Paying off Lexus finace

Quietlife · February 27, 2019

I’ve bought my car on a pcp in order to get the £2000 dealers contribution. I was totally upfront that I intended to pay it off and they seemed fine with that. I’ve previously withdrawn from an Audi PCP within the first 14 days to avoid any charges and there wasn’t a problem with that. However, the Lexus dealer is suggesting that I need to make a payment before paying it off (which will incur some charges).

Has anybody had any issues with withdrawing from an agreement and was there a suggestion you’d need to pay the contribution back.

mrfunex · February 28, 2019

You’ll need to make 5 of your monthly payments before settling if you want to benefit from the £2000 dealer contribution.

GALex · February 28, 2019

I’ve done this twice now. First time before any monthly payment and the second time after only one. No issues with either. Just contact LFS and request a settlement figure.

malcolmw · February 28, 2019

As far as I know, the Lexus PCP is an agreement regulated under the Consumer Credit Act. Part of the legislative terms are that you can pay off all or part of the balance at any time. My current PCP agreement has this in the T&Cs.

There is no mention of forfeiting any deposit contribution (which is given by Lexus finance and not the dealer). The dealer may "encourage" you to wait for 5 or 6 months as there may be a clawback from them if you repay early.

Quietlife · February 28, 2019

Dealer have said to make one payment then do it. I'd rather withdraw in the first 14 days and avoid any charges at all. I'll give the finance department a call once I've got the car. Thanks

mrfunex · February 28, 2019

@malcolmw , maybe that was it - perhaps there would be a clawback against the dealer from the finance company.

skyrider04 · March 1, 2019

I was told by the dealer to pay off after the 1st payment and you won't need to repay £2k deposit. LFS said they will charge 56 days interest after the first payment to settle the agreement and they don't see this £2k offer from :Lexus where the dealer said that it's 56 days in total including 1st payment. Let us know what will you find out as I am not keen either to pay interest nor repay£2k.

sandj · March 4, 2019

I'm thinking of doing this too. I've mentioned to the dealer our intention to do so, absolutely no problem he said.

I would be grateful too for an update of what the finance department say.

Quietlife · March 8, 2019

I've finally had a reply from Lexus finance. They have stated that if I withdraw, then I WILL have to pay the £2000 deposit contribution back. If I settle (which can be done immediately), there are charges amounting to £240.

I've previously withdrawn from VW and never had any suggestion regarding the deposit condition having to be repaid. The dealer said charges would be 'about £100', so quite disappointed with the charges bring so high

malcolmw · March 8, 2019

If you withdraw (i.e. cancel within the 14 days) then the contract is void and, logically, you will lose the £2K contribution which is part of the contract.

If you start the contract (which is under the CCA) you can repay it at any time but you must pay interest and charges incurred to date of repayment and hence the approx £240 charges. As the contract has started they cannot withdraw the deposit contribution which was part of the deal.

This seems correct to me and paying it off will save a lot of interest in the long term.

rayaans · March 9, 2019

On 3/8/2019 at 12:01 PM, Quietlife said:

I've finally had a reply from Lexus finance. They have stated that if I withdraw, then I WILL have to pay the £2000 deposit contribution back. If I settle (which can be done immediately), there are charges amounting to £240.

I've previously withdrawn from VW and never had any suggestion regarding the deposit condition having to be repaid. The dealer said charges would be 'about £100', so quite disappointed with the charges bring so high

So you're bothered about paying £240 to settle than the £1000's in interest and the £2000 deposit contribution? 🤨

Quietlife · March 9, 2019

Never quite understand why people get so bolshy on car forums.

No, I'm not 'bothered'. I'm pointing out that 1. There is a question whether taking the deposit contribution back is entirely legit, particularly as other manufacturers do not do this. 2. The dealer said charges would be 'about £100', which is done way short of £240.

I'm not losing any sleep over it, but as a few people asked me to let them know the result of my enquiry, I passed on what I was told.

rayaans · March 9, 2019

3 hours ago, Quietlife said:

Never quite understand why people get so bolshy on car forums.

