OUR PAYMENT DEFERRALS EXPLAINED
In line with the Financial Conduct Authority motor finance guidance published on 24 April 2020, updated on 15 July 2020 and more recently in November 2020, we are able to provide short-term Payment Deferrals to support customers experiencing (or reasonably expecting to experience) temporary financial difficulties as a result of COVID-19.
The maximum length of deferred payments remains at six months overall. Each individual application cannot exceed three months.
Non-continuous payment deferrals: If you have resumed monthly repayments after an initial payment deferral and experience temporary financial difficulties again due to COVID-19, you can apply for a further deferral of up to three months (subject to the maximum of six months’ deferred payments overall when taking into account previous deferred payments). Any application should be made at least five working days before your next monthly payment becomes due. If you have missed a monthly payment after a payment deferral has ended, you will not be entitled to a further deferral.
Deadline for applying for payment deferrals: The previous closure date of 31 October has been extended in the most recent FCA update. Applications for an initial or additional Payment Deferral can now be made until midnight on 31 March 2021.
There is one exception for customers with a payment deferral covering payments beyond 31 March 2021, who will be entitled after 31 March to apply to extend their deferral providing these deferrals cover consecutive payments and subject to the maximum of 6 months in total. Also, a payment deferral must not cover any payments after 31 July 2021 and so in some cases a customer may not be entitled to extend to a full 6 month deferral (for example a customer with a deferral starting in March 2021 will not be entitled to apply to extend the deferral beyond July 2021 and so in this case their maximum overall deferral period will be 5 months). A customer newly impacted by COVID-19 will have to apply in good time before their February 2021 payment is due if they would like to be considered for up to 6 months of payment deferrals.
For more information on Payment Deferrals, your options and their implications, please view the video message from the CEO of BMW Group Financial Services, Mike Dennett.
Please note this video was recorded when the closure date for payment deferrals applications was 31 October 2020. This closure date has now been extended - as explained above. All other information in the video remains applicable. The maximum payment deferral period remains at six months.
Payment Deferrals are intended to provide customers with temporary financial support in the exceptional circumstances arising out of the Coronavirus pandemic. If you are experiencing longer-term payment difficulties, please call us to discuss the options available to you.
PAYMENT DEFERRALS EXPLAINED
These explanatory notes are for Select PCP (Personal Contract Purchase), Hire Purchase and Personal Loan agreements. If you have a Personal Contract Hire agreement, please call us for information about your deferral options on 0370 5050 125.
If you are experiencing or reasonably expecting to experience temporary financial difficulties as a result of COVID-19, you can apply for a Payment Deferral of up to 3 months (subject to 6 months in total if you are applying for an additional deferral).
For more information on Payment Deferrals, your options and their implications please click here to view a video message from our Chief Executive Officer, Mike Dennett.
IMPORTANT NOTE: this video was recorded when the closure date for payment deferrals applications was 31 October 2020. This closure date has now been extended: for information on the new deadlines for payment deferral applications, please see above under ‘Deadline for applying for payment deferrals’. All other information in the video remains applicable. The maximum payment deferral period remains at six months.
How Payment Deferrals work
Extension of your agreement
The length (known as ‘term’) of your agreement will be extended by the same number of months as your deferral period (up to three months on an application and up to 6 months in total).
Extending your agreement by the same number of months deferred means that the number of payments you make in total will stay the same.
You will, of course, be able to continue using the vehicle during the extended period.
Additional interest to pay
As it will take you longer to pay back the amount borrowed, there will be additional interest to pay. This will be calculated using the same rate stated on your agreement and will be spread across your remaining monthly repayments, causing them to increase.
If you have a Select PCP agreement, an additional Payment Deferral will further delay the date of your Optional Final Payment by the number of monthly payments that you have deferred. The interest you are charged for the deferral includes interest on this amount, because this will be outstanding for longer.
A Payment Deferral will therefore increase your overall debt.
