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  • FIRST POST
    • stridernje
    • By stridernje 5th Jan 18, 4:42 PM
    • 10Posts
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    stridernje
    Hire Purchase Agreements
    • #1
    • 5th Jan 18, 4:42 PM
    Hire Purchase Agreements 5th Jan 18 at 4:42 PM
    I would like to open a discussion on Hire Purchase Agreements when buying a new car.

    So we open with the list price of the Car = A.
    We can then negotiate any dealer / manufacturer discounts = B
    We can then include a deposit paid by us = C.
    Finally depending upon millage, colour, trim and term of contract the dealer will arrive at a residual value of the car. = D
    Therefore A - B - C - D = E.
    E being the balance to be paid over the term adjusted by the APR.

    My reason for asking is that I have seen a car I want to buy. I want to pay £250.00 per month. To achieve this the dealer said we need to find 4K to take off the list price value. So I will pay some (2.5K) and they will pay the rest (1.5K). Great, we get to £250.00 per month. However I checked on CARWOW and can buy the exact same model for 4K less of the list price. So I rang them and they said with zero deposit the repayments would be £300.00 per month. How does that stack up?
Page 1
    • TheMoonandBack
    • By TheMoonandBack 5th Jan 18, 4:49 PM
    • 59 Posts
    • 95 Thanks
    TheMoonandBack
    • #2
    • 5th Jan 18, 4:49 PM
    • #2
    • 5th Jan 18, 4:49 PM
    Hi, I think the advice you will get on here is don’t do it....
    When you get to the end of your rope, tie a knot and hang on

    Proud to be dealing with my debts
    • daveyjp
    • By daveyjp 5th Jan 18, 6:08 PM
    • 7,279 Posts
    • 5,677 Thanks
    daveyjp
    • #3
    • 5th Jan 18, 6:08 PM
    • #3
    • 5th Jan 18, 6:08 PM
    Its stacks up in that the salesman is doing his job, i.e. get as much out of the punter as possible.

    As an alternative consider borrowing the money from a third party and buy direct from a broker.
    • IanMSpencer
    • By IanMSpencer 5th Jan 18, 6:59 PM
    • 1,291 Posts
    • 975 Thanks
    IanMSpencer
    • #4
    • 5th Jan 18, 6:59 PM
    • #4
    • 5th Jan 18, 6:59 PM
    It stacks up because borrowing from a dealer is likely to be the most expensive. They are under no obligation to give you a good deal. You've got an open hand, as you've said what you can afford, you have shown you don't really understand how the loan market works, and he's got a buyer who isn't yet walking away when you can get the same car £4k cheaper elsewhere. If the online price is £4k cheaper, then see what finance options the online offer is giving, or check with your bank, it's a no brainer if the dealer won't match it. Car salesmen just want to get the most money out of you that they can, they are not your friend and they are not doing you favours, however pleasant they may seem.

    For example, we looked at a new car, used an online dealer, got the PCP deal which was with Barclays and went back to the dealer who matched the monthly payments because they could use a much higher trade in value, but the rate was actually a lot worse. We then got the car for cash at the discounted value that they were working from - about 15% - not the greatest deal that people around here get but not bad for my pathetic negotiating skills.
    • stridernje
    • By stridernje 6th Jan 18, 5:05 PM
    • 10 Posts
    • 0 Thanks
    stridernje
    • #5
    • 6th Jan 18, 5:05 PM
    • #5
    • 6th Jan 18, 5:05 PM
    But why 2 figures for the car which is the same sale value.

    Dealer A has said that to get to £250.00 per month payments equals 2.5K deposit from me and they will put 1.5K down. Total 4K. Therefore a 26K list price car becomes 22K.
    Dealer B will sell me the car for 22K (4k of list price) but wants 300.00 per month. To do this they are either changing the residual value of the car or increasing the amount of credit charge or changing the APR. I thought BMW finance sets the residual amount, finance charges & APR, all of which will determine the final monthly payments.
    • AdrianC
    • By AdrianC 6th Jan 18, 6:28 PM
    • 16,147 Posts
    • 14,427 Thanks
    AdrianC
    • #6
    • 6th Jan 18, 6:28 PM
    • #6
    • 6th Jan 18, 6:28 PM
    I would like to open a discussion on Hire Purchase Agreements when buying a new car.

    So we open with the list price of the Car = A.
    We can then negotiate any dealer / manufacturer discounts = B
    We can then include a deposit paid by us = C.
    Finally depending upon millage, colour, trim and term of contract the dealer will arrive at a residual value of the car. = D
    Therefore A - B - C - D = E.
    E being the balance to be paid over the term adjusted by the APR.

    My reason for asking is that I have seen a car I want to buy. I want to pay £250.00 per month. To achieve this the dealer said we need to find 4K to take off the list price value. So I will pay some (2.5K) and they will pay the rest (1.5K). Great, we get to £250.00 per month. However I checked on CARWOW and can buy the exact same model for 4K less of the list price. So I rang them and they said with zero deposit the repayments would be £300.00 per month. How does that stack up?
    Originally posted by stridernje
    If there's a residual, then it's not "HP", it's a PCP.

