I'm looking around at some nearly-new car options to replace one of ours which has gone to the sc***-heap in the sky, but also seeing various new car offers with substantial discounts "subject to taking out a PCP". Some of these seem to offer the possibility of a new car for barely more than a 1-2 year old model.

I think I've read people on this forum saying that it is possible and legal to take out one of these PCP deals, but then settle it almost immediately, and effectively buy with cash but at a discounted PCP cost. If I've understood that correctly, please could someone explain how this works?! Are there any gotcha's which can cause that to fall through? I've done some googling, but maybe unsurprisingly this doesn't seem to be clearly explained anywhere!

many thanks.

Done this 3 times, Leon, Note, Fabia and saved a packet, total contributions for those 3 totalled about £8000.

Do it immediately i.e within the first week, at most get it settled with 2 weeks. Simply phone for a settlement figure and then transfer the money. All you will be charged is the number of days interest and no fees. Do it after about 2 weeks and there will be a settlement charge, depending on the contract it can be substantial.

Bought a Toyota in March on a PCP with contributions but its not worth settling. The interest on the loan (4.9% APR) is a lower interest rate than I am getting in the bank so the settlement money went into a 4 year bond (5.75%). First time I have done this but when I bought the 3 above bank interest was 1% at best and loan interest at least 5% thus paying off was a no brainer.

When we bought the Toyota in the T & C's it did say that if you paid off early Toyota reserved the right to recover the contribution. No idea if this was in the other agreements and no idea if anyone has ever been charged but would need verifying. Checked and says the same on the Lexus website but not found it on any others. As far as I am aware you can pay off under the credit legislation with no requirement to pay any contributions back.

All depends on the exact T&C's with the PCP