code.
(c) Dealers are authorised as intermediaries by the Competition and Consumer Protection Commission.
In addition to the regulations referred to above, the rights and protections for consumers in respect of PCP are provided for within other regulations such as general contract and provision of services law, data protection and e-privacy law among others.