Car finance - why not??

7_week_wonder

My OH and I are about to buy a new car and we have the money saved up ready to pay for it. But now we’ve seen the manufacturer advertising financing at 0% interest for 42 months. There is an initial deposit to pay and a balance at the end of the period, but overall the price would be the same as paying up front.

So it seems like the best thing is to take the finance and keep the balance of the cash earning interest in various current accounts etc. However, I've always been slightly wary of financing deals (not sure why). Are there any reasons we shouldn’t do this or catches I haven’t thought of?

poppasmurf_bewdley

You could try asking for a discount of at least the amount of interest you would pay through a normal HP deal. Probably a 10-12% discount will be on the cards. Never, ever, pay full retail price for a new car.

My Mondeo estate retail price was £26k new, price paid £18k. To replace now the retail equivalent is £34k but I wouldn't expect to pay no more than £25k.

Peter333

I don't understand why you would not want to pay outright if you have the money now. At the end of the day, whether it's interest free finance or not, it is still a debt for 4 years. And you will most likely spend the money (that you would have paid out for the car now) on other stuff, but you will still have the car debt.

If you have the money, pay outright. They won't necessarily give you any off for paying upfront, but you could try and haggle for a bit off, or other stuff like free car mats, a free tank of fuel, free insurance, free tax, or all of the above. :j

7_week_wonder

Thanks for the replies. I know for certain that we wouldn't spend the money we have saved up, but the reason for not paying up front would be that we could put the rest of the money in an interest paying account and over the course of the loan period I've just calculated we would get around £850 interest.

Hmm - now that I've actually done the calculation maybe I will try asking for a discount of at least that amount if we pay cash. Arrgghh - I hate haggling, which is part of the reason that the finance appealed to me!

GwylimT

It depends on the situation, when we bought a new Jazz if we paid cash we got juat over £1600 off, if we took out 0% finance over three years we got £2500 off, it also included three years servicing and your first MOT, we had a look and it didn't increase our insurance either. So for us we put our money into a separate account and had the monthly payments come out of there.

rob404uk

If you don't like haggling I would just buy a what car magazine. In there they have target prices and say to the dealer simply, 'can you match this price?' If they can do it. At least then you have reasoning for your offer instead of a pie in the sky number.

Pixie5740

Car salespeople make more money selling finance than they do selling the car so there's more room for negotiation when you're taking out finance.

If you really hate haggling then you could try using www.DrivetheDeal.com to lower the price you pay. You enter the details of the car you want to buy and dealerships across the UK compete to offer you the best price and win your business without you having to haggle face to face. A colleague of mine just knocked £7k off the list price of a new VW he is buying. The car can also be delivered to you so it doesn't matter if the dealership is anywhere near you or not.

ccluedo

Pixie5740 wrote: »

Car salespeople make more money selling finance than they do selling the car so there's more room for negotiation when you're taking out finance.

If you really hate haggling then you could try using www.DrivetheDeal.com to lower the price you pay. You enter the details of the car you want to buy and dealerships across the UK compete to offer you the best price and win your business without you having to haggle face to face. A colleague of mine just knocked £7k off the list price of a new VW he is buying. The car can also be delivered to you so it doesn't matter if the dealership is anywhere near you or not.

Thanks Pixie, I wish I knew about that site last week
I've ordered a new car last Wednesday and signed the paperwork BUT I haven't paid a deposit or anything yet. I might try and get out of it as car not due til end Sept and £2k cheaper on drivethedeal.

7_week_wonder

Thanks again everyone, especially Pixie for the drivethedeal recommendation. Anything that takes the pain of haggling away is very welcome. We'll do a test drive this weekend and take it from there.

ccluedo

Update, after contacting dealer about car almost £2.4k cheaper on DTD, dealer dropped price by £1,500!!! Took the deal as trade in is less hassle than selling my existing car myself.

Thank you so much once again Pixie5740......RESULT!

Pixie5740

Thanks for the update ccleudo. That's a good result and my good deed done for the day.