    Carwow are probably going with a different residual (balloon). Don't forget that you're financing the residual - D - so the equation is closer to being

    A-B-C = E+D

    because you're paying interest on both E and D. The left hand side (A-B-C) is what you'd be paying in cash, the right hand side is what you're financing (E+D).
    • bazzyb
    • By bazzyb 6th Jan 18, 7:03 PM
    • 1,083 Posts
    • 3,214 Thanks
    bazzyb
    • #7
    • 6th Jan 18, 7:03 PM
    • #7
    • 6th Jan 18, 7:03 PM
    I thought BMW finance sets the residual amount, finance charges & APR, all of which will determine the final monthly payments.
    Originally posted by stridernje
    You thought wrong. The dealer will have control of the rate and will adjust according to how much commission they wish to make from the deal. Are you even sure they are both using the same finance provider? You mentioned BMW - the BMW dealer will be using Alphera for their quote which will give a much more generous residual/balloon payment than if Carwow are quoting from a different lender who have more reserved residuals. Even if using the same lender, different dealers could have different rate cards.

    All the above is assuming you are in fact talking about PCP, but as you mention HP if this is actually HP + balloon (unlikely) then the dealer would also be able to change the amount of the balloon payment to build the deal.
    • neilmcl
    • By neilmcl 6th Jan 18, 7:48 PM
    • 10,437 Posts
    • 7,362 Thanks
    neilmcl
    • #8
    • 6th Jan 18, 7:48 PM
    • #8
    • 6th Jan 18, 7:48 PM
    If there's a residual, then it's not "HP", it's a PCP
    Originally posted by AdrianC
    If you want to be technically correct a PCP is an HP agreement but I get the point you're making
    • Lucky Duck
    • By Lucky Duck 6th Jan 18, 8:12 PM
    • 152 Posts
    • 85 Thanks
    Lucky Duck
    • #9
    • 6th Jan 18, 8:12 PM
    • #9
    • 6th Jan 18, 8:12 PM
    You thought wrong. The dealer will have control of the rate and will adjust according to how much commission they wish to make from the deal. Are you even sure they are both using the same finance provider? You mentioned BMW - the BMW dealer will be using Alphera for their quote which will give a much more generous residual/balloon payment than if Carwow are quoting from a different lender who have more reserved residuals. Even if using the same lender, different dealers could have different rate cards.

    All the above is assuming you are in fact talking about PCP, but as you mention HP if this is actually HP + balloon (unlikely) then the dealer would also be able to change the amount of the balloon payment to build the deal.
    Originally posted by bazzyb
    I recently bought a car via Carwow, the finance offered was exactly the same as that advertised on the manufacturer's website
    • Tarambor
    • By Tarambor 6th Jan 18, 8:41 PM
    • 1,964 Posts
    • 1,398 Thanks
    Tarambor
    Well with the payments and deposits being mentioned this clearly is another PCP deal. What is it with people rushing like lemmings off a cliff to blow £14k or more over 4 years to walk away with nothing?
    • stridernje
    • By stridernje 6th Jan 18, 9:03 PM
    • 10 Posts
    • 0 Thanks
    stridernje
    er... because we can??
    • stridernje
    • By stridernje 6th Jan 18, 9:26 PM
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    • 0 Thanks
    stridernje
    So just to clarify a couple of points. The residual value I referred to is indicated as a "optional final payment", or the car can be handed back in accordance with the terms of the agreement. But this is obviously a figure that the finance company deem suitalbe to recover any final costs after re-sale.
    It is a "Hire Purchase Agreement regulated by the consumer credit act 1974" This is noted in the type of credit section.
    Both the dealer I have been to see and the Dealer through CarWoW are BMW dealerships, but as stated the Carwow dealer may be using a different finance company, I shall look into and find out. The dealership are using BMW financial services.
    • bazzyb
    • By bazzyb 6th Jan 18, 9:50 PM
    • 1,083 Posts
    • 3,214 Thanks
    bazzyb
    Do you know what the balloon payment is on each offer? Or have you just been given monthly payments from the second dealer and no further info.

    As they are both BMW main dealers who are quoting you on the finance, my suspicion is that the one who has offered the better price on the vehicle is quoting the finance at a higher rate to get a bigger commission to compensate for a lower profit. However you don't seem to have enough information to go on - it would be worth getting a full breakdown from each dealer - specifically rate and balloon payment. (Possibly a silly question but you have checked they are quoting over the same term and one isn't a shorter deal?)

    If they are in fact both quoting from the same lender (Alphera) you could always go back to dealer number 2 and say dealer number 1 have quoted you X% and see if they will match it. As others have already stated above though I would ensure that PCP is definitely the right route for you as for many people there are often much better ways to finance vehicles - the best option depends on whether you intend on keeping the car or not.
    • Mercdriver
    • By Mercdriver 7th Jan 18, 2:20 AM
    • 1,510 Posts
    • 1,025 Thanks
    Mercdriver
    er... because we can??
    Originally posted by stridernje
    Tarambor's point is that you can get £14k on a better rate and get a car that is 1-3 years old where you can extend the manufacturer's warranty (definitely useful on a BMW) and the car is still yours at the end of the term.