Will this affect my Optional Final Payment and mileage allowance on a PCP agreement?
If you are on a Select Personal Contract Purchase (PCP) agreement, a Payment Deferral will delay the date of your Optional Final Payment by the number of monthly payments that you defer.
Your car is therefore likely to be worth less at the end of the agreement. This may affect how you decide to exercise your choice of options available at the end of your agreement. You still have the option to return the vehicle without paying the Optional Final Payment but please be aware that vehicle damage and excess mileage charges may be payable, as per your original contract.
For deferrals up to three months in total (whether taken as one deferral or as more than one deferral adding up to three months in total):
- The amount of your Optional Final Payment will not change. However, the interest you are charged for the deferral period includes interest on this Optional Final Payment because this amount will be outstanding for longer.
- The mileage allowance (total contract mileage) in your agreement will not change. If you choose to return the vehicle at the end of the agreement you will be charged for any excess mileage over this allowance. The mileage allowance and excess mileage charge per mile is shown on your agreement. You can view your contract details anytime via our MyFinance self-service facility.
For deferrals of four, five or six months in total:
- As the vehicle will be up to six months older at the end of the agreement, on any Payment Deferral that exceeds three months, there will also be an increase in your monthly payments for the anticipated depreciation in the value of the vehicle in the extended period over three months and the Optional Final Payment will be reduced. The Optional Final Payment is sometimes known as the Guaranteed Minimum Future Value (GMFV) and is payable if you choose to purchase the vehicle at the end of the agreement.
This depreciation will be calculated using the rate of depreciation set at the beginning of your agreement. It is not affected by any change to market conditions.
We have decided not to make this change for depreciation on initial Payment Deferrals of up to three months. This means that, also taking into account the additional interest, the impact on the monthly payments is higher for deferrals exceeding three months than for deferrals of three months or less.
- On any deferral exceeding three months, we will increase your total mileage allowance so that you will not be charged extra for continued use of the vehicle during the extended period (up to six months in total), providing you do not exceed the new mileage allowance. The mileage allowance will be increased in proportion to the increased term of your agreement.
For example, if you have an agreement of 48 months with a contractual mileage of 40,000 miles, and we provide Payment Deferrals for a total of six months, your agreement will be extended to 54 months and your mileage allowance will be increased to 45,000 miles. This means you will not be charged excess mileage charges unless you exceed 45,000 miles.
Please remember that on an initial deferral of up to three months, the mileage allowance will not change.
Please see the illustrations below to see how this can impact monthly payments.
The following examples illustrate how the additional interest will affect monthly payments:
| Financial Product | Original Amount of Credit | Original Monthly Payment | Original Optional Final Payment | Months into Contract at Start of Payment Deferral | Additional Monthly Payment | Additional Monthly Payment for Depreciation | New Monthly Payment | New Optional Final Payment |
| Personal Contract Purchase | £15,000 | £265 | £6,750 | 12 months | £10 | £0 | £275 | £6,750 |
| Personal Contract Purchase | £30,000 | £530 | £13,500 | 12 months | £20 | £0 | £550 | £13,500 |
| Personal Contract Purchase | £15,000 | £265 | £6,750 | 24 months | £12 | £0 | £277 | £6,750 |
| Personal Contract Purchase | £30,000 | £530 | £13,500 | 24 months | £25 | £0 | £555 | £13,500 |
| Hire Purchase | £15,000 | £377 | £0 | 12 months | £9 | £0 | £386 | N/A |
| Hire Purchase | £30,000 | £753 | £0 | 12 months | £18 | £0 | £771 | N/A |
The following examples illustrate how the additional interest and depreciation adjustment will affect monthly payments after a deferral of six months:
| Financial Product | Original Amount of Credit | Original Monthly Payment | Original Optional Final Payment | Months into Contract at Start of Payment Deferral | Additional Monthly Interest | Additional Monthly Payment for Depreciation | New Monthly Payment | New Optional Final Payment |
| Personal Contract Purchase | £15,000 | £265 | £6,750 | 12 months | £19 | £14 | £298 | £6,234 |
| Personal Contract Purchase | £30,000 | £530 | £13,500 | 12 months | £37 | £29 | £596 | £12,469 |
| Personal Contract Purchase | £15,000 | £265 | £6,750 | 24 months | £23 | £21 | £310 | £6,234 |
| Personal Contract Purchase | £30,000 | £530 | £13,500 | 24 months | £46 | £43 | £619 | £12,469 |
| Hire Purchase | £15,000 | £377 | £0 | 12 months | £18 | £0 | £395 | N/A |
| Hire Purchase | £30,000 | £753 | £0 | 12 months | £36 | £0 | £789 | N/A |
Important note: These are illustrations only. The impact on an individual agreement will depend on a number of factors, including the original amount of credit and contract term, APR, Payment Deferral period and the stage of the agreement at which the deferral is granted. For example, if a deferral is granted nearer to the end of an agreement, the increase in monthly payments is likely to be higher as there will be fewer monthly payments on which to spread the additional costs.
