Car Financing - Qoutation/Soft Searches

[Deleted User]

I'm looking at getting a new Ford Ranger pick up and after looking at a fair few differing finance options I've not yet seen anyone who does a quotation/soft search to give you a rough idea of your eligibility for such finance.

Can anyone point me in the right direction?

I've looked at personal loans but they are an expensive option and rule out the possible leasing option. These are the only finance products I can find which seem to offer a soft search but at the same time the price of a new Ranger is going to probably go past the 25k mark where a lot of these personal loans require you to then be a home owner.

Basically they're too expensive and I need to be able to do some soft searches on HP/Lease finance options which are much more affordable.

SeanG79

There are no "soft" searches that I am aware of but dealers/brokers will be able to quote you on various options.

If your credit searches show you as clean and listed and you can show affordability, you are likely to be approved for the finance.

Vehicle finance generally works different from personal loans etc. in that if the customer is approved by a "prime" lender there is a set rate that the dealer/broker will receive from the lender, what ever rate is then sold above this rate is what determines the commission they earn via the finance.

A sub-prime tenant wont have many options.

debtcutter

SeanG79 wrote: »

There are no "soft" searches that I am aware of but dealers/brokers will be able to quote you on various options.

There definitely is such thing as a soft search.

Money supermarket use them, i think nationwide offer them for some of their loans.

I think you can see the soft searches yourself but lenders checking your file can't

[Deleted User]

I know I can do soft searches via Money Supermarket and Nationwide for a personal loan but I'm trying to find someone who will do a soft search on HP type loan which is effectively a secured loan against the vehicle.

I'm presuming the rates might be slightly better as opposed to a straight forward unsecured personal loan (probably not by much but every penny counts so they say)

SeanG79

debtcutter wrote: »

There definitely is such thing as a soft search.

Money supermarket use them, i think nationwide offer them for some of their loans.

I think you can see the soft searches yourself but lenders checking your file can't

Those soft searches that Nationwide perform are for personal loans not vehicle finance to the best of my knowledge there are no soft searches available for vehicle finance (HP, conditional sale, PCP, etc)

SeanG79

[Deleted User] wrote:

I'm presuming the rates might be slightly better as opposed to a straight forward unsecured personal loan (probably not by much but every penny counts so they say)

In the vast majority of cases, especially £7.5k - £15k, personal loans will be cheaper than vehicle finance. (there are 0% offers, dealer deposit contributions, etc. BUT if you obtain the best possible discount on the price of vehicle then the personal loan will normally end up the cheapest option if you qualify for that loan)

pheonixrising21

SeanG79 wrote: »

In the vast majority of cases, especially £7.5k - £15k, personal loans will be cheaper than vehicle finance. (there are 0% offers, dealer deposit contributions, etc. BUT if you obtain the best possible discount on the price of vehicle then the personal loan will normally end up the cheapest option if you qualify for that loan)

I don't agree. 0% is obviously the best deal. Also, often the best price is only available on finance deals, as you say deposit contributions.

Whats the best rate you can get with a high street lender, 5.9%? I have done a few mystery shops lately at car dealers and the highest APR I have been offered is 7.9%. That's 2% higher. Even if you paid that over a full 3 years on ALL of £15k, then the most you would pay in additional interest is £900. Compunded down, this would probably be less than £700.

Also, I've seen finance APR's at 4.9%, which you cannot get on the high street

Additionally, car finance is more often than not secured on the car, so therefore is seen as less risky. they can take the car back if the borrower stops paying and that can go some or all of the way to settling the debt.

This is the reason why the dealers offer these discounts. They know that by offering the discount they get you in on the finance as well which gives them the interest. Basically, they give you a discount to take the finance, so they make money from the interest. If you pay in cash (i.e. borrow money from elsewhere), they charge you more for the car to make up for you giving the interest to someone else.

From all the mystery shops I have done, it would seem that the worst thing you can do (purely from an overall cost point of view) is take a high street loan to buy a car, unless the difference in the APR's is huge.

Take VW for example, offering £1500 deposit contribution on Golfs. If you buy a Golf for £17,000 and put in £2,000 yourself, you need to finance £15,000 on the highstreet. With the finance plan, VW stick in £1500, and then they will calculate a GFV (most finance plans are PCP these days), say this is £6,000 (which you ay at the end if you want to keep the car). This only leaves £7,500 to finance with VW. I've not doen the figures, but the interest on £7.5k over three years at 7.9% will be alot less than the interest on £15k over three years at 5.9%. Then there is the monthly payment to think about. It will be much lower with the dealer finance. You would probably need the high street loan over 5 years to match the monthly payments if you can match them at all... Oh and also, you don't pay interest on the GFV part of the plan. this is your final payment, nothing is added to it afterwards. You only pay interest on this if you decide to make the payment and keep the car but need to finance this to make the payment. This again saves you money.

Anyway, to answer the OP's question, I do not beleive that there is such thing as a soft search for HP/PCP finance. Some high street lenders such as Nationwide do them, but I don;t know of any for HP/PCP. However, as I have stated, HP/PCP deals are secured on the car, so you are much more likely to be offered one due to the security the car offers the lender.

SeanG79

I'm not going to argue as your email makes perfect sense, what I can tell you with 100% certainty is there is no such thing as free money. I work closely with a bank that runs a 0% finance program and in every case, the finance is calculated at an equivalent of 9.9% APR, the dealer is invoiced by the bank for the interest contribution (blind discount applied to the invoice price that the customer is not aware of).