HPI 15 day cool off period - what are the options

~Brock~

Hi, Eoan has PM'd me about this thread based upon my previous postings on this subject, and I thought it best to add a reply to this thread directly.

The CCD legislation gives a right to withdraw from any credit agreement within 14 days starting from the day after the agreement is made (which in most cases is the date which the borrower received confirmation that the agreement is active and is given a copy of the terms, or a notification that the terms are the same as any previously supplied).

In the case of most car finance agreements (unless the car vendor and the lender are the same person, which is rare), the credit agreement is with the lender. The right to withdraw DOES NOT extend to the actual purchase of the vehicle as well.

So.... in this case, and in order to withdraw, the borrower must repay to the lender the amount borrowed plus a daily interest charge (which will be specified on the agreement).

This does not affect any part of the contract between the borrower and the garage for the sale of the vehicle. It may well be that the garage will lose out on the finance commission because this will undoubtedly not be paid to them by the lender, but unless there is a specific clause in any contract between the garage and the customer then I would regard this as 'tough'.

I am in no doubt that garages will start to wise up to the prospect of customers withdrawing from their credit agreements and therefore stop the practice of using commisison as a bargaining tool when it comes to negotiating the price of a car.

One final point. DO NOT withdraw unless you are 100% sure you will be able to repay the money within the 30 days allowed from the point of notification. If this does not happen then the outstanding amount will become a statutory debt without any protection of the consumer credit act.

Flyboy152

~Brock~ wrote: »

Hi, Eoan has PM'd me about this thread based upon my previous postings on this subject, and I thought it best to add a reply to this thread directly.

The CCD legislation gives a right to withdraw from any credit agreement within 14 days starting from the day after the agreement is made (which in most cases is the date which the borrower received confirmation that the agreement is active and is given a copy of the terms, or a notification that the terms are the same as any previously supplied).

In the case of most car finance agreements (unless the car vendor and the lender are the same person, which is rare), the credit agreement is with the lender. The right to withdraw DOES NOT extend to the actual purchase of the vehicle as well.

So.... in this case, and in order to withdraw, the borrower must repay to the lender the amount borrowed plus a daily interest charge (which will be specified on the agreement).

This does not affect any part of the contract between the borrower and the garage for the sale of the vehicle. It may well be that the garage will lose out on the finance commission because this will undoubtedly not be paid to them by the lender, but unless there is a specific clause in any contract between the garage and the customer then I would regard this as 'tough'.

I am in no doubt that garages will start to wise up to the prospect of customers withdrawing from their credit agreements and therefore stop the practice of using commisison as a bargaining tool when it comes to negotiating the price of a car.

One final point. DO NOT withdraw unless you are 100% sure you will be able to repay the money within the 30 days allowed from the point of notification. If this does not happen then the outstanding amount will become a statutory debt without any protection of the consumer credit act.

Can you explain this a little further?

Eoan

~Brock~ wrote: »

Hi, Eoan has PM'd me about this thread based upon my previous postings on this subject, and I thought it best to add a reply to this thread directly.

The CCD legislation gives a right to withdraw from any credit agreement within 14 days starting from the day after the agreement is made (which in most cases is the date which the borrower received confirmation that the agreement is active and is given a copy of the terms, or a notification that the terms are the same as any previously supplied).

In the case of most car finance agreements (unless the car vendor and the lender are the same person, which is rare), the credit agreement is with the lender. The right to withdraw DOES NOT extend to the actual purchase of the vehicle as well.

So.... in this case, and in order to withdraw, the borrower must repay to the lender the amount borrowed plus a daily interest charge (which will be specified on the agreement).

This does not affect any part of the contract between the borrower and the garage for the sale of the vehicle. It may well be that the garage will lose out on the finance commission because this will undoubtedly not be paid to them by the lender, but unless there is a specific clause in any contract between the garage and the customer then I would regard this as 'tough'.

I am in no doubt that garages will start to wise up to the prospect of customers withdrawing from their credit agreements and therefore stop the practice of using commisison as a bargaining tool when it comes to negotiating the price of a car.

One final point. DO NOT withdraw unless you are 100% sure you will be able to repay the money within the 30 days allowed from the point of notification. If this does not happen then the outstanding amount will become a statutory debt without any protection of the consumer credit act.

Thanks for the reply, and your input. I think you are right, if consumers start to see this as a way to bargain for a better deal, and to then use their own finance, then garages may change their habits. It's not of my making though, they attempted to let me believe I was financing a higher amount, until it came time to sign when collecting the car. I just happened to notice the Right of Withdrawal and thought that this gave me some protection if I could get a better finance deal elsewhere.

I have secured the finance elsewhere, although I'll wait until the funds are cleared before taking it any further. As you say, I don't want to end up with a statutory debt.

~Brock~

Flyboy152 wrote: »

Can you explain this a little further?

Yes of course.

It would seem probable that the garage has used the knowledge that he will get a commission from the finance company as a means of discounting the vehicle price, possibly as a means of securing the sale, and maybe even as a means of securing some sort of volume bonus from the finance company.

This practice worked on the basis that up until now the borrower had no right to cancel or withdraw from the loan because it would have been signed on trade premises....therefore the commission would have been safe. That is now out of the window and replaced by an across the board 14 day right to withdraw. I doubt that the dealer has cottoned on to the implications of this yet.......

Flyboy152

Eoan wrote: »

Thanks for the reply, and your input. I think you are right, if consumers start to see this as a way to bargain for a better deal, and to then use their own finance, then garages may change their habits. It's not of my making though, they attempted to let me believe I was financing a higher amount, until it came time to sign when collecting the car. I just happened to notice the Right of Withdrawal and thought that this gave me some protection if I could get a better finance deal elsewhere.

