Car finance commissions

Benji

When negotiating discounts on new & used cars, it's useful to know how much money the dealer is making. Obviously, one can look at Glass's for the price the dealer is likely to have paid, but it stuck me that the dealer will be making a lot on the finance too.

Would anyone 'in the know' be willing to share the secrets for different finance companies?

On a personal note - anyone know how much Motability Finance pay (if anything) to dealers on their Used Car HP?

TIA

Benji

Sorry Harveybobbles. Commissions in most industries are quite easily found and so I didn't think it unreasonable (or even un-sensible) to know how much 'lea-way' the dealer has.

No where did I say that the dealer doesn't have a right to the money - at the end of the day a deal has to work for both parties, if a dealer decides that an offer doesn't give him enough margin, then he can say no. Again, maybe the dealer won't play ball with the finance income because he is worried about clawback - that is his business decision but it doesn't affect the general premise of openness in business.

harveybobbles

Because lots of comanies are offering good rates on loans, it's hard for us dealers to get close to them with standard finance companies such as Santander, Blackhorse, etc... the most we'd ever get is 200quid, which given the amount of paperwork and time involved in some cases then it hardly seems worht it.

Benji

harveybobbles wrote: »

Because lots of comanies are offering good rates on loans, it's hard for us dealers to get close to them with standard finance companies such as Santander, Blackhorse, etc... the most we'd ever get is 200quid, which given the amount of paperwork and time involved in some cases then it hardly seems worht it.

Thats market forces and low interest rates for you .
However, maybe that is also a good reason to use this thread to your advantage. Popular opinion has it that if you use 'in house' finance then you have more chance of getting a discount - or even that some dealers push their finance deals because the mark-up is so big. A post from yourself saying "MSE Car Financing pay 2.5% - 4% and then only 4 years after the finance was arranged" might show us punters that it is unfair to squeeze the poor car sales person as (s)hes giving us as much discount as is possible.

I don't know how much negotiating power you have with the finance companies available to you, but a £10k loan over 4 years at just 8% generates around £1,600 interest so would have thought the finance house would have been able to pay more to introducers when the Wholesale Interest Rate (2 year swap) is around a quarter of that.

Lemonade_Pockets

I think for the purposes of most people this over complicating it a little.

However in general the indvidual finance houses set a base rate (which usually isn't the same as the BOE base rate). If the dealer sells a car above this rate they make commision, if they sell it below they have pay a subsidy. They will normally always get something called volume bonus which relates to the size of the loan and the term but the generally isn't more than £200.
It is impossible to say what the commision structure is as all the finance house's have different base rates. In addition there are loads of different commision loan/structures. For example some have nil rated deals where they have a extra low fixed base rate put pay no commision and no Volume bonus.

The best way to do it if you want to genuinely haggle and not just screw the dealer over by settling the finance instantly is as follows (Even this might not actually benefit you if for example they have used a nil rated deal.)
Haggle on the price of the car first and foremost make it clear to the dealer that you are considering a personal loan.
When you are happy with the price of the car, get you best personal loan quote for that price. Print it out, take it down to the dealer or ring them up and tell them your monthly payment to see if they can beat it. Keep a eye on additional fees and take that into account.

E.g if it costs £140pm to borrow £8000 from the dealer over 5 years but £145 to borrow on a personal loan and neither have any additional set up fees. The dealer is cheaper, no need to worry about APR, commision etc etc. SIMPLES.