Car finance cancelation question.

mortgagenoob · 27 September 2017 at 10:20AM

Hi,

I have recently purchased a new car using Mercedes-Benz finance at the dealership with a 4.9% apr. I have checked online and I can borrow the same amount, as a personal loan, for 2.8% from M&S Bank which would be quite a saving over the course of the loan. I am within my 14 day cooling off period so I know canceling the agreement won't be a problem. My question is, does anybody know if I would have to pay back the £1950 dealer contribution which was dependent on taking out the finance. Because this would more than cancel out any savings made by the lower rate of interest. I have checked all through my paperwork and I can't find any mention of this scenario.

Many thanks in advance for your advice

[Deleted User] · 27 September 2017 at 10:27AM

No, you wouldn't.

But be aware you may not be accepted, or get the headline rate, with your current recent loan.

sivs · 27 September 2017 at 1:46PM

I would first apply for the loan and check you get the headline rate and then if you do use this to cancel the agreement.

Like the other poster has said you might not get this rate.

System · 27 September 2017 at 2:42PM

With the caveats mentioned above, what you are wanting to do you'll find many people have done especially those who have the money to buy outright. It makes no sense to turn down free money off just for having to go through the additional step of taking out finance and paying it off.

The only thing you will have to do is pay interest on the initial finance for the time you've had it until you clear it off with the new loan.

System · 27 September 2017 at 2:58PM

mortgagenoob wrote: »

Hi,

I have recently purchased a new car using Mercedes-Benz finance at the dealership with a 4.9% apr. I have checked online and I can borrow the same amount, as a personal loan, for 2.8% from M&S Bank which would be quite a saving over the course of the loan. I am within my 14 day cooling off period so I know canceling the agreement won't be a problem. My question is, does anybody know if I would have to pay back the £1950 dealer contribution which was dependent on taking out the finance. Because this would more than cancel out any savings made by the lower rate of interest. I have checked all through my paperwork and I can't find any mention of this scenario.

Many thanks in advance for your advice

If you cancel any contract during the ‘cooling off’ period, then the contract is revoked. Why would the Finance Company standby the £1950 contribution in such circumstances? In my view, paying off the contract once it is in place is an entirely different scenario. Have I misunderstood the exam question?

System · 27 September 2017 at 3:10PM

The contract isn't being cancelled, it isn't being revoked. The finance is being paid off in full, that is not the same thing.

Nearlyold · 27 September 2017 at 3:30PM

Just one point to add - once you have notified Mercedes Finance that you wish to withdraw from the finance agreement during the 14 day period you cannot change your mind, you will have 30 days to repay the loan (plus any accrued interest) - so do make sure you have the new loan in place at the more competitive rate (assuming it's available) beforehand.

System · 27 September 2017 at 4:02PM

Tarambor wrote: »

The contract isn't being cancelled, it isn't being revoked. The finance is being paid off in full, that is not the same thing.

The OP states that cancelling the contract will not be a problem as they are still within the cooling off period. Why mention it if it is not relevant to the question posed? I agree that if the contract is paid off in full, then the deposit contribution isn’t an issue.

MataNui · 27 September 2017 at 4:19PM

Tarambor wrote: »

The contract isn't being cancelled, it isn't being revoked. The finance is being paid off in full, that is not the same thing.

Ah, Well it might be. It depends on exactly what the OP says to the finance company. He seems here to be talking about his 14 days cooling off period which is cancelling and would forfeit the contribution. What he needs to do is 'settle' which has nothing to do with the 14 days. I recently looked into exactly this and was told by the dealer to make one payment for the avoidance of any doubt with the finance company. Then it would basically only cost me the one moths interest plus the additional one month interest penalty.

But. As you say. Its still free money if you do it right.

[Deleted User] · 27 September 2017 at 4:21PM

MataNui wrote: »

it would basically only cost me the one moths interest

How much interest would one moth have? They're quite small and seem to have a short attention span.

Nearlyold · 27 September 2017 at 5:00PM

MataNui wrote: »

Ah, Well it might be. It depends on exactly what the OP says to the finance company. He seems here to be talking about his 14 days cooling off period which is cancelling and would forfeit the contribution. What he needs to do is 'settle' which has nothing to do with the 14 days. I recently looked into exactly this and was told by the dealer to make one payment for the avoidance of any doubt with the finance company. Then it would basically only cost me the one moths interest plus the additional one month interest penalty.

But. As you say. Its still free money if you do it right.

There is no mechanism to recover the deposit contribution from the customer, the finance company will have paid the dealer for the car and the customer will have paid the finance company the amount they borrowed - the dealer is telling you to pay for a month because the commission claw back they'll suffer won't be so immediate and they'll worry about next months targets when it comes to it. Settling would mean you will have paid the finance arrangement fee plus 1 months accrued interest, plus up to 58 days interest "penalty" plus the option to purchase fee (which can be circa £150+). If you exercise the right to withdraw you only pay the accrued interest - no other fees can be charged.

Car finance cancelation question.

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