    My annual mileage wouldn't work with PCP. I bought an 18 month old Mazda CX5 on 0% APR HP. In 2.5 years time, the car will be mine with no more to pay. I don't have to hand it back and have nothing left. I have extended the manufacturer's warranty by 3 years, so when I have finished paying I will still have 18 months left on that warranty. The amount I am borrowing is a few k below 14k as I traded in my E class.

    I can understand the desirability of having a new car every 2-4 years. But don't assume because it is new that it will not have issues and that they will not be ruled as wear and tear.

    Tarambor's position - and he is consistent on this - is why pay 14k PLUS your deposit to potentially have nothing at the end of it.

    I work in an area that is feast or famine - in 3 years I could be in a situation where i cannot afford to keep paying a substantial amount each month. If I were on a PCP I would be up a gumtree. Yes I would still have to run my car, but I won't have a balloon payment or be left without a car at the end of the term.

    I am paying £319 a month, not that much more than that quote of £300 a month, and I don't have that balloon waiting for me. I don't believe in tooth fairies so I don't assume equity in the car at the end of the term, and when discussing my mileage with salesmen, who at first said not to worry, until I insisted that if were to decide to walk away I didn't want to be left with a huge bill, my payments based on 22k a year were over £400 a month. My payments are substantially below that , and I still have the car at the end of the 3 years, if I decide to move on, I have the remaining value - which won't be huge to use. So I pay less and I have far more equity than at the end of a PCP deal.
    • stridernje
    • By stridernje 7th Jan 18, 4:00 PM
    • 10 Posts
    • 0 Thanks
    stridernje
    Do you know what the balloon payment is on each offer? Or have you just been given monthly payments from the second dealer and no further info.

    As they are both BMW main dealers who are quoting you on the finance, my suspicion is that the one who has offered the better price on the vehicle is quoting the finance at a higher rate to get a bigger commission to compensate for a lower profit. However you don't seem to have enough information to go on - it would be worth getting a full breakdown from each dealer - specifically rate and balloon payment. (Possibly a silly question but you have checked they are quoting over the same term and one isn't a shorter deal?)

    If they are in fact both quoting from the same lender (Alphera) you could always go back to dealer number 2 and say dealer number 1 have quoted you X% and see if they will match it. As others have already stated above though I would ensure that PCP is definitely the right route for you as for many people there are often much better ways to finance vehicles - the best option depends on whether you intend on keeping the car or not.
    Originally posted by bazzyb
    Thanks, what I am trying to drill down to is that if the lender is the same and the APR is the same then either the end payment is being adjusted or the charges for the credit are different.
    depending upon the dealer. But I will look into it further, thanks.
    • stridernje
    • By stridernje 7th Jan 18, 4:15 PM
    • 10 Posts
    • 0 Thanks
    stridernje
    Tarambor's point is that you can get £14k on a better rate and get a car that is 1-3 years old where you can extend the manufacturer's warranty (definitely useful on a BMW) and the car is still yours at the end of the term.

    My annual mileage wouldn't work with PCP. I bought an 18 month old Mazda CX5 on 0% APR HP. In 2.5 years time, the car will be mine with no more to pay. I don't have to hand it back and have nothing left. I have extended the manufacturer's warranty by 3 years, so when I have finished paying I will still have 18 months left on that warranty. The amount I am borrowing is a few k below 14k as I traded in my E class.

    I can understand the desirability of having a new car every 2-4 years. But don't assume because it is new that it will not have issues and that they will not be ruled as wear and tear.

    Tarambor's position - and he is consistent on this - is why pay 14k PLUS your deposit to potentially have nothing at the end of it.

    I work in an area that is feast or famine - in 3 years I could be in a situation where i cannot afford to keep paying a substantial amount each month. If I were on a PCP I would be up a gumtree. Yes I would still have to run my car, but I won't have a balloon payment or be left without a car at the end of the term.

    I am paying £319 a month, not that much more than that quote of £300 a month, and I don't have that balloon waiting for me. I don't believe in tooth fairies so I don't assume equity in the car at the end of the term, and when discussing my mileage with salesmen, who at first said not to worry, until I insisted that if were to decide to walk away I didn't want to be left with a huge bill, my payments based on 22k a year were over £400 a month. My payments are substantially below that , and I still have the car at the end of the 3 years, if I decide to move on, I have the remaining value - which won't be huge to use. So I pay less and I have far more equity than at the end of a PCP deal.
    Originally posted by Mercdriver
    If your paying £316.00 over 30 months a 0% apr then you borrowed around 10K. If I was going to buy a car for that amount then I would do the same. And you are buying to suit your circumstances. People say you don't make money on cars which I tend to agree with. The point you and Tarambor are making is that you save money because you will no longer be paying that monthly fee after a specific time frame. Therefore whilst I am still spending my £300 per month, you are saving yours. But that is how we chose to spend our money.
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