Car loan cancellation question

khaki304

Yesterday I bought a used car from a very reputable main dealer.

In the past I have always paid cash and intended to do so this time, but they had a deal that if I paid by credit agreement I would get a massive discount off the car price.

Now since I had the money and I didnt want to end up paying more by paying by credit but in hushed tones the Salesman said there was a way round it.

Due to Office of Fair Trading rules, I could sign all the documents but then within 14 days of getting the car, I could cancel the credit agreement and then pay the balance off in full. Is this true?

Also, if I do this, What affect, if any, will this have on my credit rating?

In anticipation, thanks for any replies.

lawrie28

Not if you signed the paperwork at the dealership. A deal signed "on" the premises has no cooling off period, and whilst you can pay it off quickly, there is nothing to stop you having to pay early repayment penalties.

I would go back today and speak to the salesman. The extra discount comes from the kickback the dealers get from the finance provider. However, if you cancel the agreement, the dealership get nothing, so this salesman is trying to fiddle the system for some reason. I would offer the reduced price, in cash for the car. If he refuses, speak to his boss. If he refuses ask to speak to the top person, the dealer principle. Be prepared to walk away if they don't play ball, just make sure they have your mobile number, if they change there mind.

cardiffgrad1

What the dealer was talking about was a loan 'withdrawal.' This is different from a cancellation and something fairly new. I'm only familiar with it because I used to, until very recently, work for the finance section of a bank. You have 14 days in which to tell your finance company, 'I'm keeping the car but I want to withdraw from the loan.' You then have to pay the loan advance within 30 days, but by doing it this way, you avoid paying any interest or additional fees. If you want to withdraw, I would get on and contact the finance company asap before you miss your chance.

I imagine it would show on your credit record - though I'm not 100% sure of this. But once you've paid the loan advance and it's settled, I don't think it would have an adverse affect.

Apples2

I'm staggered the salesman informed you of this "loophole".

Normally they get their commision from selling the finance.

We have seen posts where people attempt this only for the garage to then withdraw from the sale altogether citing, "that price was only on offer if the finance was taken with it" type waffle.

mo786uk

As the poster above has said - its a new rule introduced in Feb 2011 whereby you can cancel a credit agreement within 14 days but you are still tied to the product. The idea is if you need credit you should still have the option to shop around and get credit elsewhere.

Obviously the salesman gets comission from selling credit but it must be a lax system if he still gets comission even after credit has been cancelled.

As the new rules have only been in place for a couple of months perhaps the loophhole does work due to an inefficieny in their system