How can I see the specific impact on my agreement?
After agreeing to your request for a Payment Deferral, we will email you a ‘letter of concession’ detailing the additional interest on your agreement, your new monthly payments and, for deferrals over 3 months in total, your new Optional Final Payment and Total Contractual Mileage. If you have a query or decide not to proceed with your deferral you should call us as soon as possible.
How can I reduce the additional interest I have to pay?
After being granted a deferral, you can make voluntary payments if you can afford to do so. This will reduce the interest charged for the deferral, after payment of any arrears incurred prior to the start of the deferral. You can make payments by calling us on 0370 5050 125.
Will I have any other additional costs?
You will also need to pay for your car to remain taxed and insured with fully comprehensive car insurance during the extra month(s) that your agreement will run. You may also need to pay for an additional MOT or vehicle service if these fall due.
As the agreement will be extended, the vehicle is likely to be worth less at the end of the agreement. Please see above.
Notices we may subsequently send to you.
Due to the way a Payment Deferral is arranged, we are legally obliged to send you statutory notices on a regular basis which will show your deferred payments as arrears.
These arrears notices are for information purposes only and to keep you up to date with the current status of your agreement. You will not need to take any further action in relation to deferred payments shown in this arrears notice as long as you adhere with the deferral arrangements. You may need to take action in relation to any other payments in arrears which are included in an arrears notice.
Will my credit file be negatively affected?
Whilst we will not report a worsening status to your credit file in respect of any payment deferral taken, it may still affect our and other lenders’ future lending decisions as we and other lenders may take into account other information resulting from a deferral when making future lending decisions to ensure a suitable affordability assessment is made, e.g. information provided by applicants or bank account information.
We will also report any future arrears in the usual ways, so it is important that you consider the increased payments following a deferral.
What if I have a payment due in the next few days?
If your monthly payment is due within the next five days, then due to direct debit and standing order arrangements, collection of this payment may still take place. In this case, the period of deferral that you have selected will start from the following month’s payment.
What if before I apply for my deferral I am already in arrears as a result of circumstances relating to Coronavirus?
Your deferral will start from your next payment date and we will contact you to discuss the options available to you in relation to your arrears. Any arrears that you may have at the time of starting the deferral will still need to be repaid after your deferral period ends.
What happens at the end of my Payment Deferral period?
We will contact you in good time before the end of your Payment Deferral period about your options.
Please see below under ‘Options at the end of your Payment Deferral’.
Other options that may be available to you.