No, I'm not 'bothered'. I'm pointing out that 1. There is a question whether taking the deposit contribution back is entirely legit, particularly as other manufacturers do not do this. 2. The dealer said charges would be 'about £100', which is done way short of £240.

I'm not losing any sleep over it, but as a few people asked me to let them know the result of my enquiry, I passed on what I was told.

Well its fairly simple.

Taking the deposit contribution back is legit if you're not in a contract. You're not in a contract if you cancel within 14 days.

The dealer can say what they like, the fact of the matter is it wasn't in writing so you wouldn't be able to argue against them anyway.

rich1068 · March 9, 2019

4 hours ago, Quietlife said:

Never quite understand why people get so bolshy on car forums.

With you on that. Generally that sort of thing is absent on LOC.

I understand your original point. I've a friend who has taken advantage of VAG finance inducements more than once and then paid off the PCP or whatever after one payment. No threat of having to pay anything back.

malcolmw · March 9, 2019

9 minutes ago, rich1068 said:

...paid off the PCP or whatever after one payment. No threat of having to pay anything back.

You won't under these circumstances as the contract has come into force.

Say you have a balance on the PCP of £30,000. At 5.9% the interest is about £145 per month. If the penalty is 56 days then your £240 isn't a million miles out.

Ken R · March 10, 2019

I also took out the PCP to get the £2k contribution, made the first monthly payment and then contacted Lexus Finance for a settlement figure and made payment without claw-back of the initial contribution.

GTG · June 12, 2019

I am just going through this process. The dealer told me there would be no penalty for early settlement. I settled, as agreed with the dealer, after 14 days, however, Toyota Finance have added 56 days interest charges. The difference between the dealers settlement figure and Toyota Finance settlement figure is just over £300.

I have all my communications with the dealer in writing, so have all the info I need to prove mis-selling and have asked for a refund.

Toyota Finance just written to me and threatened to reinstate the agreement and charge me £3600 of interest. I have settled in full, so I don't see how they can unilaterally reinstate the agreement.

Toyota23owner · August 22, 2023

Four years later !!!

I'm researching the finance companies 56days interest blurb which isn't stated anywhere. I've googled it and this is one of the only threads I've come across which mentions it. So if anyone else is researching, the following may help.

The wording of some respondants above is confusing. I think I know what they mean but they use the wrong terminology which I guess is the root cause of confustion.

Terminating or cancelling or withdrawing etc from an agreement. In effect what this means is you no longer want the car, you're handing it back to the finance company. For example, perhaps you can no longer afford the repayments or some other circumstance has occured that you no longer want the car.

14day? UK law permits 14days 'cooling off' period. You can cancel the agreement up to 14days without penalty - hand the car back, that's it. After 14days you will incur additional financial penalties. From what I can see above, nobody wishes to cancel or withdraw from their agreement, although they may have wrongly said they did.

Settling an agreement. This is where you want to buy the car from the finance compnay. ( the subject of this thread ). In that case the 14day rule is irrelevant as is paying the finance contribution back. The £2000 contribution was for taking out a PCP which you have done, therefore there is no requirement to pay it back. i.e. you've fulfilled your part of the offer.

The reason I'm researching 56days is because that's what I'm now being told by Toyota customer services when I asked for a settlement figure. The point is, they make no mention of 56days when you sign the agreement. What they imply is they can arbitrarily set any fee they want - the actual wording they refer to in the T&C is "We may charge a compensatory amount..." but fail in any way to explain what that amount may be. They're implying this phrasology gives them licence to charge whatever they want. It's so ambiguous that customer services gave me false information when I first highlighted the issue and it's only when I questioned their calculations, this 56day rule materialised. Their settlement figure was just that - a figure. No breakdown of the loan to be repaid and the additional surcharge, no detail of how the surcharge is arrived at, simply here's what you owe us. Zero transparancy.

