In any loan, there are two main components -- the principal and the interest. Additionally there could be other parts such as administrative fees, late penalties, etc. The repayments include principal plus interest. Total to be repaid is the total of all these parts. So, total to be repaid = principal + interest + administrative fees.
In many cases, lenders end up promoting credit by showing low-interest percentages, low monthly payments or low upfront fees. This information looks attractive and often customers are misled into taking such loans. For instance, a bank may show very low interest, but the APR (the cost of interest plus administrative fees) can be significantly higher. In other cases, the financing agency may charge a higher rate of APR than the representative one shown in the advertisement.
Lenders may not show the total to be repaid to customers, which could be significantly higher in many cases. They may include the total to be repaid in the loan document in very subtle print. That's why customers should check and confirm the total to be repaid before getting into a new loan agreement.
In PCP, the monthly payment does not include the principal, but only payment towards depreciation. So in the context of PCP, total to repay is interest + administrative fees + depreciation. Let's understand this with an example:
You want to buy a car worth £10,000 under PCP for a term of 36 months at a rate of 5% with a GMFV of £3,000. The advertisement may show a monthly installment of £239.77. Your total liability during this period is £7000 (Car price minus GMFV). However, there may also be an administrative cost of £1,000. Including this cost plus interest, you'll end up paying a total of £8631 (£239.77 x 36). This amount is the total to be Repaid.
This is just one example of PCP finance. You can use our free PCP Calculator to create your own PCP car finance calculations