ALTERNATIVES TO A PAYMENT DEFERRAL:
1. You may have the right to voluntary terminate your agreement and return the vehicle. If you have an agreement regulated by the Consumer Credit Act (this is shown on the top of your agreement) and you no longer wish to keep the vehicle, you may wish to consider this option. In this case, you will have to pay any arrears, and pay for any vehicle damage and any excess mileage. If you have paid less than half of the Total Amount Payable under your agreement, you will also have to pay the difference between what you have paid and half of the Total Amount Payable. If you wish to discuss this option please call us.
2. You can also postpone your payment by making a one-off movement of your payment date by a maximum of 20 days. This can be done online by logging into your MyALPHERA Finance account.
3. You can settle the agreement by paying the settlement figure and then keep or sell the vehicle. A settlement figure can be obtained via our MyALPHERA Finance self-service facility.
4. You can continue to make your usual monthly payments as normal. Please be aware that if you miss a payment without requesting a Payment Deferral, we will be obliged to report these arrears to credit reference agencies. If you have applied for a Payment Deferral before missing a payment and we have not been able to make the deferral arrangements in time because of operational difficulties as a result of Coronavirus, we will work to prevent this negatively impacting your credit file.
5. You may wish to consider applying to refinance your agreement. This will be subject to underwriting checks. This means entering into a new credit agreement to replace your existing agreement. Whilst this may mean lower monthly payments than are due under your current agreement (if the duration is longer than the outstanding duration of your current agreement), please note:
· More interest will be payable and therefore the total amount payable will increase, and
· A new agreement will be subject to an affordability assessment and will only be suitable if you are confident you are able to afford your payment obligations under the new agreement without undue difficulty. It will not be suitable if you have arrears in addition to deferred payments, and
· You will have to pay more to voluntary terminate the new agreement (end the agreement early and return the vehicle) than if you did not refinance.
DEBT HELP AND MONEY GUIDANCE
Free and impartial debt advice and money guidance is available at not-for-profit debt advice bodies. Please see:
- the Money Advice Service’s Navigator Tool and Debt Advice Locator Tool, and
- the FCA information page ‘Dealing with financial difficulties during the coronavirus pandemic’.
If you are experiencing payment difficulties we strongly recommend that you access the help that you feel best suits your circumstances.
You can get guidance or not-for-profit debt advice through both digital and telephone services and, subject to local and national pandemic restrictions, face to face. See www.moneyadviceservice.org.uk for details.
If you are confident you are able to deal with your debts without the need for full debt advice:
· You may wish to work out a budget. Resources are available in the FCA information page mentioned above, and
· We would recommend you contact all your creditors to discuss your repayments.
For most people it makes sense to pay essential expenses and priority debts before any discretionary expenses or non-priority debts. To see if this is right for you, you can use online guides such as the Money Advice Service ‘How to prioritise your debts’ page.
CUSTOMERS IN LONGER TERM DIFFICULTIES OR WITH HEALTH ISSUES
Payment Deferrals are intended to provide support to customers experiencing (or reasonably expecting to experience) temporary payment difficulties in circumstances resulting from the Coronavirus pandemic.
If you are experiencing payment difficulties which are not short-term resulting from the pandemic, or if you require additional support due to any health issues please call us to discuss the options available to you. We will take into account your individual circumstances in deciding how best to help you.
If you have understood all of the above information, taken debt advice (if required) and you wish to submit an application for an Initial Payment Deferral, please click below to do so.
OPTIONS AT THE END OF YOUR INITIAL PAYMENT DEFERRAL
We will write to you in good time before the end of your Payment Deferral about your options. It is important you consider carefully whether:
· You are able to resume your monthly payments immediately, or
· You are unable to do so due to continuing circumstances arising out of Coronavirus.
For more information, please see:
RESUMING YOUR MONTHLY PAYMENTS
If you are able to resume your full monthly payments (including the deferral interest and any depreciation adjustment) immediately and in full at the end of your current Payment Deferral, it is likely to be in your financial interests to do so. This will avoid having to pay additional costs incurred by deferring your payments further.