Would have loved to know the outcome of @CTG's last post but as often with forums, posts are not followed up on. I find it hard to believe Toyota Finance would be niave enough to threaten to re-instate the agreement ( which without fully knowing the facts, sounds implausible ) but having seen first hand their cavalier attitude towards financial accountability, it certainly wouldn't surprise me.

Hope that helps explain 'settlement' a little more.

Zippytwo · October 11, 2023

I'm about to find myself in a similar position, with collection due on Saturday. The finance agreement does include, under 'WHAT YOU MUST PAY ON TERMINATION':

..."10.6 Interest at the rate in clause 2.5 on the above sums until you pay them from the day this Agreement ends."

and

"You have the right to withdraw from this Agreement in accordance with the notices in this Agreement. If you wish to do so, you must follow the notices and you will then be liable to pay us the monies that we have paid in relation to this Agreement including, without limitation, any finance deposit allowance or any other sums or allowances together with interest within 30 days."

So that's pretty clear in terms of termination requiring the repayment of the deposit allowance.

Whereas EARLY SETTLEMENT / PARTIAL REPAYMENT includes:

11.2 We may charge a compensatory amount in accordance with laws and regulations if you wish to make payment under Clause 11.1

11.3 If you make a payment under Clause 11, we may allocate your payment against your Agreement in the following order: Interest, default charges, other costs and charges, arrears, Repayments and then any final payment due under the Agreement. We reserve the right to vary this order at our discretion."

Toyota23owner - you're right: no transparency on what this actually means in practice... Guess I'll have to roll the dice after delivery. Are you able to say what interest / charges you had to pay to make an early settlement?

Phil xxkr · October 12, 2023

13 hours ago, Zippytwo said:

I'm about to find myself in a similar position, with collection due on Saturday. The finance agreement does include, under 'WHAT YOU MUST PAY ON TERMINATION':

..."10.6 Interest at the rate in clause 2.5 on the above sums until you pay them from the day this Agreement ends."

and

"You have the right to withdraw from this Agreement in accordance with the notices in this Agreement. If you wish to do so, you must follow the notices and you will then be liable to pay us the monies that we have paid in relation to this Agreement including, without limitation, any finance deposit allowance or any other sums or allowances together with interest within 30 days."

So that's pretty clear in terms of termination requiring the repayment of the deposit allowance.

Whereas EARLY SETTLEMENT / PARTIAL REPAYMENT includes:

11.2 We may charge a compensatory amount in accordance with laws and regulations if you wish to make payment under Clause 11.1

11.3 If you make a payment under Clause 11, we may allocate your payment against your Agreement in the following order: Interest, default charges, other costs and charges, arrears, Repayments and then any final payment due under the Agreement. We reserve the right to vary this order at our discretion."

Toyota23owner - you're right: no transparency on what this actually means in practice... Guess I'll have to roll the dice after delivery. Are you able to say what interest / charges you had to pay to make an early settlement?

There's a chap called Dean Dunham writes in the Mail on-line on legal matters, maybe worth trying to get him to un- complicate it? 🤔

PaulWhitt20 · October 12, 2023

If you pay it off early, do you have to pay the balloon payment or Guaranteed Future Value ?

I can see in a lot of cases especially for an EV the GFV will be considerably more than the trade in value you are given if you have paid it off in full.

Ken R · October 12, 2023

If you pay it off early then the GFV becomes irrelevant. You will simply pay what is actually due at the point of settlement which will include interest charges and any admin fees. Lexus finance will simply issue a settlement figure on request.

You are indeed correct regarding GFV in relation to EV's. I know of somebody who was prepared to pay cash for his new EV and was actively discouraged from doing so by the retailer who advised that a PCP route was "safer" with the safety net of the GFV.

Tickedon · October 23, 2023

I believe the 56 days “interest penalty” comes from the legislation governing credit agreements. I am also fairly sure it’s recently(ish) changed to two months interest penalty, or, a maximum of one month if the agreement has less than 12 months to run. I’ve had a quick look but couldn’t find a reference, but perhaps this will point someone in the right direction to find a reliable source explaining it.