I have secured the finance elsewhere, although I'll wait until the funds are cleared before taking it any further. As you say, I don't want to end up with a statutory debt.

A word of caution, if I may. One of the advantages of hire purchase is the ability to walk away from the debt after one half of the purchase price has been paid. If you have a personal loan, the debt will remain, but the value of the car will fall.

For example, after a three years the amount left owing might be five thousand pounds, but the value of the car might be only four thousand pounds. You could terminate the agreement and return the car and simply walk away. But, with a personal loan, you would still be left with a debt of one thousand pounds.

If your situation became dire and the debt collectors are knocking on the door, they can't touch the car. If you have paid as much as one third of the price, the HP company would have to get a seperate court order to repossess.

This is not an argument to persuade you not to cancel your agreement, but to give you some information to make an informed decision.

Flyboy152

~Brock~ wrote: »

Yes of course.

It would seem probable that the garage has used the knowledge that he will get a commission from the finance company as a means of discounting the vehicle price, possibly as a means of securing the sale, and maybe even as a means of securing some sort of volume bonus from the finance company.

This practice worked on the basis that up until now the borrower had no right to cancel or withdraw from the loan because it would have been signed on trade premises....therefore the commission would have been safe. That is now out of the window and replaced by an across the board 14 day right to withdraw. I doubt that the dealer has cottoned on to the implications of this yet.......

That maybe true in terms of the niaivity of this particular dealer, but what is wrong with any dealer making as much profit as he can on a deal, surely he should be allowed to do that?

Eoan

I understand the risks regarding personal loan vs Hire Purchase.

Flyboy152 wrote: »

That maybe true in terms of the niaivity of this particular dealer, but what is wrong with any dealer making as much profit as he can on a deal, surely he should be allowed to do that?

Agreed, the dealer should be allowed to do that, but the customer should also be expected to attempt to purchase the goods for as low a price as they legally can. Dealers/Finance companies have used the agreements to their advantage, I don't see why customers can't do likewise. This legislation protects the consumer, but also opens up the ability for situations like this to arise.

Another example I was considering. If I have £5k in cash you may normally expect to get the best price for a car by paying cash. In some cases this is not what happens, and in fact buying on finance could get you a cheaper initial price (especially if the car is close to what the garage paid for it). I might get the car for £4800 on finance, with the garage making profit on the commission. With the Right of Withdrawal, you now have the option to buy on Credit at the cheaper price, Withdraw from the Agreement and settle at £4800, with the finance company.

It's up to the garage/finance company to agree on how the commission is paid.

Flyboy152

Eoan wrote: »

I understand the risks regarding personal loan vs Hire Purchase.



Agreed, the dealer should be allowed to do that, but the customer should also be expected to attempt to purchase the goods for as low a price as they legally can. Dealers/Finance companies have used the agreements to their advantage, I don't see why customers can't do likewise. This legislation protects the consumer, but also opens up the ability for situations like this to arise.

Another example I was considering. If I have £5k in cash you may normally expect to get the best price for a car by paying cash. In some cases this is not what happens, and in fact buying on finance could get you a cheaper initial price (especially if the car is close to what the garage paid for it). I might get the car for £4800 on finance, with the garage making profit on the commission. With the Right of Withdrawal, you now have the option to buy on Credit at the cheaper price, Withdraw from the Agreement and settle at £4800, with the finance company.

It's up to the garage/finance company to agree on how the commission is paid.

But that is basically having your cake and eating it. The customer pushes the dealer for a lower price to the point where there is little or no margin left in the car. The only hope the dealer has of earning any profit at all, is through the finance. If the finance is mis-sold, then fair enough, the dealer has only themselves to blame, but if all a dealers customers leave him with no profit, it will mean bankruptcy for the dealer. What will happen is that dealers will be more and more reluctant to be as flexible on pricing and will stop offering finance altogether.

Eoan

Flyboy152 wrote: »

But that is basically having your cake and eating it. The customer pushes the dealer for a lower price to the point where there is little or no margin left in the car. The only hope the dealer has of earning any profit at all, is through the finance. If the finance is mis-sold, then fair enough, the dealer has only themselves to blame, but if all a dealers customers leave him with no profit, it will mean bankruptcy for the dealer. What will happen is that dealers will be more and more reluctant to be as flexible on pricing and will stop offering finance altogether.

It's not really having your cake and eating it. It's up to the dealer to decide on how to sell the product. It's negotiating within the parameters that are available. If you are negotiating with the knowledge that the Right of Withdrawal can actually save you money, then the garage should be negotiating on the basis that the customer may exercise their right. They would need to make it less attractive for a customer to do so, if that means a reduction in margins then surely that's market forces at work.

The rules change all the time, the dealers will adapt.

~Brock~

Flyboy152 wrote: »

That maybe true in terms of the niaivity of this particular dealer, but what is wrong with any dealer making as much profit as he can on a deal, surely he should be allowed to do that?

I don't think anybody is disagreeing with you, certainly not me, but we didn't introduce these new rules, the EU did.

Chances are that the ability to negotiate a better price on the car based on the prospect of some finance commission for the dealer will disappear. Not sure whether that is good for consumers or not - It probably isn't - but it's just another of many potential unintended consequences when lawmakers get given a blank canvas.

I didn't really want to bring in my own personal opinion to this as I prefer to stick to the facts, but I would have thought that most half intelligent consumers would do their shopping around for the best deal BEFORE they start entering into the actual finance agreements.

Might not be long before suppliers of goods (and don't forget we are not just talking cars here....this is applicable to ALL point of sale credit) start making consumers wait for 14 days before they even release the goods. That would cause a real outcry.