We will have provided you with information on your new monthly payments at the start of your Payment Deferral. We will write to you again before the end of your deferral period as a reminder of your revised monthly payment amount and date when your payments will resume, as well as information on your other options.
If you have cancelled your direct debit payment during the pandemic, please ensure you re-activate your direct debit in time for the first payment to be collected to prevent arrears arising. Please visit MyALPHERA Finance to reinstate this, allowing 10 working days before your next instalment is due.
If we do not hear from you before the first payment is due after your deferral period ends, whether by applying for an additional deferral on this website (see below) or by calling us to discuss the other options that may be available to you, we will proceed on the basis that you are able to resume full payments and will collect your first revised monthly payment.
It is important you contact us if you are not able to resume your payments. Please see below for more information.
IF YOU ARE NOT ABLE TO RESUME YOUR FULL MONTHLY PAYMENTS IMMEDIATELY AT THE END OF A DEFERRAL PERIOD
If you remain in temporary payment difficulties due to Coronavirus at the end of a deferral period and are not able to resume your full monthly payments immediately, you will have different options depending on whether you have had the maximum six months deferred payments overall:
If you have already deferred six months payments:
You will not be entitled to apply for an additional payment deferral as the maximum available is 6 months overall. Please contact us to discuss your circumstances and other solutions available to support you.
We recognise you may be facing uncertainty at this time and that it may be difficult for you to make long term decisions in these circumstances. Please do not let this prevent you from contacting us. We can talk to you about the possibilities for a further short-term arrangement to give you more time to get back on track or until your financial prospects become clearer to you.
If you have deferred fewer than six months payments:
You can apply via the link below for an additional deferral of up to a further three months, subject to the maximum six months in total. You will need to apply in the last month of your deferral period and at least five working days before your monthly payments resume. This is important as if you apply after your monthly payment becomes due at end of a deferral, you will go into arrears and may lose your right to a further deferral.
Non-continuous payment deferrals: if you have been able to resume your monthly payments after a previous deferral and now have become in need of a further deferral, you can apply for an additional deferral of up three months (up to six months in total) at least five working days before your next monthly payment falls due. If you have missed a monthly payment after a payment deferral has ended, you will not be entitled to a further deferral.
A reminder that the deadline for making an application is 31 March 2021, unless you are applying to extend a deferral that covers payments beyond 31 March 2021. Please see above for more information.
Additional Payment Deferrals are intended to provide customers with further financial support in the exceptional circumstances arising out of the Coronavirus pandemic. If you are experiencing longer-term payment difficulties, please call us to discuss the options available to you.
For information on Payment Deferrals, your options and their implications please see the information above. You can also click here to view a video message from our Chief Executive Officer, Mike Dennett.
IMPORTANT NOTE: this video was recorded when the closure date for payment deferrals applications was 31 October 2020. This closure date has now been extended: please see above under ‘Deadline for applying for payment deferrals’. All other information in the video remains applicable. The maximum payment deferral period remains at six months.
We will contact you via email to inform you if your application is accepted. Upon granting a deferral, we will not collect any payments on your agreement during the additional deferral period.
Please only request the number of months’ deferral that you require.
If you can afford to make partial payments, and wish to do so, you can apply for a Payment Deferral (up to a further three months and up to six months in total) and then call us to make voluntary payments at the level you can afford. It is likely to be in your interests to do so to limit the extra costs of an additional Payment Deferral, after payment of any arrears incurred prior to the start of the initial deferral.
Please remember an additional payment deferral will increase your overall debt and may affect future credit applications. It is therefore not in your best interests to apply for a Payment Deferral unless you need this support due to temporary financial difficulties resulting from the impacts of COVID-19. Please see ‘Other options that may be available to you’ for other options that may be available to you.
To apply for a payment deferral:
If you have understood all of the above information, taken debt advice (if required) and you wish to submit an application for an Initial Payment Deferral of one, two or three months, please click below to do so. Please do not use this form if you have already had a payment deferral with us.