A PCP can be settled by the customer at any time if they pay the balance outstanding, including the GMFV to the lender.
The lender may allow the customer a rebate of the interest remaining on the agreement. However, if the agreement is regulated, the customer may also have the right to voluntarily terminate the agreement before the final payment falls due and hand the vehicle back. Under the Consumer Credit Act 1974, the minimum amount of rebate is laid down by law.
At the end of the PCP agreement the customer has three options:
The customer can pay the GMFV (plus any Option to Purchase fee that is part of the agreement) and keep the vehicle. At this point the customer will take title to the vehicle and become its legal owner. Many finance companies allow the GMFV to be refinanced to avoid the customer having to find a large amount of cash.
If the vehicle is worth less than the GMFV, the customer can return the car and walk away – subject to mileage and condition. The GMFV guarantees that the lender will take the car back from their customers at the end of the agreement with no further payment due, assuming all the monthly repayments have been made. If the vehicle is worth less than the GMFV, the lender absorbs the loss. If the vehicle has exceeded the agreed mileage then the customer will be required to pay an additional charge calculated on the basis of a pence per mile charge + VAT (the exact charge to be applied will have been made clear at the outset of the agreement). Also, if the car has not been maintained or serviced according to the manufacturers recommendations, or if the condition is worse than `fair wear and tear`, the lender will charge the customer to compensate for the condition. All charges are laid out in the terms and conditions of the agreement.
Where the dealer's part exchange value for the car is greater than the GMFV, the difference (also referred to as equity) can be used as part or all of the deposit on their replacement vehicle. Any of this difference not used as a deposit is paid to the customer. Alternatively, the customer can sell the vehicle privately, settle the GMFV by paying the outstanding amount to the finance company and keep any profit, although the dealer and lender should be made aware of a private sale.